Jeremy Karwandy Interdisciplinary M.Sc. Candidate “Innovation and Firm Strategy”

1. Exploring Cross-sectoral Transfer of Regional Innovative Capacity: from agriculture biotechnology to health care Jeremy Karwandy Interdisciplinary M.Sc. Candidate “Innovation and Firm Strategy”

2. Can a developing innovative health sector leverage the innovation success of an existing Agricultural biotechnology sector? • Saskatoon’s agricultural biotechnology cluster • international reputation for its work on the development of new crop varieties • Recently capitalized on federal investment in genomic science … several projects on animal and plant science are ongoing • Health Care Innovation • A growing and aging global population drives the demand for innovative solutions in the health care sector. • A self-defining, local health innovation system could not be identified by participants in a recent study by Karwandy and Ryan (2003)

3. Project Framework – assessing regional competencies • Regional Competencies (competitive advantage) • The Resource Based View of the firm has been extended to the regional level (Foss, 1999; Mathews, 2003) • Provides the concepts needed to identify and categorize competitive advantage and its sources. • Lawson (1997) suggests communal competencies “supersede firm-level competencies in scope and persistence (Tallman, 2004: 10)

4. Basic Principles • Firms are distinct bundles of resources and capabilities • Resources: • finite assets • tangible or intangible • i.e. technologies, capital goods (FOPs), know-how, patents and IPRs • Capabilities: • ability to utilize resources • more than just procedures, they enable ‘economic learning’ • i.e. bring products to market faster, efficient implementation of org. change, effective researcher.

5. Basic Principles • Two types of competitive advantage • Resources + Capabilities = Competitive Advantage • Traded interdependencies (Economic) • Exist in the economic sphere • i.e. licensing, alliances, or acquisitions in which formal exchanges occur • UnTraded interdependencies (Social) • “based on shared knowledge for which no market mechanism exists” (Storper 1993, 1995, 1997 as cited in Tallman, 2004: 8) • i.e. conventions, rules, practices, and institutions • Implication: Two Parallel systems; untraded interdependencies reduce the transaction costs of exchanges related to traded interdependencies

6. General Observations • Distinction between short term and long term • RBV literature frames this argument as disequilibrium strategies (rent seeking or use of isolating mechanism) VS capability development (path dependent, long term process) • Håkansson (1993: 217) “we are looking for a collective business structure where stability and variety can be combined” (Foss, 1999: 7)

7. General Observations • Health Care: Resources • Professional + Managerial Labour • Hugely deficient … “the region has an overabundance of accountants and lawyers but not enough management-based professionals” that would be necessary for innovation-based initiatives in healthcare and IT (Karwandy and Ryan, 2003: 32). • Technical Labour • Is a plentiful resource but the communities ability to access and retain was questioned • Financing • Insufficient and unsophisticated … a cultural impediment was described as “a resistance to excel and to create wealth” (Karwandy and Ryan, 2003: 33)

8. General Observations • Health Care: Capabilities • Central actors to the innovation process • TRLabs – unique Industry-Government-University model for collaborative R+D and commercialization • Saskatoon Health Region – Business Development Office – a for-profit, arms length office well positioned to identify and define health sector market opportunities • QCC communications (private IT firm), Provincial government (financing and innovation agenda), NRC-IRAP (support of entrepreneurial efforts)

9. General Observations • Ag Biotech: Resources • Labour – generally a thick labour market exists with some deficiency in management labour • Finance – adequate sources for early stage public financing but limited amounts of private venture capital • Raw Materials – valuable local infrastructure (labs, greenhouses, field trials, etc) and significant knowledge production (IP, publications and citations)

10. General Observations • Ag Biotech: Capabilities • Centrality and Density measures identify 8 core actors (see Procyshyn forthcoming) • Agriculture and Agrifood Canada (AAFC), Ag West, Canadian Light Source (CLSI), NRC – Plant Biotechnology Institute (PBI), NRC – Industrial Research Assistance Program (IRAP), POS pilot plant, Saskatchewan Research Council (SRC), and University of Saskatchewan (U of S). • Public institutions exert the most influence over the ‘social fabric’ of the cluster (untraded interdependencies) • Strength: the creation and dissemination of knowledge • Shortfall: translation of research findings into commercial products

11. Discussion • Traded Interdependencies are less transferable across sectors • Based on industry specific resources and routines (labour, specialized inputs like knowledge, etc) • Distinction is needed between upstream and downstream activities • Saskatoon cluster is focused on upstream activities (R+D) • Upstream UnTraded interdependencies likely differ from downstream UnTraded interdependencies • Health sector development requires access to capabilities external to the firm … joint effort is needed to overcome the current lack in competencies.

12. Thank You ! Jeremy Karwandy University of Saskatchewan jeremy.karwandy@usask.ca