OTTAWA — Critics are calling for a public review of the federal government’s superclusters innovation program after The Logic revealed an industry department advisory panel recommended changes to how the organizations work.

However, three confidential assessments the department commissioned last year as it considered the program’s future argue the program is succeeding at getting innovative companies to collaborate and helping them access new markets.

The Liberal government announced the supercluster program in the March 2017 budget, pledging up to $950 million over five years for the organizations, which bring together multinationals, small firms and research institutions and funds R&D, training and other projects. The government believed it would foster collaboration, boost business investment and create jobs. As The Logic first reported on Monday, with the initial term due to expire in March 2023 the five non-profits have asked Ottawa to renew the program and give them an additional $1.5 billion to distribute. 

That has spurred some critics of the superclusters to call for a public assessment of the program—or its end. “What we cannot say right now with the requests of the superclusters is [what] are the results,” Conservative Party industry critic Gérard Deltell said in an interview with The Logic. While it’s not necessarily opposed to the program or other Liberal innovation initiatives, the opposition party is “asking the government to review” all its innovation programs “before making any new announcement.” 

Ben Bergen, president of scale-up lobby group the Council of Canadian Innovators, said he would rather see the government try to boost innovation by reforming federal procurement policy and the scientific research and experimental development tax incentive than renew funding for the superclusters, which he called “a misguided program that failed to live up to its own hype.” 

Innovation, Science and Economic Development Canada (ISED) declined to say whether it has asked the finance department to extend the supercluster program in Thursday’s budget. 

However, last year ISED began a private push to evaluate the superclusters’ impact. As The Logic first reported this week, it appointed a panel of business executives to make recommendations for the program’s potential second mandate. According to documents The Logic obtained from a source, for each supercluster it also conducted its own Strengths, Weaknesses, Opportunities and Threats assessment (SWOT)—a framework commonly used to evaluate companies and other organizations—and commissioned Ernst & Young (EY) to conduct an analysis of the program as a whole.

All three ISED-commissioned reviews suggest the supercluster program has succeeded in getting participating firms to work together more, the documents show. In a web survey of 176 firms, which EY conducted in August and September 2021, respondents said they had formed an average of four partnerships via their supercluster involvement and the vast majority expected those links to last.  

“We’ve got really good stories to tell about why this concept of business-led collaborative innovation is good policy for Canada,” Sue Paish, CEO of the Vancouver-based Digital Technology Supercluster (DTS) told The Logic. The organization has backed projects to apply technology to health care, natural resources and traditional industries as well as worker training. 

The DTS is “bringing partners together in consortia from multiple different industries, who are realizing they can apply the same technology solutions to solve seemingly disparate challenges,” according to a December 2021 ISED deck that The Logic obtained from a source. It’s also getting “traditional competitors” to work together. However, among the weaknesses its SWOT lists is that the supercluster “may not see ‘cluster building’ results as quickly as [others] focused on just one industry” because of DTS’s cross-sectoral approach, and the deck suggests the organization be encouraged to develop more specific priorities for future funding. 

The superclusters also point to the opportunities for firms to develop new products and scale up their operations. Hamilton, Ont.-based Next Generation Manufacturing Canada’s (NGen) funding has led to the creation of 15 new firms and 131 new manufacturing processes, according to the ISED deck. 

Participants in NGen’s 40 completed projects, to which it provided $45 million in public funding, have generated more than $1.85 billion in revenue from sales and IP licensing, according to CEO Jayson Myers. “There were some real blockbuster projects,” he said. For example, in January 2021, NGen committed $5.05 million to Toronto-based Providence Therapeutics and its partners for a $10.1-million effort to build out the production capability and supply chain for its COVID-19 vaccine; it’s since been able to license out its technology and manufacturing process. 

NGen’s returns to date make the projects it puts together “a pretty attractive value proposition” for institutional or private-equity investors, Myers said, which could provide the supercluster an alternative source of revenue. 

Some superclusters have also attracted attention abroad and helped members enter new markets, according to ISED’s SWOT analysis. Regina-based Protein Industries Canada aims to increase Canada’s national plant-protein processing capacity by up to eight million metric tons. “We can’t consume that as a country—we just don’t have enough people,” noted CEO Bill Greuel. He and Paish both see export opportunities in the Asia-Pacific, Europe and the U.S.

The program is “showing strong results and exceeding program targets in many areas,” said ISED spokesperson Alison Reilander. She said the superclusters are “on average, doubling the level of expected industry funding and creating triple the amount of projected IP assets per project.” 

The superclusters’ approach to intellectual property has long been a target for the program’s critics. Both the Conservatives’ Deltell and the CCI’s Bergen told The Logic this week they support a recommendation from ISED’s advisory panel that if the government renews the program the superclusters should prioritize Canadian-headquartered firms and Canadian-held IP.

“The notion that federal funding should be focused on domestic firms commercializing data and IP is definitely the right mindset,” Bergen wrote in an email. “However, there are much better ways to go about it than doubling down on the superclusters.“

The five organizations have long pushed back on IP-related criticism, arguing that project participants by default control the inventions they produce and must also produce a joint IP strategy in advance. But Jim Hinton, a lawyer and founder of the IP-services firm Own Innovation, said that process puts small firms at a disadvantage in negotiations with multinational partners that have existing patent portfolios and teams of lawyers. 

As of September 2021, program participants had generated a combined 863 new patent applications, trade secrets and other rights, against a target of 114, or one per “technology project,” according to the ISED deck. 

“The bar is very low,” Hinton told The Logic. A single project could produce “a dozen forms of IP, no problem and that doesn’t mean it’s any more successful than another.” For example, a new technology might yield patents on software, hardware and the interaction of the two, as well as trade secrets around algorithms, data and customer lists and industrial designs, he said. 

“It doesn’t make any sense to count those things—it’s an artificial metric,” Hinton said, calling for the superclusters to instead focus on ensuring Canadian firms are increasing their share of global IP in their target sectors.