There are many challenges in the commercialization of physical technologies. and in creating world-class companies. But one of the greatest and most commonly cited challenges is Canada’s weakness in the commercialization of inventions.
This Impact Brief examined how the lack of appropriate government programs contributes to this problem. Using scientific research as a starting point, we embarked on a theoretical exercise to examine what support would be available if we chose to pursue the commercialization of specific university technologies.
The first problem we identified is that the way governments classify innovative technologies . Government agencies and strategies typically focus their investments on four main areas: information technology (IT), biotechnology, cleantech and advanced manufacturing. But they omit the classification for physical technologies, which we define as technologies arising from academic research in faculties of engineering and departments of chemistry, physics, earth sciences, and space sciences.
But physical technologies have a much greater impact on the economy of Canada than other sectors:
- They contribute almost eight times as much to Canada’s GDP as does the combined effort of the Information communications technology (ICT) and biotechnology industries.
- Industries employing physical technologies substantially outspend traditional ICT and pharma sectors when it comes to R&D.
- Worldwide, leading physical technology companies spend more in total on R&D than either ICT or life sciences, and are granted a significantly larger number of patents.
Physical technologies are distinct from other types of technology because of their commercialization path. Information technologies have a simple and well-known commercialization path without significant technological risk. The risk in IT is usually in market acceptance, and it is possible to obtain private capital to fund development as soon as some market traction is shown.
Life science commercialization is lengthy and costly. There are high technological risks that require substantial testing both of efficacy and potential for harm to get to market. But there is a system in place to support the path from research to market, albeit a complex system that requires companies to go through hoops to access federal and provincial funding, each of which require some matching. In biotechnology, there is often a known market which can easily be assessed prior to commercialization. Thus, much of the risk is technological.
In the physical technologies, there is another long and complex path to commercialization, understood best by the process to take a scientific discovery through the nine different Technology Readiness Levels before market readiness. Whereas in IT and biotechnology, the market can be identified very early in the path to commercialization, in physical technologies one must reduce the technological risk to some extent by the creation of a prototype before testing for market acceptance.
With such a path ahead, there are no government programs that support the early-stage physical technology commercialization without requiring some external matching of funding. And yet, due to the risks associated with physical technologies, the probability of securing external funding is very low, particularly without the ability to obtain market validation until product development has reached a stage where customers can understand its potential applicability. Without market validation, venture capitalists and other investors will not support a company. However, without their support, no matching funds are available so it is easier just to license the technology to a third party who can afford the investment. There should be a system that ensures that findings from basic or applied research are not left without further support as attempts are made to commercialize discoveries.
In particular, the process of requiring matching funds for each program needs to be reevaluated. Companies in biotechnology and in physical technologies have to go to tremendous lengths to secure funds when matching funds are introduced as a criterion for program eligibility.
Given the contributions of physical technologies to the Canadian economy, governments at all levels should examine whether this is an area that should be supported more broadly. If so, they should seek to establish programs that fully support commercialization efforts in that domain.