New Brunswick government launches Innovation Agenda to increase its productivity and R&D intensity

The Government of New Brunswick is moving quickly on a comprehensive Innovation Agenda designed to raise its R&D performance from near the bottom of the Canadian ranking into the top four provinces by 2012. The goal is to increase competitiveness and prosperity by closing the innovation gap between New Brunswick and other provinces, and includes several incentives for dramatically boosting R&D expenditures by the private sector.

The Innovation Agenda is one of the four so-called building blocks of the province’s Prosperity Plan, released last February by premier Bernard Lord. In addition to Embracing Innovation, the Plan cites Investing in People, Creating a Competitive Fiscal and Business Environment, and Building Strategic Infrastructure as critical to New Brunswick’s future economic success.

Two of the Agenda’s 10 action priorities — a $20-million, arm’s length Innovation Foundation and a $15-million investment in a University Infrastructure Trust — were announced earlier this month. Tax incentives including an enhanced R&D tax credit were included in the province’s December 10 Budget, as was $1 million for a modest Technology Adoption and Commercialization Program. Successful applicants will receive up to $100,000 to assist in the adoption of new technologies, services and products, but a government official says the average award will be much smaller.

“We’ve recognized that the structural problem of low R&D spending as a percentage of provincial gross domestic product (PGDP) is there,” says Norman Betts minister of Business New Brunswick. “The R&D per capita in New Brunswick was $215 in 1999 compared to $565 nationally. That gap is not a university research gap, but an industry research gap.”

NO WHERE TO GO BUT UP

The latest Statistics Canada data show that in 2000, the gap between New Brunswick and the rest of Canada is widening. The province’s per capita R&D spending dropped $202 while the national average rose to $636. With $153 million in R&D spending in 2000, New Brunswick is ahead of only Newfoundland ($136 million) and Prince Edward Island ($36 million), while its PGDP of 0.8 is dead last in the nation. The Agenda notes that New Brunswick’s R&D expenditures will have to increase more than two and a half times just to pull even with the national average of 1.8.

The centrepiece of the new Agenda is the Innovation Foundation, which was established with a mandate to leverage private sector R&D investment at a ratio of between 5:1 and 7:1 in four areas that the government has identified as emerging innovation clusters (see chart). The Foundation has been capitalized with an initial $20 million and will be replenished if the resulting projects are deemed a success. The Foundation’s 13-person board of directors held its inaugural meeting late last week and was expected to resolve several issues, including its investment profile, investment targets and allocations, and investment criteria including leverage ratio. The Foundation is headed by Dr Yves Gagnon, outgoing associate VP research at the Univ of Moncton.

New Brunswick’s private sector economy is dominated by two large firms controlled by the Irving and McCain families. The companies under their control are considered relatively innovative in the forestry, energy and food processing sectors and account for the majority of private sector R&D spending in the province

“We have two large firms, a lot of smaller firms and not a lot in the middle,” says Betts. “Therefore we have the Technology Adoption and Commercialization Program designed to help businesses move along the continuum to commercialization. It will be managed within Business New Brunswick.”

UNIVERSITY INFRASTRUCTURE

The $15-million University Infrastructure Trust is broken into two programs, and endowed with surplus funds from FY01-02. A $10-million envelope will be distributed among the province’s four universities using the same weighting as the allocation of operating grants. That gives the Univ of New Brunswick 54% of the total, followed by the Univ of Moncton (31.2%), Mount Allison Univ (9.6%) and St Thomas Univ (5.2%). Universities are required to submit a list of proposed projects and the funding will be granted subject to negotiations between the institutions and the government. The program is intended to build teaching and research capacity within institutions. Eligible projects include new program development, computer equipment and matching funding for federal programs such as the Canada Foundation for Innovation.

A $5-million envelope is devoted to larger projects of strategic importance to the province. As with the larger program, the government will have final say on which projects are successful. The onus is on the institutions, however, to show that the projects are providing value.

“If we can show need, there may be more money. Not everyone is convinced this is the way to go,” says Pascal Roubichaud, senior policy analyst with the Department of Education’s post-secondary affairs branch. “The premier is close to the university. He’s a young person and very keen on making universities part of the innovation solution. Investing in R&D is a fairly new concept in New Brunswick.”

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