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Public Funds Vital To Competition in
Vital To Stay Competitive
From the Toronto Star Feb. 18, 2005. Business Section Front
By: David Crane
If you want a sense
of what many of our manufacturers and their employees are up
against, just take a look at the plight of Axiom Group Inc. of
Aurora, a small auto parts company.
Axiom was hit with
a demand from its largest customer, Intier Automotive Inc., to
immediately cut its prices 31.8 per cent, a demand that was truly
life-threatening for the company. For its part, Intier may have been
passing on similar price-cut pressures it was getting from its own
customers, the big automotive assemblers.
The reality is that
the competitive environment facing manufacturers has never been more
intense, as they contend with demands for lower prices or risk
losing their business to lower-cost companies in Mexico, China,
India or elsewhere offshore. We are living in a new era, and many
companies may not survive unless they can find radically new ways to
produce what they sell, move to new and higher-value products, or
relocate their businesses in low-cost jurisdictions. It is a
Darwinian world where only the most adaptable survive.
This kind of
change, to be sure, is not new. From coast to coast we have seen a
succession of plant closings as new competitors, or new
technologies, displaced the old.
But the intensity
of the global competitive environment, and the pace of technological
change, are much greater than in the past, raising critical
questions about what kinds of activities will sustain our economy
and our communities in the future.
A study by the New
York Federal Reserve has argued that future jobs and wealth creation
will have to come from new activities, not from trying to protect or
artificially resuscitate old activities. This is a harsh message and
why innovation is so important for Canada. But efforts to advance
our capacity for innovation too often run into ill-informed and
ideological blinkers that reveal a shocking lack of understanding of
the process of innovation and wealth creation.
criticism of Technology Partnerships Canada, a federal program
launched in 1996 to help bring new technologies to commercial
realization, provides a good example. Yet, according to an
independent audit, the program has delivered "a high level of
technical success" for the participating companies, leading to
"improved technical capability and firm competitiveness."
Partnerships was established to help companies advance technologies
that, without some public assistance, would be unlikely to be
developed, thus depriving the Canadian economy of future
technologies and jobs. The federal program provides about 30 per
cent of the cost of such projects, with the amount repayable in the
form of royalties or direct payments on commercial success. Most of
the projects go to small- and mid-size companies in Canada.
mid-size companies have benefited, such as Research In Motion Ltd.,
Neurochem Inc., DALSA Corp., MacDonald, Detwiler and Associates
Ltd., QuestAir Technologies Inc., Wi-Lan Inc., Westport Innovations
Inc., ATS Automation Tooling Systems Inc., LPP Manufacturing Inc. (a
Linamar Corp. subsidiary), SemBioSys Genetics Inc., Mechatronic
Systems Inc., Northstar Energy Corp., ID Biomedical Corp., Com Dev
Ltd., Sierra Wireless Inc., Zenon Environmental Inc., CRS Robotics
Inc., Celmed Biosciences Inc., Tundra Semiconductor Corp., Ballard
Power Systems Inc., Gallium Software Inc., Mosaid Technologies Inc.
and Iogen Corp.
In fact, at the end
of 2004 some 673 projects were being financed by the technology
program, with commitments of $2.7 billion toward projects with a
total investment of $13.6 billion, with the bulk of the financing
coming from the companies themselves.
But without the
federal funding, most of these initiatives by companies to develop
new products or processes would not have been undertaken, based on
findings by the external audit.
As we look to the
future, we will continue to need risk-sharing between the private
sector and government to bring forward high-risk projects that, like
RIM's BlackBerry, have the potential to generate new jobs and wealth
for Canada. Fortunately, Industry Minister David Emerson says he
wants to make the program even more effective and extend it to a
wider array of industries.
The reality is that
in the fierce competitive world it is only through such
collaboration that we will build a successful economy that can
sustain a successful society.
Indeed, we will
have to do more — including more demonstration projects for new
technologies and smarter use of government procurement to encourage
This is one reason
why next week's federal budget is so important.
If the incentives
and funding for innovation are not there, we are in serious trouble.