CAIRN
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Knowledge Impact in Society

CAIRN Research Areas

The work areas of the CAIRN include three areas of agricultural innovation and four areas of policy analysis.

Areas of Agricultural Innovation
Areas of Policy Analysis
Primary Competitiveness & Productivity Innovation Systems Analysis
Functional Food Processing Regulatory Systems Analysis
Bio-Energy/Bio-Product Development Industry Coordination
  Innovation Impact and Measurement

Area 1 Primary Competitiveness and Productivity

Industry Liaison - Richard Gray

Agriculture is very large economic sector in Canada. Farm sales alone exceeded $41 billion in 2008. With upstream providers of inputs and downstream processor of products, the sector makes up 8% of the GDP in the Canadian economy. The sector is not only a major source of economic activity; it also generates foreign exchange and contributes to the well being of Canadians through the production of healthy food, bioproducts and environmental amenities.

Innovation is critical to the sector’s future well being. Innovation enhances total factor productivity, thereby lowering per unit production costs. Given the size of the sector, even a 1% productivity gain generates an additional $400 million per year in value added at the primary level alone. These gains also allow the sector to profitably compete in the global market place. New organizational structures and regulations can create greater synergies in R&D activity and create incentives for new products and processes to be developed.

Despite the documented high rates of return, productivity enhancing innovation faces many policy challenges. For instance, while conventional breeding served the industry well for many years, a lack of property rights has limited investment in the rapidly expanding field of genomics. Similarly, over the last two decades we have seen a slowdown in essential public research funding for productivity enhancing actives (e.g., wheat breeding) and a shift towards industry research funding (e.g., check-offs administered by Western Grain Research Foundation as well as large multinational funded private research [e.g. canola]). These shifts in public and private funding have been accompanied by a shift in research agendas (e.g., greater concern for environment stewardship, food safety/food quality, etc), which further contribute to policy challenges.

In crop research, large private research firms have focused their effort on canola, corn and soybeans. While these efforts have stimulated private research, they have also raised issues over freedom to operate and the role of the public sector. Regulations and trade barriers have impeded gains in biotechnology. Despite high returns, genetic research for other crops suffers from chronic underfunding. While successful models of levy funded research do exist in Canada and abroad, most crops continue to be underfunded. Despite large economies of scale, much of the productivity enhancing research remains fragmented because of a lack of co-operation and coordination among numerous jurisdictions and players. As an independent network of policy researchers, CAIRN can play an important role in helping the sector improve the system for this area of agricultural innovation.

Project ideas in this area coming soon!

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Area 2 Functional Food and Food Processing Development

Industry Liaison: Shelley Thompson

The food processing industry is a large employer and an important potential source of economic growth. Consumers are increasingly demanding a wider range of convenient, safe, nutritious, and high quality food, demands that are being met through rapid innovations in food systems. Innovations in functional food and nutraceuticals not only satisfy consumer demands, but may also have the additional benefit of lowering health care costs, something that is increasingly of national importance given the aging population and burgeoning health care costs. Food innovation is also essential to remain competitive in an increasingly global trading environment.

Innovation in the food sector faces many challenges, particularly with respect to commercialization. In some cases, incomplete property rights impede research. Regulatory product testing and labeling requirements for new products are often viewed as costly and cumbersome, and also discriminatory compared to those in competing countries. Food safety requirements can be onerous and complex, particularly given the jurisdictional differences that often exist. Regulatory issues are especially difficult policy issues, given the need to maintain consumer confidence in the system. Innovation is particularly complicated for health related food products because many of the economic gains from adoption accrue to savings in public health care costs, which are not fully reflected in consumer demand.

The economies of scale in product development and processing, combined with a limited domestic market in Canada, make access to the larger global market imperative for successful commercialization. The harmonization of standards and international agreements is vital to access larger markets and to provide adequate returns to research investments. By addressing these issues, CAIRN research can help to improve the innovation system for functional food and food processing development.

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Area 3 Bio-Energy/Bio-Products Development and Environmental Stewardship

Industry Liaison: David Sparling

There is a growing recognition that with innovation, agriculture can play a very important role in providing new energy sources and in reducing greenhouse gas emissions through renewable energy, bio-products and carbon sequestration. In the areas of bio-energy and bio-product development, the industry is still in the very early stages of development and appears to be under-performing relative to its potential, especially compared to conservation technologies (e.g. zero tillage). Unlike the situation in the U.S. and the E.U., Canada’s policy with respect to bioproducts is undeveloped. Canada has enormous biomass resources but no real strategy to build an industry on that potential. This includes technologies like first and second generation biofuels, the biological co-generation of fuel and electricity, biomass burning, wind and solar technologies, as well as bio-products like fibre (used for industrial products) and crop biocontrols (used in insect, weed and disease management). The range of products and activities is broad and innovations in this industry will not only affect the products that society uses but also the processes by which products are produced and the nature of the interactions between farmers, food firms and the environment.

Among the specific challenges facing the bioenergy/bioproduct sector is the notion that the markets for many of the end products do not yet reflect the environmental benefits that they confer on society. Until policies can create more complete incentives, environmentally friendly products are undervalued but yet are forced to compete directly with conventional products, despite their high initial research costs. In many cases, since these products are new, an existing industrial base to fund the research is not yet present. Other challenges include a substantial testing and regulatory approval process, as well as tariff and non-tariff trade barriers. While better defined property rights are important in creating commercialization incentives, it is also important that these new rights do not limit access for new industry players. Similarly, defining trade rules that can govern the international exchange of these products is important.

For those products that contribute to reductions in greenhouse gases, the development of a market based approach to limit GHG emissions is essential to create the economic incentives for innovation in these emerging technologies. Valuing carbon in the marketplace will help the industry achieve its potential but there are many policy questions related to price discovery and the impact that carbon markets might have on both industry and the environment. CAIRN will work with emerging industry and public institutions to develop policies required to support an effective system for this area of agricultural innovation.

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Area A Innovation Systems Analysis

Area Leader: Murray Fulton

This area of research explicitly examines innovation as a system, where governments, industry organizations and the private sector interact to provide a conduit for flows of new knowledge to be translated into innovation. While the other CAIRN areas of innovation policy analysis are each important components of innovation systems, researchers in this group will explicitly examine innovation as a system to help identify successful strategies.

The scope of analysis will include international, national, regional and local cluster systems of innovation. While some of the analysis will deal with innovation on a broad scale, attention will be paid to working with industry groups to examine innovation for a particular sector and its products. Other analysis will look specifically at mechanisms of international knowledge flows and innovation. Descriptive and comparative analysis will help identify those systems that are most effective in dealing with different areas of innovation. Theoretical and empirical analysis will help reveal weaknesses in existing systems. Particular attention will be paid to how government policy driven by jurisdictional dynamics is impeding innovation processes in Canada.

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Area B Regulatory Systems Analysis

Area Leader: James Vercammen

Regulation is a major factor in determining the success and impact of innovation in Canada’s agriculture and food sector. Regulation affects all facets of the agricultural supply chain including research and development, commodity production, processing and packaging, commercialization, marketing, and trade. As new technologies are developed, it is important to ensure that they are consistent with the regulatory regime of Canada and its trading partners. Similarly, regulatory frameworks need to anticipate the type of innovation that is likely to occur and be responsive to Canadian firms so as to encourage new product development and facilitate commercialization, while at the same time protecting consumers and the environment. Institutions and regulations in any future innovation strategy must therefore account for how emerging technologies will fit into the market place but also how they will impact safety and the environment.

With regard to the agriculture sector, innovation and regulation impact each other in two distinct ways: (1) existing regulations can constrain or stifle welfare improving innovations; and (2) new innovations will dictate the need for new regulations, which can, in turn, better guide innovation in emerging areas. While regulation is very important to maintain consumer confidence, it also often represents a major impediment to innovation as a source of costs and delay in the innovation process. In addition, many industries choose to self regulate through use of private standards.

CAIRN will deal specifically with the relationship between regulatory processes and innovation by examining the interface between regulation and private standards to ensure that regulations give strong incentives for appropriate types of private standards to emerge. Working with industry, CAIRN will study the economic impact of Canadian and foreign regulations from a social benefit and cost perspective. This could lead to recommendations for change in specific regulations or in regulatory frameworks for new technologies. CAIRN researchers will also examine various national and international regulatory systems that could allow regulation to be flexible, more compatible with other jurisdictions, and more responsive to new products. The research could also examine issues of standards harmonization and international data sharing.

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Area C Industry Coordination and Commercialization

Area Leader: Stavroula Malla

Innovation activities are shared by governments, producer organizations and private research firms through a wide range of contractual and institutional arrangements. There is significant evidence of the role and value of public/private collaborations in enhancing innovation and commercialization success. Research funding structures, intellectual property (IP) right laws, the ownership and management of IP and mechanisms for commercialization are inextricably entwined and play a critical role in successful innovation.

Recently, new domestic laws, international agreements and technological improvements have significantly enhanced the ability of private industry to protect IP resulting in significant private investment. While basic research has continued to be undertaken mainly by public institutions, the public sector has also moved to protect and actively commercialize IP. For products of biotechnology the exclusive ownership of key pieces of IPRs give research firms some degree of market power. The resulting freedom to operate issues can strain long-term relationships, fragment knowledge, and impede innovation.

International flows of capital, knowledge, and other inputs, along with access to markets, are critical to remain globally competitive. The management and commercialization of IP continues to evolve in many jurisdictions around the world, as public institutions strive to act in the public interest by developing policies to facilitate revenue generation and commercialization, while the producer associations and the private research sector strive to find better arrangements for commercialization.

It is evident that the commercialization of many forms of new knowledge continues to be a complex issue in Canada and abroad. This area of policy research will examine how innovation activities in the agri-food sector are funded, coordinated and commercialized, including the complex process of moving innovations between research institutions and commercial firms, and the role that IP plays in this process. CAIRN will continue to work with industry to identify successful commercialization strategies and to examine other barriers to commercialization, including size of market issues, financing issues, and regulatory and jurisdictional issues.From an international perspective CAIRN research will analyze the role of migration, direct foreign investment, non-tariff trade barriers, and other factors that impact commercialization.

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Area D Innovation Impact and Measurement

Area Leader: Derek Brewin

As the chief indicator of innovation system performance, there is an ongoing need to measure the economic costs and benefits to research and development (R&D). One of the prerequisites for investment in R&D is an expected high rate of return. While high returns to R&D have been well documented in the past, they cannot be taken for granted. Recent studies suggest lower investments in R&D are part of the reduced rate of productivity growth in farm level productivity.

Research is an incentive driven process that is impacted by the needs of individual groups who undertake it. For the public sector, the benefits, costs and distributional effects for the entire country are important. For producer groups, support for research levies is dependant on expected grower returns. Similarly, private research firms need to see an expected return on their investments. Each innovation system will have implications regarding how much research is done, its effectiveness, as well as who will pay for the research and who will benefit.

The measurement of R&D impacts is often complex. The returns to innovation may not be reflected in a specific output, but are evident in measures of total factor productivity, or in the case of basic research, downstream innovation benefits. International, spatial and cross commodity research spillovers are often important. Transformative innovation can lead to outcomes that are not anticipated at the time of investment. Long lead and lag times further complicate the analysis. Finally, research decisions are made ex ante meaning that the returns cannot be directly estimated but have to be anticipated based on past relationships. Given these complexities, a rigorous approach is needed to obtain reliable estimates. CAIRN will work with public and private institutions to provide these estimates and to develop knowledge that will improve the understanding of the returns to research, and importantly, what seems to be working and what does not.

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