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A way to foster innovation: a venture capital district from Silicon Valley and route 128 to Waterloo Region

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Abstract

Although the US economy is traditionally cited as the model, there are other technology frontier examples, such as Canada, arising from strong linkages among firms, research communities, the financial community and government. This paper compares the most important American districts—Route 128 and Silicon Valley—with the Waterloo Region of Ontario. Second, it focuses on the linkage between venture capital and Canadian universities and shows some successful cases of knowledge and technology transfer at the University of Waterloo. Taken together, these sections provide a snapshot of the nature and status of technology transfer at Canadian universities and how it compares with that in the US.

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Notes

  1. The KBE term was defined: “[economy] which is directly based on the production, distribution and use of knowledge and information” (OECD 1996).

  2. We have to say that there are more specialized regional systems of innovation in Calgary, Edmonton and Saskatoon, but we focus only on the largest regional innovation system.

  3. During the Lisbon European Council (March 2000) Heads of State and Government established the guidelines in order to make the EU a more competitive and dynamic economy based on knowledge by 2010. In 2002 at the Barcelona European Council they agreed that: research and technological development (R&D) investment in the EU must be increased with the aim of approaching 3% of GDP by 2010, up from 1.9 % in 2000; the level of business funding should rise from 56% to two-third of total R&D investment, a proportion already achieved in the US and in some European countries.

  4. In 2000 Finance Minister Paul Martin posed this challenge, which was confirmed in the 2001 Speech from the Throne.

  5. This name was coined by Don Hoefler, a journalist, in 1971: it was the title of an article about the semiconductor industry written for Electronic News, a weekly industry tabloid.

  6. See Porter (1998, p. 199).

  7. Italian Venture Capital and Private Equity Association (AIFI 1986), British Venture Capital Association in UK (BVCA 1983), Australian Venture Capital Association (AVCAL 1992), Canada’s Venture Capital & Private Equity Association (CVCA 1974), Indian Venture Capital Association in India (IVCA 1998), and Taiwan Venture Capital Association (TVCA 1999) to list a few.

  8. Business angels are wealthy individuals (successful entrepreneurs or senior managers) who provide capital for a business start-up in exchange for ownership equity. They fill the gap in start-up financing between friends/family and VC.

  9. The Israeli experience probably is the most successful instance of diffusion of the Silicon Valley model of VC beyond US. See Avnimelech and Teubal (2004); Carmell and de Fontenay (2003).

  10. JDC is a special government agency under the purview of the Ministry of Construction and Transportation. It was established in 2002 under the Special Act on Jeju Free International city. See http://www.jdcenter.com.

  11. Even if, as Porter suggests, the development of innovation clusters should be market-driven; otherwise government has to invest over a long time: in Taiwan the government invested more than 1BUS$ during 1980–2002 and created the Industrial Technology Research Institute as a technology transfer organization.

  12. These data suggest a decline in the global attractiveness of the EU as a location for R&D as compared to the US. In 1991, both the US and the three larger EU countries (France, Germany, UK) attracted around 45% of all cross-country business R&D investment in the OECD area. In 1998, the three European countries attracted only 35%, whereas the US share had soared to 55%. (OECD 2001).

  13. See Bylinsky (1967).

  14. See Dominguez (1974, p. 47).

  15. See Rosegrant and Lampe (1992), Earls (2002), and Jaffe (1989).

  16. See Senge (1990).

  17. See Saxenian (1991), Rogers and Larsen (1984), Wolfe (1983), Kenney (2000).

  18. The World Trade Organization establishes minimum standards for the protection and enforcement of IPRs. See http://www.wto.org/english/tratop_e/trips_e/trips_e.htm

  19. As an example, we can mention that, traditionally, the Government pays about 85% of research at Stanford.

  20. Conflicts of interest may result from use of university facilities by a spin-off, alterated professional judgment by academics to further personal gain or control over research findings and withholding publications/data.

  21. We find the same approach in many developed countries, like UK and Japan.

  22. Previously, it had been necessary to petition each sponsoring agency, causing often considerable delays that extended beyond patent filing deadlines, preventing many invention disclosures from being licensed.

  23. The Bayh–Dole Act protects the public interest by authorizing a federal agency “to march in” and assert control over a federally funded invention.

  24. See OTL Patent Policy, http://www.otl.stanford.edu/inventors/policies.html

  25. OTL’s 1995–1996 income of $44 million represents over 10% of total research funds spent by Stanford. See http://www.otl.stanford.edu

  26. The Sponsored Projects Office had the responsibility for negotiating contracts with research sponsors, including the US government.

  27. February 28, 2004, Associated Press.

  28. The town had a large Lutheran community which established Waterloo College, in 1914; the College was soon affiliated with University of Western Ontario in London. And in 1959 it became the University of Waterloo: nowadays it has world-renowned computer science, engineering, and mathematics programs. The Lutheran college continued to operate independently first as Waterloo Lutheran University, and then in November 1973 it became an autonomous institution, Wilfrid Laurier University.

  29. Working Ventures Canadian Fund is Canada’s largest national VC fund launched by TechCapital Partners, a very specialized fund: its interest is in early stages companies whose technologies are 0.5 years away from commercialization and that are located in the Waterloo area (hands-on approach).

  30. Ron Craig, Professor of Business from WLU, is a member of the Board of Directors.

  31. The tax policy is favourable to private investors, which are eligible to receive a 15% tax credit of the amount invested, up to a maximum of $C75,000. Half of that credit will be received in the year of investment and the remainder will be received as the fund invests the money in local businesses.

  32. The IVR methodology was developed by Greenstone Venture Partners and Leading Edge BC. For each region the IVR was calculated dividing the value of technology companies existing from 1999 to 2004 by the amount of equity invested in technology companies in the same period.

  33. 16% without RIM. Source: Toronto Stock Exchange (TSX).

  34. Automation Tooling Systems Inc. (ATA, 1993), COM DEV International Ltd. (DCV, 1996), Dalsa Corp. (DSA, 1996), the Descartes Systems Group Inc. (DSG, 1998), MKS Inc. (MKH, 1997), Open Text Corp. (OTC, 1996), RIM (1997). Source: TSX.

  35. The same result by Ottawa and Vancouver. Source: TSX.

  36. See Mowery and Sampat (2005).

  37. Source: Statistics Canada; National Science Board, Science & Engineering Indicators, 1998.

  38. Cheriton, professor at Stanford and former UW student, is widely known for his research contributions in high-performance scalable systems, Internet architecture and hardware-software interaction, and successful commercialization of his research results. In addition to his achievements in research, he was involved in many start up companies both as co-founder and investor and acted as a technical adviser to many prominent Silicon Valley companies including Sun Microsystems, Cisco, Google, VMware and Tibco. In 2005 he was named one of Forbes Magazine’s Top Ten Venture Capitalists (http://www.forbes.com/2005/01/26/midasland05.html) owing to his seed investment in Google.

  39. See Bodell et al. (2006).

  40. UW is a co-op university, now it has more than 10,000 students in co-op studies (Source: UW). It is another way of blending academics with industry.

  41. Source: UWTLO.

  42. In March 2001, the UW-based Waterloo Biotelemetry Institute announced its collaboration with UW spin-off, Virtek Vision, expanding environmental monitoring performed at the institute to include genomic research in environmental areas. Source: UW.

  43. This notion of loosely affiliated and collaborative relationships among academic institutions has been proposed by the Ontario Council on University Research and is under discussion. In this area MARS Discovery District was created, an integrated commercialization model developed in Toronto to commercialize state-of-the art biotechnology research and leading-edge genomics and proteomics research.

  44. As an example, the government has created the National Innovation Centres (NIC) offering management expertise and support in order to establish networks and collaborations from local to national area. NICs can use national networks such as the Canadian Manufacturers and Exporters (CME) or the Industrial Research Assistance Program (IRAP) run by the National Research Council of Canada (NRC).

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  1. Department of Economics, Business and Statistics, University of Milan, Via Conservatorio 7, 20122, Milano, Italy

    Cinzia Colapinto

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  1. Cinzia Colapinto
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Correspondence to Cinzia Colapinto.

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This work was written during a research visit to the Department of Economics, University of Waterloo, Canada. I would like to thank Christina Fader (University of Waterloo), especially Franco Papandrea (University of Canberra) and the contribution of an anonymous referee in reviewing this paper.

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Colapinto, C. A way to foster innovation: a venture capital district from Silicon Valley and route 128 to Waterloo Region. Int. Rev. Econ. 54, 319–343 (2007). https://doi.org/10.1007/s12232-007-0018-1

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