Canada Should Adopt The DARPA Model For Funding Key R&D

Canada, and other developed countries, need to improve their ability to drive prosperity through innovation yet this goal has been elusive. A recent article in Harvard Business Review “Special Forces” Innovation: How DARPA Attacks Problems written by Regina Dugan and Kaigham Gabriel provides some new insight into this problem and in particular how Stokes’ research model can help to make better R&D funding decisions.

Root Causes For Canada’s Poor Innovation Performance

There are many reasons cited for Canada’s poor innovation performance such as low competitive intensity due to the small population, low population density due to the large geographic area, low VC funding, risk aversion, lack of entrepreneurial spirit, and lack of ambition.

There is also no urgent necessity driving a need to innovate in corporate Canada. Experts often look at Finland’s commitment to an innovation-led economic strategy which ‘arose due to the severe economic crisis of 1991 and simultaneous impact of near collapse of the domestic banking system and massive export disruption du to the disintegration of the USSR’. Urgent necessity only exists in several localized areas: 1) youth who see lean software start-ups as their only choice for a good career, 2) clean tech for those who think that global warming is real.  Canada’s complacency stems from being a stable country, high wages, social safety net, stable food supply, affordable cost of living such that the majority of population are well off.  Also Canada came out of the financial crisis fairly well off. Canada also has no natural enemies to drive defence R&D similar to how the cold war fuelled Silicon Valley’s development before the emergence of venture capital funding.

Canada’s Approach to R&D

Another leading reason often cited for Canada’s poor innovation performance is the approach used to fund R&D does not lead to economic benefits. Canada is an outlier in several respects when it comes to how R&D is funded namely:

1) Due to the absence of many large firms, R&D funding is driven by the government and directed to universities who don’t have a good track record when it comes to commercialization of the R&D funding; and

2) R&D funding is provided to firms indirectly through R&D tax credits as opposed to direct funding.

Industry does not fund more R&D because 98% Canadian firms are SMEs who can’t afford to invest much in innovation.  Most Canadian SMEs have no ambition to grow being content with selling to their local markets. There are also a lack of mid sized firms in industries who could commercialize R&D being undertaken in Canadian universities. 527 mid-sized companies reportedly vanished between 2007 and 2010 representing a drop of 3.6 per cent compared with a rise of 2.6 per cent of the overall number of new Canadian firms according to numbers compiled by the Business Development Bank of Canada (BDC).

There is also a lack of industrial strategy aligned with Canada’s strengths and misalignment between business and universities. No sustained plan to target new emerging industries is evident and large research endeavours tend to lose focus and attention as multiple competing agenda’s erode economic exploitation. So it is difficult to build momentum with misalignment, lack of focus, bureaucratic complexity, geography, lack of large firms, etc.  My own study in Alberta’s innovation system revealed the lack of focus and low return on investment from R&D investments made in Alberta universities over the last decade.

Dugan and Gabriel’s paper use Stokes’ research model to explain DARPA’s success. Stokes’ research model is very useful to understand why Canada has not fully benefited from the significant investments in R&D spent at Canadian universities over the last 15 years.

Stokes’ Research Model

Princeton’s political scientist Donald E. Stokes proposed the following 2×2 diagram to categorize research and naming each quadrant with a leading historical researcher who exemplifies each approach:

Stokes Research Model

Each quadrant categorizes research by answering whether the research has practical use and whether it is a quest for fundamental understanding. The answers to these questions defines four categories:

  1. Pure Basic Research (Bohr Quadrant) – Curiosity driven research that is directed at seeking foundational knowledge without consideration of practical use characterized by the work of Niels Bohr.
  2. Pure Applied Research (Edison Quadrant) – Pure applied research that is directed at finding a solution to a real problem with no interest in explaining the underlying scientific phenomena characterized by the work of Thomas Edison.
  3. Use-Inspired Basic Research (Pasteur Quadrant) – Research that is directed at expanding basic scientific knowledge in order to meet pressing societal needs characterized by the work of Louis Pasteur. DARPA is a leading example of an organization that has adopted this type of research with results demonstrated by their achievements as described in Dugan and Gabriel’s article.
  4. Unnamed Quadrant – Research that is neither scientifically interesting or useful was left unnamed.

Stokes’ model suggests that Canada’s approach to R&D funding at universities tends towards Bohr’s quadrant which is not clearly driven by practical use – although eventually it may be commercialized it is not at the speed-to-market demonstrated by DARPA in Dugan and Gabriel’s article.

Reorienting Canada’s NRC

The Canadian federal government has begun to make changes by reorienting NRC to focus on commercialization and is working to consolidate the many government R&D funding programs. This is akin to emphasizing Pasteur quadrant research in the Stokes’ model.  Also the federal government is seeking to leverage defence procurement through key industrial capabilities for better economic outcomes. Although far from a DARPA model this approach is linking a need to the drive research.

While the government is moving the right direction there has been significant push-back from university researchers who feel that pure basic will be harmed by focusing more on commercialization. Ongoing pressure by the Alberta government to change the university research system to foster more commercialization is running into increasing resistance from academics. Unfortunately the government-university debate is highly emotive and often presented as a black or white, either-or type situation by the university researchers. The Stokes’ research model suggests that Canada could take a more holistic view of allocating research funds. The Stokes’ research model also provides a means to take a more balanced approach by establishing how university R&D research investments would be allocated between the three quadrants.

Recommendations

Viewing Canada’s poor innovation performance using Stokes’ research model suggests several recommendations:

  1. Canada needs more Pasteur quadrant research and bring clarity/balance to how R&D investments are allocated to each of the Pasteur, Bohr, and Edison quadrants.
  2. To implement recommendation 1 a balanced team of leading thinkers and public/industry engagement should create and prioritize a list of pressing needs whose solution would create economic benefits and national/societal good for Canada.
  3. National priorities and industrial strategies should be aligned as previously discussed on this blog.
  4. Several grand challenges (not solutions) be selected from this list that should receive significant funding employing a DARPA style approach.
  5. Innovation performance metrics that measure time to market should be incorporated into the current innovation scorecard that has deficiencies.
  6. Adopt the DARPA approach (described very well by Dugan and Gabriel) to achieve faster-time-to-market results for Canada’s pressing needs identified in recommendation 2.

In terms of a balanced portfolio of R&D investments in Canadian universities more work is needed to determine what the optimum balance should be between Pasteur, Bohr, and Edison quadrants.

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