Innovation and Commercialization in the Canadian Bioproduct Industry

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Innovation and Commercialization in the Canadian
Bioproduct Industry

• Pamela Laughland
• John Cranfield
• David Sparling
• University of Guelph

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Motivation

• Industrial biotech an growing area of interest
• Shift waste into something of value
• CNDs resource based gives it a competitive
  advantage vis-à-vis biomass
• Product development process is complex
• Gap regarding commercialization and innovation
  activities and related drivers
• Information gap to help policy makers understand
  better firms activities, industry structure and
  characteristics

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A changing industry?
2003 2006
Number of firms 232 239
Years in BP 12.85 9.83
Firm size ( S/M/L) 66/17/17 84/8/8
Average products 4.5 6.1
Firms w/ collaborations 84 80
Firms w/ patents 53 Cdn, 34 Foreign 66 Cdn, 72 US, 43 EU
BP RD exp/BP employee 12,270 20,464
Total BP revenues 3.1B 1.8B
BP revenue as of total 46 48
BP revenue/BP employee 398,633 442,443
Source Statistics Canada, Bioproducts
Development Survey, 2003 2006
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Primary focus of enterprises
Source Statistics Canada, Bioproducts
Development Survey, 2003 2006
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Regional location of enterprises
Source Statistics Canada, Bioproducts
Development Survey, 2003 2006
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Raising capital
Source Statistics Canada, Bioproducts
Development Survey, 2003 2006
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Raising capital, cont
Source Statistics Canada, Bioproducts
Development Survey, 2003 2006
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Conceptual framework

• Portfolio of products/projects add or trim?
• Uncertain of benefits
• Maximize CE of portfolio of products under
  development or on the market
• Choose level of hard and soft capital allocated
  to the respective product/project
• Subject to a resource constraint on (hard and
  soft) capital
• Non-negativity constraint on hard soft capital

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Conceptual framework, cont

• FOC equates net marginal benefits
• Corner versus interior solution
• Optimal level of hard soft capital expressed as
  a share of overall capital

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Conceptual framework, cont

• Resource based theory of the firm sustained
  competitive advantage arises from heterogeneous
  resources and inimitatability

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Methods Data

• Share of (hard and soft) capital allocated to
  each product is a latent variable
• Map to a count of the number of products
• Negative bionomial count data model of number of
  products under development or on the market
• Variables capturing internal and external
  resources to the firm (and how these might be
  deployed strategically), market environment

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Methods Data, cont

• 2003 2006 Bioproducts Development Survey
• Internal IP firm size age BP RD spending per
  employee early/late focus BP share of revenue
  benefits, barriers and strategies for
  development private firm
• External access capital SRED collaborations
• Market sub-sector of predominant focus region

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Benefits, barriers strategies

• Likert scale response items
• 1low importance, 5high importance
• Analyzed using PCA (with varimax rotation)

2006 results Cronbach a Explained variation
Product/sales benefits 0.82 39
Cost/environ benefits 0.70 21
Technology commercialization barriers 0.81 35
Bio-product specific barriers 0.77 21
Accessing external knowledge markets 0.77 37
Developing internal knowledge markets 0.72 12
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Benefits, barriers strategies, cont
1low importance, 5high importance
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Marginal effects internal factors
2003 2006
IP n.s. 2.37
Small firm -2.03 n.s.
BP RD exp/BP employee -0.002 0.0001
Late focus -2.70 n.s.
BP importance n.s. 4.12
Product/sales benefits 0.52 n.s.
Cost/env benefits n.s. 1.19
Accessing external knowledge n.s. 0.68
Developing internal knowledge n.s. -0.70
Private firm n.s. 2.44
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Marginal effects external factors
2003 2006
SRED 1.37 n.s.
Total collaborations 0.25 0.12
Target met n.s. -1.73
Target not met n.s. n.s.
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Marginal effects market factors
2003 2006
Biochem 1.70 4.38
Biofuel n.s. -2.04
Biofibre n.s. -3.31
Atlantic -0.91 n.s.
SK/MB 1.88 3.64
Alberta 2.25 n.s.
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Take home points

• From 2003 to 2006, more smaller firms with
  slightly higher count of products
• Impact of importance of benefits changed
  product/sales versus cost/environmental
• IP, collaborations BP RD expenditure
  positively associated with count of products
• Large effects associated with sub-sector some
  regional variables

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Future work

• Need to be able to link databases to create
  panels
• Link firms to measure performance in more
  desirable way
• Understand industry dynamics better
• Distribution of BP importance
• Network effects
• Non/semi-parametric analysis

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THANK YOU
Any questions?
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Factor analysis benefits, barriers strategies
Benefits Barriers Strategies
1) Environmental/ cost benefits Reduced energy consumption Reduced production cost Reduced envtl damage Community development Bioproduct specific barriers Unreliable quantity quality of biomass Higher transportation cost of biomass Higher price of biomass Accessing external knowledge markets Acquired/used knowledge from industry public Used scientific databases Entered foreign markets Began new RD project
2) Product/ sales benefits Increased product range Improved product value/performance Developed new market/products Increased sales/mkt share 2) Tech development barriers Inadequate product certification Restrictions on IP rights Lack of financial capital Regulation Difficulty entering market Lack of skilled personnel 2) Developing internal knowledge resources Developed firm policies for knowledge/ IP protection Conducted IP audit Developed/encouraged staff education/upgrading