by Nathan White
Can New Brunswick become a hotbed for research and development?
Federal Liberal leader Stéphane Dion seems to think so, but his optimism is meeting with mixed reviews from the business community.
Dion made his first visit to New Brunswick earlier this month and took time to discuss the province’s future with the Telegraph-Journal. He believes Premier Shawn Graham’s goal of self-sufficiency by 2025 can be achieved, and that research and development can be a part of that, despite the region’s reliance on small- and medium-sized enterprises (SMEs).
Although the party has no official platform yet, it’s possible Canadians could be returning to the polls again this year. When asked what New Brunswick’s economy could expect if Dion were prime minister, he touched on ideas he believes could help the province commercialize research. He suggests better partnerships between universities and industry, tax incentives to encourage SMEs to do research, and the idea of a government “one-stop-shop” to help businesses develop technology.
“If he’s talking about following Graham’s lead, he’s going down the right road,” said Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, an economic and social policy think tank.
He agrees SMEs should be encouraged to develop their own products. He’d like to see existing tax credits for research and development “beefed up” and tied to a production credit.
“That way, if a company invests in R&D which then leads to products being produced and sold, the company gets credit for the exploration, production and manufacturing,” said Cirtwill.
He estimated that “the vast majority” of research money is being spent within universities, which traditionally aren’t well-known for bringing products to market rapidly.
“Most of our R&D money is spent at universities that don’t have to capacity to turn it into a product,” he said. “They themselves have admitted they’re very bad at commercialization of research.”
But John McLaughlin, the president of the University of New Brunswick, believes UNB is doing a better job of helping entrepreneurs commercialize in recent years.
For example, Fredericton’s Mathis Instruments Ltd. was launched through an incubator program at UNB. The company’s thermal sensors went on to win an international R&D 100 award that has been given to such notable innovations as Polaroid film, anti-lock brakes and the ATM.
“We’ve got a pretty good sense of what works and what doesn’t work,” said McLaughlin.
But Francis McGuire, CEO of Moncton-based Major Drilling, Inc., a world leader in specialized drilling, believes research and development is better left to the heavy-hitters: billion-dollar companies with the marketing clout to sell their products.
SMEs, on the other hand, should concentrate on adopting new technologies, adapting and innovating, rather than trying to compete on the development end, McGuire said.
“Adapting and innovating is really what SMEs do (well). To think that SMEs do research is really not (their strong point),” he said. But they can be successful “if you go find a best practice, and adapt it, and take leading-edge technology, buy it, adapt it and integrate it into what you do, take a little step beyond.”
McGuire says he’s just being realistic. His company has annual sales of $350 million and does next to no research and development because he says it can’t compete with giants such as Sweden’s Sandvik Group.
“They develop and bring to market a brand new product every single day of the year. They bring 300 to 400 products to market (because) they have a system of slamming it into their marketing and sales network with brochures, videos, training. It doesn’t matter what it is, they have a nice little process where it gets out to the sales network and, lo and behold, they’re out there selling it.”
“I would suggest that’s almost impossible to make work (for SMEs),” McGuire added, arguing that the costs of an international sales force would outstrip most SMEs’ existing revenues.
Cirtwill, on the other hand, sees that as a can’t-do attitude.
“That’s a standard ‘non-starter in Atlantic Canada’ response,” said Cirtwill. “We’re always looking at the glass as kind of half empty. We need to shake our heads and say that if we can come up with a product we need to find the resources to get the product to market.
“There are challenges, yes, but should we be holding off R&D until we get the resources together? I don’t think so.”
Stephane Robichaud is the New Brunswick vice-president of the Canadian Federation of Independent Business, which represents about 4,500 small and medium- sized businesses in the province.
Robichaud said Dion’s comments are “interesting” although he pointed out that his reaction to an opposition leader’s thoughts are different from his reaction to comments by a government minister.
“I think there’s some valid points being made as far as the need to recognize the types of investments that should be made by small- and medium-sized enterprises,” he said.
He said he views innovations made in the aquaculture sector in recent years as important research and development.
“The first five, six, eight years of their business was pretty much all R&D: learning how their products interacted with the environment, how to cultivate and manage with the varying weather patterns and the varying seasons,” he said.
Robichaud points to Néguac-based Maison BeauSoleil, an international exporter of high-quality oysters, as a company whose research hasn’t gotten its due because it’s never been “the flavour of the week.”
Don Dennison, executive director of the New Brunswick Business Council, said the research and development that is being done in the region needs to be recognized, and that companies need better access to things such as tax credits.
“Research and development in Atlantic Canada and New Brunswick is below national averages and that applies whether it’s a case of investment by private business, by government or by universities.
“The investment in R&D needs to be increased”Â‰”…”Â‰A lot of our businesses do do significant work in R&D and in demonstration of new technologies but”Â‰”…”Â‰the existing mechanisms to get tax credit for those investments are very cumbersome,” he said. “The business council feels (tax incentives) should be simplified and made more accessible to smaller companies. I don’t mean necessarily at the 10- or 15-employee level, but companies around 200 employees, even companies of that size find the claiming process for R&D not worthwhile and find it better to hire outside expertise.”
Although New Brunswick’s path to self-sufficiency is still cloudy, Dennison said Dion’s weighing in on the subject “is very welcome.”
“We’re pleased to see that Mr. Dion has taken note of the province’s commitment,” said Dennison.