Enhancing Rural Innovation in Canada

Report

OECD Rural Studies

19 March 2024

3. Policies and programmes for innovation and entrepreneurship in Canada

Abstract

This chapter explores the evolution of major federal, provincial and territorial policies supporting innovation and entrepreneurship in rural areas of Canada.

Key messages

Like some other federal countries, Canada has national and provincial/territorial level policies to support innovation and entrepreneurship. Canadian provinces and territories play a particularly important role in most aspects of economic, environmental and social development policy, including policies that affect innovation. As such, entrepreneurs in Canada navigate this multi-level governance landscape when they search for support for innovation and business development that includes federal government line agency programmes, federal regional development agency (RDA) support, provincial and territorial programmes and, in some instances, local government support. There are also many diverse Indigenous governments, Indigenous Development Corporations, Tribal Associations and Indigenous organisations with policies and services for innovation and entrepreneurship. Municipal/provincial/territorial and federal governments, in many cases, devolve responsibility for the deployment of funding programmes to non-profit community entities, further complicating the Canadian funding context. For rural entrepreneurs, core national and provincial/territorial support mechanisms may overlook the types of innovation that are more common to rural areas, such as those that focus on user-based or solution-based challenges and those that may be suitable for accessible rural versus remote rural areas, because of the heavy focus on science, technology and innovation (STI). On the other hand, federal regional innovation programmes tend to be more adapted to the needs of both rural and urban entrepreneurs.

In Canada, there are ample examples of innovative entrepreneurship in rural and remote regions. For example, the case studies conducted for this report reveal multiple innovative examples of Indigenous entrepreneurs and communities playing leading economic development roles in their rural areas. And yet, challenges related to accessing finance persist for underserved populations, including Indigenous communities. Federal and provincial/territorial innovation strategies could offer better support. In many rural areas, legacy institutions from the Community Futures Program (CFP), as well as local civil society organisations, serve critical roles by providing technical support and acting as brokers with local financial intermediaries to overcome such challenges. They help to link rural entrepreneurs to the full array of resources supporting innovation.

Canada has strong performance in basic research and development largely due to strong federal and provincial/territorial financial support for post-secondary-based research. While post-secondary-firm linkages are a catalyst to support the upgrading and upskilling of rural individuals and firms that contribute to “user-driven” innovation, they are not as strong in: i) facilitating “demand-driven” innovations;1 ii) taking innovative ideas to commercialisation; or iii) providing tailored upskilling and reskilling opportunities for rural areas. Nevertheless, there is an opportunity to learn from at least one province, Quebec, that has a more defined and integrated approach to promoting university-firm linkages through research institutions that serve priorities in rural areas, Indigenous communities and climate change while encouraging research and innovation.

Canada has the largest rural and remote land mass of all OECD countries. The 9.2 million square kilometres (km²) of rural and remote land mass in Canada outsizes that of other large OECD countries such as the United States (8.9 million km²), Brazil (8.3 million km²) and Australia (7.6 million km²), according to satellite mapping and settlement patterns (CIESIN, 2013[1]).

Based on population grid estimates, one in five people live in rural and remote areas of Canada. According to the OECD (2020[2]), close to 60% of Indigenous peoples live in predominantly rural regions (60%), whereas 27% of non-Indigenous populations live in predominantly rural regions. Rural and remote areas comprise 98% of the total landmass and approximately 18% of the population. Rural and remote communities produce approximately 30% of Canada’s gross domestic product (GDP), with 220 000 rural businesses representing nearly 17% of Canada’s employers in 2021 (Government of Canada, 2022[3]). Additionally, many census metropolitan areas (CMAs) have strong rural characteristics such as agricultural lands, making rural areas within urban metropolitan areas substantial. According to the 2021 census, 87% of the land within urban areas (CMAs/CAs) are rural, with only 13% capturing population centres. The average land mass of rural areas within urban CMAs is 76.8%. Similarly, in the United States, about 90% of the land mass within metropolitan areas was considered rural (non-urban) (Cox, 2022[4]).

As identified in Chapter 2, the way we measure innovation matters for the geography of innovation. In particular, rural and remote areas have different forms of innovative creation that address local opportunities and challenges.

Building on desk research, insights from an OECD government survey on drivers of innovation in rural areas, six case study missions and consultation with various local, federal and national public and private sector experts, this chapter provides an overview of the findings related to current policies and programmes focused on supporting rural innovation and rural entrepreneurs at the federal, provincial and territorial levels. While it focuses more heavily on federal programmes and lessons learned from the different types of rural areas in the study, it also provides guidance to provincial and territorial policy makers. The case study areas were Fogo Island (Newfoundland and Labrador), the Gaspé Peninsula (Quebec), Inuvik (Northwest Territories), Kenora (Ontario), Kincardine (Ontario) and Regina (Saskatchewan). Further details on each of the case studies are available in Annex 3.A, highlighting the diversity of the challenges facing a selection of rural areas. These case study areas are mapped within their relevant census subdivision in Figure 3.1.

This chapter on policies and programmes for rural innovation in Canada is constructed in three parts. It builds on the context containing a description of the various forms that innovation can take in rural areas, including in the North,2 which presents a substantially different challenge to public service access, which cannot be adequately captured by the standard definition in Chapter 2. It is also important to note that the Government of Canada has adopted an Inuit Nunangat definition that recognises all Inuit regions regardless of provincial/territorial boundaries. In the first section, there is a description of federal innovation policy and the role of RDAs in supporting innovation and entrepreneurship. This is followed by a review of provincial and territorial innovation policy in the four provinces and one territory visited for the case studies. The second section of the chapter identifies ways that innovation policy in Canada can be adapted to rural areas, highlighting that the current focus on cluster-based development, driven by a science-based regional innovation system (RIS) approach fails to adequately support rural innovation. The final part of the chapter provides overarching conclusions from the chapter and findings from the case studies. The annex to this chapter includes a description of the six case studies and the innovations seen in each.

Rural innovation is occurring in Canada in a variety of contexts. However, few are suited to the RIS approach. Rural areas within a metropolitan region often offer examples of applicable traditional RIS approaches to innovation, despite some instances of urban research and development (R&D) supporting rural innovations in several of the case studies. The set of rural innovations taking place outside the RIS model confirms the need for a parallel approach to fostering innovation that complements the current urban-focused RIS approach. As in Chapter 2, the following chapter looks at some of the framework conditions needed for innovation through the lens of scale and accessibility, as elaborated in Figure 3.1 below. It broadly covers challenges in delivering government services related to innovation and entrepreneurship and some of the services often associated with innovation, such as university-firm linkages, finance and access to digital and physical infrastructure. While the chapter identifies these areas as key challenges, they are only some of the conditions that are relevant for rural innovation. Beyond these conditions, conditions for rural access to housing, healthcare, education and social services are standard building blocks of building prosperous communities for harbouring an innovation ecosystem.

Figure 3.1. Map of case study areas, by census division

Evolution of federal, provincial and territorial policies and programmes to promote innovation in Canada

In the last 50 years, rural Canadians have created and commercialised a number of disruptive innovations. Chronologically, these include the axial flow combine harvester developed by Massey Ferguson, advanced telephone switching systems produced by Nortel, Corel’s WordPerfect, Bombardier’s Canadair regional jets and the BlackBerry smartphone that initially dominated the global smartphone market. Strikingly, the companies that produced these products either no longer exist or are now minor players in their industry.

Canada’s innovation record suggests that while the country is strong in basic research and generating new ideas, it remains relatively weak in the successful commercialisation of these innovations (Nicholson, 2016[5]; Schwanen, 2017[6]; Edler, 2019[7]; Phillips and Castle, 2022[8]). Since the 1970s, both the federal and provincial/territorial governments have made major public funding commitments to research and development, both in post-secondary institutions and, to a lesser extent, private firms. Nevertheless, there is a strong sense that public funding in the absence of a comprehensive innovation strategy and culture of innovation is not enough (Nicholson, 2018[9]). In particular, a greater focus is needed on strengthening regional innovation policy in a country as diverse as Canada, particularly given the primacy of provincial and territorial governments in innovation and entrepreneurship support.

Innovation policy in Canada

The Government of Canada has had a relatively long commitment to science and innovation policy. The federal government provides generous tax credit support programmes, in particular for small and medium-sized enterprises (SMEs). Canada has a federal Scientific Research and Experimental Development (SR&ED) tax credit that is used across Canada to support innovation investment. In comparison, while information on the rural or urban distribution of tax credits is not modelled comparatively across OECD countries, Canada’s federal tax credit programme largely benefits SMEs, which represent a larger share in rural areas than large corporations (Figure 3.2), suggesting that the subsidy and tax incentives on R&D are not directly disfavouring rural firms due to size characteristics. Canada is relatively generous in its tax subsidy programme, providing a marginal tax subsidy rate for SMEs in Canada of 0.31 for both profit-making and loss-making firms, which is well above the OECD median of 0.20 for profit-making and 0.18 for loss-making firms. Furthermore, the rate is relatively stronger for SMEs than larger corporations, whose implied tax subsidy rate is 0.13 (0.10) in the profit(loss)-making scenario, below the OECD median of 0.17 (0.15).

Figure 3.2. Implied tax subsidy rates on R&D expenditures: Canada, 2021

1-B-Index, by firm size and profit scenario

Beyond the federal R&D tax subsidy programme, most innovation policies are driven through post-secondary or public research centres and cluster development initiatives under the mandate of provincial and territorial governments. There are hundreds of different federal support programmes to support entrepreneurs and innovation. In recent work by Statistics Canada, in partnership with the Treasury Board Secretariat, 123 federal programmes via the Business Innovation and Growth Support (BIGS) initiative were recorded in a database of support programmes (Statistics Canada, 2023[12]). In 2020, SMEs accounted for 95.8% of the initiative’s recipients of federal support programmes. In particular, SMEs with fewer than 100 employees accounted for 87.9% of total recipients and 61.4% of the total amount given. Over two-thirds of BIGS recipients were in the services sector, while the largest share in the goods-producing sector were in manufacturing, followed by agriculture.

Canada’s natural resources and energy sector is undergoing a period of transformation towards clean and renewable practices at the federal, provincial, territorial and municipal levels. This includes innovation initiatives such as the Mining Innovation Commercialization Accelerator, with an investment of CAD 40 million through the Government of Canada’s Strategic Innovation Fund (MICA, 2021[13]) and Canada’s Oil Sands Innovation Alliance (COSIA, 2012[14]). These initiatives bring together stakeholders from industry, government and academia to deliver innovative and more sustainable practices in the natural resources and energy sector.

Innovation, Science and Economic Development Canada (ISED) is the federal department in charge of co‑ordinating programmes and policies focused on helping Canadian businesses grow and expand. It serves several ministers, including the Minister of Innovation, Science and Industry, the Minister of Export Promotion, International Trade and Economic Development, the Minister of Rural Economic Development and the Minister responsible for the Atlantic Canada Opportunities Agency, the Minister of Tourism and Minister of the Economic Development Agency of Canada for the Regions of Quebec and the Minister of Small Business.

ISED leads the federal government’s innovation agenda and collaborates across 18 federal departments and agencies, including the 7 federal RDAs, namely the Atlantic Canada Opportunities Agency (ACOA), Canada Economic Development for Quebec Regions (CED), the Canadian Northern Economic Development Agency (CanNor), the Federal Economic Development Agency for Northern Ontario (FedNor), the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), Pacific Economic Development Canada (PacifiCan) and Prairies Economic Development Canada (PrairiesCan). It also bears noting that the federal RDAs share interlocking responsibilities for rural regions with the Ministry for Rural Economic Development (a cabinet portfolio established in 2019). The ministry includes a Centre for Rural Economic Development, which is tasked with co‑ordinating a whole-of-government approach to help improve federal policy and programme relevance and access and provide rural communities with advice and guidance to help them access federal support to meet their needs.3

As the department in-charge of co-ordination for programmes on innovation, ISED also co-ordinates the Rural Economic Development Strategy, which is a bottom-up strategy supported by the newly built Centre for Rural Economic Development (Government of Canada, 2023[15]). The strategy is built around improving rural communities, supporting rural Canadians and building partnerships. It aims to improve rural places and communities by expanding broadband and mobile connectivity, renewing infrastructure and building climate resilience, strengthening local economies and supporting businesses impacted by the pandemic. It focuses on supporting people in rural Canada by helping newcomers in rural communities, building affordable housing and investing in public transit, helping women re-enter the workforce and investing in early learning and childcare. It builds partnerships by integrating rural perspectives into federal policies and decisions, working horizontally to improve access to federal programmes and services, and ensuring that federal investments benefit communities (Government of Canada, 2021[16]). To address some of the objectives of strategy, additional funding was provided for programmes like Connect to Innovate, the Universal Broadband Fund and the low Earth orbit satellite capacity, which complement other broader initiatives. Other examples of initiatives undertaken by the strategy include increased support to various tourism initiatives, leveraging opportunities for rural social enterprise, Smart City challenges (in rural areas), renewable energy sector programmes, modernising the Youth Employment and Skills Strategy, extending the Canadian Training Benefit programme and Student Work Placement Program, while planning to actively work on bringing the rural voice to the Apprenticeship Strategy. Among other initiatives, the strategy also supports housing initiatives through the Housing Supply Challenge and is piloting several immigration schemes for rural Canada, including the Atlantic Immigration Pilot and the Rural and Northern Immigration Pilot.

Figure 3.3. Institutions working on building innovation capacity in rural areas

The mandate to co-ordinate programmes and policies for innovation in Canada under one roof facilitates challenges in conflicting institutional mandates. In addition, in some cases, there is an active partnership with local governments, as observed in the accessible rural area of Bruce County (Ontario) and in the remote rural area of Fogo Island (Newfoundland and Labrador). Active participation of local governments in such organisations can increase how responsive such initiatives are to local needs. For example, the joint responsibilities of tourism, small business development and trade under the same department as innovation is also observed in Norway, where, in addition, local governments have ownership – meaning direct funding and programme management implications – of part of the national innovation agency as described in Box 3.1.

Box 3.1. Innovation Norway: An integrated innovation agency

Innovation Norway is the Norwegian government’s national instrument for innovation and development of Norwegian enterprises and industry. They support companies in developing their competitive advantage and enhancing innovation.

Innovation Norway has ownership of over 51% of the Ministry of Trade, Industry and Fisheries and 49% of county municipalities, meaning that it finances the majority of activities in both ministries. It also manages funds from the Ministry of Local Government and Modernisation, the Ministry of Agriculture and Food, the Ministry of Foreign Affairs and the county governors.

Innovation Norway covers four main service areas to facilitate innovation in all of Norway, where there are large areas of sparsely populated rural areas that aim to support an ecosystem of entrepreneurs for innovation that seek to develop new services, new markets or new products:

Start-ups: Advisory and financial services, courses and competency training.
Export and international markets: Advice on export and international markets, financing for international ventures, courses and competency training.
Innovation and development: Advice in and funding for innovation and development, courses and competency, clusters and networks, and services for the shipping and fish industry.
Tourism and agriculture: Services linked to the agriculture and tourism sectors

Norwegian enterprises have access to a broad business support system as well as financial means. Innovation Norway provides competency, advisory, promotional and networking services. The marketing of Norway as a tourist destination is also considered one of the organisation’s important tasks.

This institutional arrangement combines municipalities and international networks’ knowledge of local industry with business ideas and entrepreneurship while being the Norwegian government’s official trade representative abroad.

Source: Based on Innovation Norway (n.d.[17]), Our Services, https://en.innovasjonnorge.no/article/our-services.

Early in its existence, the former Science Council of Canada,4 an advisory board of up to 40 scientists and civil servants active from 1966 to 1993, published 2 reports that remain relevant today. Innovation in a Cold Climate (1971[18]) and Technology Transfer Government Laboratories to Manufacturing Industry (1975[19]). These two publications found that the decline of advanced manufacturing products by Canadian firms in the 1960s was associated with limited investment in applied research despite measures of technological progress and a high share of skilled engineers. Second, they found that there was an opportunity to use government resources (physical laboratories) to support innovation in manufacturing, using the resources of government laboratories and harnessing the commercialisation mandate of rural firms. However, most firms that could use new technologies lacked the capacity to connect with a potential source to complete the transfer process. In part, it was argued that this is because they often lacked the corresponding resources to turn a concept into reality or move it towards commercialisation.

Much of what the council recommended to address these needs is still relevant. Core recommendations include:

A greater focus by research organisations on technology transfer.
Fostering greater interaction between basic research and industry scientists.
Creating a pathway for firms to explain their needs to researchers.
More contracting out of government research to private firms to increase capacity and contacts.
Greater use of procurement processes to encourage the domestic production of new technologies (Science Council of Canada, 1975, pp. 46-48[19]).

Since the Science Council of Canada was abolished, Canada’s science and innovation policy has been articulated through a number of specific policy initiatives put forward by various governments over the last decades, most recently with Canada’s Innovation and Skills Plan as part of the 2017 budget. The plan provided both new support for skills development to meet employment needs of the future and a set of supports meant to increase the rate of innovation. Most funding is made available through existing entities, including the Business Development Bank of Canada, Export Development Canada and other funding agencies.

Federal innovation policy in Canada remains aligned with the mainstream understanding of how policy can induce innovation by stimulating R&D efforts by universities, government research facilities and firms through direct funding and tax incentives, providing tax and funding incentives for firm investment in new technologies, and by encouraging the growth of clusters that facilitate greater collaboration among firms in related industries. Inevitably, most of the resources provided by the Government of Canada end up in large metropolitan areas because they provide the urbanisation economies that are most attractive to this STI model (Isaksen and Karlsen, 2016[20]). On the other hand, in peripheral areas, Isaksen and Karlsen (2016[20]) argue a different user-driven approach, or similarly a doing-using-interacting (DUI) approach (where innovation is driven by “demand-pull” forces that induce efforts to find specific solutions to current problems), drives innovation (see Chapter 2) (Isaksen and Karlsen, 2016[20]). Because the DUI process tends to result in incremental innovations that largely benefit small firms and in innovations that do not involve formal R&D and are seldom patented, it is not surprising that rural areas are often seen as having low levels of innovation (Freshwater, 2012[21]; French, 2022[22]; OECD, 2014[23]; 2022[24]).

In sum, innovation in science and technology is observed to a larger extent in large cities that do not face similar challenges in access to services and markets, whereas innovation in a DUI approach is relevant to a relatively larger extent in peripheral areas. As noted in the introduction to this section of the chapter, in Canada, there is an ongoing concern that strong national performance in the research part of the STI model is not associated with high rates of adoption of resulting innovations by firms. As such, the STI innovation model is disconnected from the realities of rural firms. Instead, more support for overcoming common challenges related to a lack of connectivity that engenders barriers in access to markets and services, as well as bolstering appropriate framework conditions, such as additional support for access to funding, should be prioritised for innovation in rural areas (Marshalian, Chan and Bournisien de Valmont, 2023[25]).

Federal regional development agencies

The federal RDAs provide services to communities and entrepreneurs on a broad range of issues ranging from innovation and business support services to community programmes and Indigenous or women-specific funding programmes. Today, the federal government provides services to support innovation and entrepreneurship through seven RDAs covering all provinces, as depicted in Figure 3.4. PrairiesCan has three provinces; ACOA has four and CanNor covers three territories; there are two province-specific agencies, CED and PacifiCan; and one province, Ontario, has two agencies, FedNor and FedDev. Other than Ontario, a single agency deals with each province, while smaller provinces/territories with similar conditions are grouped within a single agency. It important for the Government of Canada to co‑operate with both provincial and territorial governments to support regional development, including in rural areas.

Notably, in the territories of Canada’s North, the Government of Canada plays a larger role. This is because territorial governments’ powers are delegated to them by the parliament of Canada, unlike provinces which have inherent sovereignty in their constitutional domain (see Figure 3.4 for CanNor administrative boundaries). This is reflected in a larger per capita budget for the RDA covering the territories (Figure 3.5).

Inuit Nunangat is a concept distinct from the territories. This term refers to the areas in which Inuit people have historically resided. It is comprised of four regions – the territory of Nunavut, the Inuvialuit Settlement Region of the Northwest Territories, the Nunavik region of Quebec and the Nunatsiavut region of Newfoundland and Labrador. Inuit in Nunatsiavut have established their own regional government, while the other three regions have “public governments” in which participation is open to all residents. These other three Inuit regions could potentially pursue self-government agreements in the future if they desired to do so. Each comprehensive land claim agreement or modern treaty includes specific arrangements for funding and delivery of social services, land management and other governance functions. Among Canadian RDAs, CanNor is unique in that it is required to meet federal obligations established under Article 23 of the Nunavut Land Claims Agreement. This article specifies a level of Inuit representation to be reached in government employment within Nunavut. CanNor also serves as the central co‑ordinating office in the implementation of the Pilimmaksaivik initiative, which is the Federal Centre of Excellence for Inuit Employment in Nunavut.5

Figure 3.4. Map of RDAs

Administrative borders of RDAs, 2023

Financially, the seven RDAs are gaining in budgetary size. With the split of PrairiesCan and PacificCan, the 2021/22 total budgetary estimates jumped by 70% to CAD 1.6 billion (current prices) from the previous year (Figure 3.5, Panel A). The total budgetary estimate was CAD 2.6 billion (current prices) the following year, a 67% growth from the previous year. Total expenditures were estimated to be at CAD 40.4 per person; in the next year, they rose to CAD 67.3 per person. In part, the cost increase in the two periods also reflects emergency COVID-19 support aid delivered through the agencies. Both ACOA and CanNor have larger expenditures per person than other agencies, reflecting those regions’ higher costs of doing business and difficulties in access to services (Figure 3.5, Panel B).6 Despite the fact that some agencies have substantially higher levels of expenditure than others, in all cases, the expenditure relative to GDP is lower than 1% for all RDAs, with the highest level in the 2022/23 period, being 0.7% of GDP in CanNor and the lowest level at 0.07% of GDP in PacifiCan.

RDAs in Canada have broad mandates and are able to function in both an urban and rural context by providing differentiated support. In rural areas, the focus is on supporting entrepreneurship and business expansion and on building local capacity in civil society. Since 2018, the agencies have delivered Regional Economic Growth through Innovation – a nationally co‑ordinated, regionally tailored programme to support the growth of Canadian businesses, their expansion into new markets and their adoption of new technologies and processes, which will help fuel the economy.

Figure 3.5. Spending by RDAs has increased over time

In rural areas, the legacy organisations of the Community Futures Program (CFP) play an important role in supporting rural innovators. The CFP was an innovative rural economic development programme created by Employment and Immigration Canada in the 1980s (Box 3.2). The organisations now operate under a variety of names across the country, typically business development centres (BDCs) or Community Futures Organizations (CFOs). Currently, 267 CFO groups are located in rural areas (CFNC, 2024[28]). Today, the main function of BDCs or CFOs is to support small businesses, including new entrepreneurs. Each BDC has a legacy revolving loan fund that it can use to leverage other lenders’ funds by taking a less-secured position in a loan package. Equally important, BDC/CFOs provide business advice to firms, including help with business planning. They typically act as intermediaries for the local financial community to meet, assess lending opportunities and develop financing packages. In many rural areas, the BDC/CFO is a “keystone” organisation that plays a much larger role than the size of its loan portfolio.

CFOs take a bottom-up approach to local development. The idea of bottom-up approaches encouraging association between rural places in view of accessing government funding is not new. It is often used to facilitate associations between functional areas that may be outside of administrative boundaries. For example:

In Switzerland, RDAs are formed through a free association of a group of municipalities, sometimes dividing parts of cantons (comparable to provinces). These entities form together one of the six current regional innovation system entities within the federal RIS programme (OECD, 2022[29]). In Switzerland, the RIS serves areas outside of the large metropolitan agglomerations and provides some partnership incentives with firms in urban places. Some areas may not be included in the federal RIS programme because of a lack of active application to form an RIS.
The United States Economic Development Administration is experimenting with bottom-up associations for applying to regional development funding in the USD 1 Billion Build Back Better Regional Challenge as described in Box 3.7 (EDA, n.d.[30]).

RDAs allocate the majority of their programme funding to support initiatives for innovation, 62% (Figure 3.6). However, there are differences between RDAs: the quasi-totality of FedDev funding is allocated specifically to innovation, while less than a quarter of funding is allocated to innovation in PacifiCan. Notably, much of the innovation funding (62%) and economic development funding (29%) overlap and many programmes may resemble each other within the groups despite having different labels.

Given the important role of the CFP in Canada, the funding allocation is relatively low (Figure 3.6) and particularly so when one considers the size of rural areas (98% of the land), the share of the rural population (18% of the total population) and the fact that delivering to areas with low density and further distances to urban areas is increasingly expensive. CFP initiatives with a larger rural mandate for supporting innovation and economic development account for only 8% of total expenditures from RDAs. Most agencies spend less than 8% of total funding on community economic development, with the exception of ACOA, which spends 28%7 of total expenditures on community economic development. Excluding ACOA, the average spending on the CFP is only 4% of total expenditure. While spending on Community Futures is lowest in CanNor (1% of total programme expenditures), the agency officially reports Indigenous-specific funding8 (18%) that delivers similar programmes as a CFP9 through an Indigenous development angle. Keeping in mind that the share of rural individuals in Canada is close to one-fifth of the population and that costs for providing assistance to rural areas are high, the allocated resources to rural-specific development programmes are relatively low. These funding allocations are particularly important for Indigenous peoples who comprise the largest proportion of the population in Nunavut (86%), the Northwest Territories (51%) and Yukon (23%), followed by Manitoba (18%) and Saskatchewan (16%) (Government of Canada, 2020[31]).

Furthermore, despite the important role of the CFP in supporting entrepreneurs in rural and remote areas, it is unclear if measures are put into place to support public sector innovation that can help deliver services in a more innovative way. This is particularly relevant when considering that the public sector is the largest sector of activity in rural areas (see Chapter 3). Public sector innovation can be reinforced through programmes that enable engagement with community stakeholders and support social and public sector innovation (Box 3.2). An example of such a programme is found in rural Japan, which is likewise characterised by strong subnational governments (prefectures) and faces the challenge of low population density and ageing demographics.

Figure 3.6. The largest share of expenditure is in innovation-related programmes

Share of programme expenditure on grants and contributions, by purpose and agency

Box 3.2. Initiatives for innovation at the community level

The use of bottom-up initiatives to provide opportunities and encourage innovation is observed in several countries. In the case of Canada and Japan, specific programmes that enable bottom-up solutions are a hallmark of rural development.

Community Futures, Canada

The Canadian national government created the Community Futures Program (CFP) in 1985 as a new initiative to address chronic levels of unemployment and underemployment in rural parts of the country. Because the CFP focused on strengthening economic development, it used local labour markets to identify a “community” and this meant that smaller places had to apply jointly, while larger places could apply individually. The programme required applicants to demonstrate that all parts of the community (local governments, business organisations and civil society) were involved in developing an economic strategy that would guide how support provided by the federal government would be used. If successful, applicants would receive support for five years, with the potential for renewal. To implement the strategy, each successful applicant had to create a local Community Futures Development Corporation (CFDC). While a rigid evaluation process was not established, each recipient was assigned a civil service case officer who provided technical support and monitored progress.

Five support mechanisms were established that applicants could choose among depending on their specific strategy (Andison, 1990, p. 59[32]):

1. Assistance for workers to become self-employed, providing income support for new establishments.

2. Funding for a BDC that operates as a subsidiary of the CFDC. The centre receives money for operations, including providing technical support to local businesses and CAD 1 million to establish a revolving loan fund to support local businesses.

3. Funding to provide relocation assistance for people to leave the community and seek employment elsewhere.

4. Support for a Community Initiative Fund (CIF) to invest in a single project intended to have a major impact on the community. Up to CAD 1 million is provided to the CIF through cost-sharing by the community is required.

5. Funding to offer training to increase local people’s skills and improve their employment prospects.

Most funded communities chose support from BDCs and CIFs since these provided the greatest medium-term support and had the greatest local impact (Freshwater and Ehrensaft, 1993[33]). But these two options also placed greater requirements on members of the community to come together around a single agreed-upon investment project in the case of a CIF and to make a long-term commitment to creating and operating a local financial intermediary in the case of a BDC. While the CFP is described as an economic development programme, it initially encouraged the formation of a strong core of local capacity. It enhanced local cohesion by ensuring a broad spectrum of community interests was involved, starting with the initial application, and that government, businesses and civil society were all represented in the CFDC (Ehrensaft and Freshwater, 1992[34]). The way the CFP was designed required participants to work collaboratively through all stages of the process, from first applying for support to creating and implementing their strategy. Communities had to choose to apply and make a significant commitment of residents’ time and resources. This process only took place in communities prepared to build local social capital as a precursor to receiving support for local economic development.

The CFP continues to operate in most rural areas of Canada but in a significantly different way: its main function today is to support business development (Larsson, Fuller and Pletsch, 2012[35]). Over time, the majority of the revolving loan funds have expanded the size of their investment portfolio by making profitable loans, which has increased the availability of support for local businesses.

Community revitalisers, Yamagata Prefecture, Japan

Over the course of the past decade, Yamagata Prefecture began developing a bottom-up approach to rural development. Spearheaded by Yamagata and dedicated public servants from rural regions, the prefecture established a programme that: i) identifies community stakeholders; ii) conducts several focus groups together; and iii) supports communities in accomplishing their own new ideas for solving challenges to public service delivery and innovation.

Yamagata Prefecture’s Rural Community Vitaliser brings changes to rural communities by supporting community actors in making decisions and providing the resources and network to accomplish these challenges. It is not intended to bring changes exogenously but to encourage a community to take action by itself. Individuals (“planners”) from the prefectures are designated as “vitalisers”. Vitalisers’ role is to accompany communities and assist local residents in sharing their future vision of the community and taking action on their own. This process is considered to be a fundamental step in helping the community and encouraging self-transformation.

Vitaliser skills have been developed via the implementation of land-based projects to improve agricultural productivity.1 Development of agricultural infrastructure requires community consensus as land and water are managed through the community’s collective action. Thus, the public sector has been supporting local communities in their future planning discussions. These achievements has brought about greater community planning know-how for the public sector and resulted in the formation of a group of rural community vitalisers.

In 2009, Yamagata Prefecture set up a registering system to award vitalisers having completing the four‑step training course official certification. The course is funded by Yamagata Prefecture government and trainees (prefecture government staff) can take the course during their office hours. The course comprises both classroom lectures and field training so that trainees can gain basic skills as well as practical experience of working with local communities.

The case of the marine community of the city of Tsuruoka, where various local groups acted individually and organised events separately, offers a good example of vitaliser activities. The local group first consulted the vitaliser about the marine development project and the vitaliser proposed to hold a workshop to share and exchange local issues. Thanks to this discussion platform, local groups have joined forces to form a single and unified committee, functioning as an umbrella body for various groups. At the committee’s initiative, several programmes to mobilise marine resources, such as a coastal café and leisure fishing spots, were launched. This initiative gained recognition at the national level and was given an award by the Minister of Agriculture, Forestry and Fisheries.

1. This is because rural areas are administratively aligned with areas with a relatively high share of the agriculture industry.

Source: Andison, M. (1990[32]), “Community futures: An evaluation of a top-down approach to community economic development”, https://doi.org/10.14288/1.0098506; Freshwater, D. and P. Ehrensaft (1993[33]), “Initial results from the implementation of Canada’s Community Futures Program”, Agricultural Experiment Station, College of Agriculture, University of Kentucky; Ehrensaft, P. and D. Freshwater (1992[34]), “Rural development strategies that work (working title)”, Nelson-Hall; Larsson, L., T. Fuller and C. Pletsch (2012[35]), “Business and community approaches to rural development: Comparing government-to-local approaches”, Journal of Rural and Community Development, Vol. 7/2.

The current approach of RDAs is to offer flexibility that fits the highly variable conditions across Canada and the ability to provide a set of support programmes that meet local needs (Bradford, 2017, pp. 14-16[36]). The OECD also sees these agencies as a key element of Canadian innovation policy, playing a central role in bringing national innovation policy to the sub-provincial and sub‑territorial level by supporting the formulation of regional growth strategies (OECD, 2019[37]).

Simplification of access to government resources is one important solution to the challenges of rural entrepreneurs. In Canada, the use of the Business Benefits Finder or similar efforts such as the Switchboard Business Support Hub,10 funded in part by FedDev in partnership with St. Lawrence College, Southern Ontario Angel Network, Queens’ University, Launch Lab (Innovation Centre) and Kingston Economic Development Corporation, could be reinforced as a tool for simplification (Box 3.3). For example, in the United Kingdom, initiatives to support simplification were a high-level priority and the development of resources such as Business Gateway, described in Box 3.3, has been an important aspect of facilitating access to national resources for entrepreneurs.

Complementing physical presence with online services can allow for easier navigation of business services according to the particular needs of entrepreneurs. This can reduce complexity and help direct people to the “right” offer in their geographic location without having to relocate. In Scotland, United Kingdom, for instance, the main RDAs, Scottish Enterprise, Highlands and Islands Enterprise and the newest South of Scotland Enterprise work with Business Gateway and 32 local authority councils to deliver support to SMEs through a shared national website.11 The aim of the initiative is to help SMEs find business support wherever they may be, in a single location. Behind this website is Business Support Partnership where all the agencies meet and share information to avoid confusion and duplication. In addition, the enterprise agencies and Business Gateway share a customer relationship management system for all businesses engaging in the public sector to give an overview of previous and current engagements.

Box 3.3. Encouraging co‑ordination and simplification for the delivery of entrepreneurship and innovation support in rural areas

Business Pathfinder Tools, Canada

The Canadian federal government has set up a Business Benefits Finder, which aims to provide businesses with a list of tailored supports. The tool is designed on the basis of questions and answers that help filter through hundreds of federal, provincial and territorial programmes. A key objective of the tool was to develop a fun, interactive and user-friendly site while providing the best results. It also aims to reach people who might not know what they are looking for and equip them with information on what the government can do for them. Importantly, the process does not collect or track individual information. The more questions are answered, the more customised and accurate the results will be. Behind the tool sits a team of four people working on keeping information up to date, summarising programmes and creating the right tags for them. While the page was largely oriented towards business growth in the beginning, it was expanded towards resilience to economic shocks due to the COVID-19 pandemic. As of 3 October 2023, the tool provided information on 1 600 programme streams (some programmes have multiple sub-services) and is advertised through sustained marketing efforts.

Canada Business App

The Canada Business App, released by Innovation, Science and Economic Development Canada in 2019, provides access to an umbrella of programmes and services that are directly relevant to SMEs in Canada. It is an all-in-one resource to connect people to over 15 000 government programmes and services in a simple, accessible and easy-to-understand way.

Switchboard: Entrepreneurial support available wherever you live, Canada

Relative to rural areas in other parts of Canada, rural areas in Southern Ontario are relatively close to cities and well connected by road, rail and broadband services. However, rural entrepreneurs have not had access to support from their counterparts in the country’s major cities. Recognising this issue, the Federal Economic Development Agency for Southern Ontario, which provides funding to the three major business accelerators, included a provision in recent funding negotiations to develop rural-urban linkages between the three major business accelerators and innovation centres serving smaller communities and rural areas across the region. The resulting Southern Ontario Scale-Up Platform brings together each major city’s business accelerator organisation into a new partnership. A goal of the new platform is to make the programming, advisory services and other support offered by these organisations in their urban locations available to entrepreneurs and SMEs located outside the major cities by partnering with local innovation centres.

Invest Ottawa has partnered with local vocational college St. Lawrence College, with its three campuses across Eastern Ontario, to develop a business ecosystem pathfinding tool to assist start-ups and scale‑ups in connecting with available resources. The tool called Switchboard provides navigation support and visibility to all relevant public support activities in the area of Kingston. Results are clustered and displayed according to which stage of the business circle entrepreneurs are in, based on qualitative analysis. In case entrepreneurs are unsure of their best fit, the tool also provides assessment help and lets people research for support directed at specific needs, including for women and Indigenous people. The page is constantly updated through support providers, making it easily saleable to other regions and allowing for reporting on the most-searched-for support. This way it can also be used to locate needs and whether demands are currently met.

By helping rural residents fulfil business ambitions in their own communities without having to commute or move into the cities to find the help they need, the benefits of their efforts may be captured locally, supporting the development of rural communities. Linkages forged via the Scale-Up Platform are also expanding the capacity of smaller innovation centres outside the major cities while fostering a stronger network between these centres and the major platform members, creating new opportunities for knowledge sharing and idea development across a wider area.

Rural Partners Network, United States

Set up by the Biden-Harris Administration, the Rural Partners Network is an alliance of federal agencies and civic partners working to expand rural prosperity through job creation, infrastructure development and community improvement. The network brings “boots to the ground” by designating community liaisons to work to simplify access to information for rural communities. It is established as a collaboration of 27 agencies and the White House in an effort to improve access to government resources, staffing and tools, build awareness of rural issues and focus on building rural strategies. It is currently going through the second pilot programme in 14 counties and 10 states.

Business Support Simplification Programme, United Kingdom

The Business Support Simplification Programme was initiated by the Department for Business Enterprise and Regulatory Reform (now the Department for Business, Innovation and Skills) for English regions. It aims to make it easier for companies and entrepreneurs to understand and access government-funded grants, subsidies and advice on how to start and grow their businesses. It was estimated over 3 000 publicly funded business support schemes existed. Businesses reported that they were confused by the number of schemes, which discouraged them from applying. Streamlining helps save them time and money when looking for support. Better targeted schemes have more impact on businesses and provide the public sector with greater value for money from a leaner system. The 3 000 schemes were reduced to 100 or less by 2010 and made available through the nationally sponsored and regionally administered Business Link Gateway. With the new United Kingdom government in 2010, this process was consolidated into Solutions for Business.

Business Gateway, Scotland, United Kingdom

In addition to the national and regional enterprise agencies that work on regional development, the Business Gateway network, operated at the level of the 32 local authorities in the United Kingdom, offers a range of professional resources, support and tools to help entrepreneurs learn new skills, create new opportunities and develop sustainable strategies for growth. Business Gateway supports start-ups and businesses seeking to develop or solve issues (e.g. digitalisation) but not necessarily grow beyond the local area/scale. For the latter, Business Gateway is expected to signpost the company towards the enterprise agencies, Skills Development Scotland, Interface and other innovation partners.

Note: For more information, see http://www.myswitchboard.ca.

Source: Government of Canada (2023[38]), Business Benefits Finder, https://innovation.ised-isde.canada.ca/innovation/s/list-liste?language=en_CA&token=a0BOG000000WfhZ2AS; OECD (2012[39]), OECD Reviews of Regional Innovation: Central and Southern Denmark 2012, https://doi.org/10.1787/9789264178748-en; UK Government (n.d.[40]), Department for Business, Innovation & Skills, https://www.gov.uk/government/organisations/department-for-business-innovation-skills; Scottish Government (n.d.[41]), Find Business Support, https://findbusinesssupport.gov.scot/ (accessed on 15 June 2023); US Government (n.d.[42]), Rural Partners Network, https://www.rural.gov/ (accessed on 15 June 2023); Community Futures Canada (n.d.[43]), Supporting Canada’s 267 Community Futures Organizations, https://communityfuturescanada.ca/ (accessed on 15 June 2023); EDC (2021[44]), “Powered by innovation: The new Canada Business App”, https://www.edc.ca/en/article/ised-releases-canada-business-app.html.

Lastly, the federal approach to innovation policy is particularly relevant for Indigenous peoples but federal agreements alone may be challenging, as incorporating Indigenous organisations in the policy cycle requires a multi-level approach building on local and national dialogues (OECD, 2020[2]). In May 2016, Canada announced its full support, without qualification, of the United Nations Declaration on the Rights of Indigenous Peoples (hereafter the UN Declaration). In 2021, Canada adopted the United Nations Declaration on the Rights of Indigenous Peoples Act (hereafter the UN Declaration Act), which requires the Government of Canada to work in consultation and co‑operation with Indigenous peoples to co-develop an action plan to achieve the objectives of the United Nations Declaration and to take measures to ensure that federal laws are consistent with the declaration and to report annually on progress. While six provinces officially opposed the legislation, citing concerns that it would impact provincial laws and jurisdiction, others have moved forward with their own implementation. British Columbia was the first province to release an action plan dedicated to implementing the United Nations Declaration on the Rights of Indigenous People (UN Declaration). The federal government also officially released its 2023‑2028 Action Plan in June 2023 to work towards achieving the objectives of the UN Declaration and UN Declaration Act (Government of Canada, 2023[45])

Territorial governments are at the forefront of Indigenous Reconciliation. For example, since its establishment, the Government of Nunavut has adopted Inuit societal values. Despite guidelines in some provinces for improving co‑ordination between the First Nations, local, provincial and territorial governments, such as the Political Accord between First Nations and the Government of Ontario12 and Local People, Local Solutions: A Guide to First Nation Co-operative Development in Saskatchewan,13 made by the Saskatchewan First Nations Economic Development Network and the Saskatchewan Co‑operative Association, Indigenous communities are not systematically integrated in policies that impact their livelihoods. According to the International Work Group for Indigenous Affairs, the Indigenous peoples and Canadian allies are challenged by the slowness of substantive action on the implementation of the Declaration of the Rights of Indigenous Peoples of the United Nations. The causes of this include pressures from the corporate sector and disputes within the government about how the implementation could move forward. For example, in the tourism and economic development strategy for the city of Kenora, Indigenous peoples are mentioned14 but it is unclear if there has been systematic dialogue and engagement between Indigenous peoples and the municipality in this work. Strategies to engage Indigenous peoples as partners in economic development are facilitated by local commitments. For example, city-pacts in Norway described in Box 3.4 demonstrate the important role of local capacity for engagement between cities and Indigenous communities.

Box 3.4. Indigenous participation in rural economic development in Norway

Norwegian context for Indigenous engagement in rural economic development

In Norway, the Indigenous Peoples Act is referred to as the Sami Act. The Sami Act contains an obligation for the state, county municipalities and municipalities to consult Sámediggi (Sami Parliament) and other Sami interests in matters affecting them. The rules state, among other things, that the consultations must be carried out with mutual loyalty and respect for the parties’ interests, values and needs.

The agreement on procedures for consultations1 between the central government authorities and Sámediggi sets out detailed procedures for how consultations with Sámediggi shall take place. For example, regular half-yearly meetings have to be held between the minister responsible for Sami affairs and the president of Sámediggi.

Municipalities and county municipalities can adapt the implementation of consultations to the conditions in their municipality and the individual case. The Ministry of Local Government and Regional Development, in consultation with the Norwegian Association of Local and Regional Authorities and with Sámediggi and the Norwegian Reindeer Husbandry Sami National Association, has prepared a guide for municipalities and county municipalities.2 The purpose of the guide is to provide municipalities and county municipalities with practical aid in carrying out the consultation obligation under the Sami Act.

Sámediggi has co-operation agreements with some county municipalities. The agreements will, among other things, contribute to strengthening co-operation in areas such as the Sami language, culture and industry. Sámediggi also has several co-operation agreements with urban municipalities that have a larger Sami population. The goal of the city agreements is an active and targeted collaboration with regional and local authorities to strengthen and develop Sami culture, language and community life.

1. See https://www.regjeringen.no/en/topics/indigenous-peoples-and-minorities/Sami-people/midtspalte/consultation-duty-in-sami-matters/id86931/.

2. See https://www.regjeringen.no/contentassets/0b26bd9f4fd043d29edbc5ae070e6f03/veileder-for-kommuner-og-fylkeskommuner-om-konsultasjoner-med-samiske-interesser-2.pdf.

Provincial and territorial innovation policy in case study areas

In a federal system of government where provinces and territories control large parts of the policy arena, the ability of the national government to shape actions at the regional or local level is limited. Every province and territory in Canada has a distinct set of science and innovation policies (Phillips and Castle, 2022[8]), even if innovation policy rarely includes rural priorities or opportunities (Krawchenko et al., 2022[46]).

This chapter focuses only on the policies of Newfoundland and Labrador, the Northwest Territory, Ontario, Quebec and Saskatchewan,15 the locations of the six case studies that were selected for this review. While innovation policies and programmes in provincial and territorial governments are substantial, it is important to note that Indigenous governments and organisations are important economic development actors that support business development and innovation.16 A more detailed analysis of the provincial and territorial innovation policies is outlined in Annex 3.A.

Provincial and territorial innovation policy seems to largely respond to federal priorities and approaches, largely because federal funding for innovation is a major component of all funding in every province. This means that provincial and territorial innovation policy is largely cluster-focused and relies mainly on university-conducted R&D to generate innovations. Smaller provinces tend to have a more specialised set of innovation priorities that reflect their current and perceived future opportunities, with Saskatchewan focusing on agriculture and mining and Newfoundland and Labrador on fisheries and ocean opportunities. The two larger provinces, Ontario and Quebec, both have a more comprehensive innovation policy that covers multiple sectors but, in both instances, the bulk of the outlays are for university research on topics that have a more urban focus. Their policies also aim to improve commercialisation by encouraging firm and university collaboration but with limited success. Both provinces have developed a regional approach to encouraging innovation but with a different structure. Quebec, which has a centralised university and college system, relies on specialised programmes within the higher education campuses to provide applied research and technical assistance to innovative local firms. Ontario has created a system of free-standing regional innovation centres across the province, which only have a limited presence in Northern Ontario.

In particular, the provinces of Ontario and Quebec have established an important goal of increasing linkages between universities, research institutes and entrepreneurs. The system of innovation interactions between entrepreneurs and other knowledge partners such as universities, research centres and other firms is an important aspect of building systematic-level innovation opportunities. For example, the International Institute for Sustainable Development Experimental Lakes Area (IISD-ELA) was initially a public sector-funded research initiative that led to several international collaborations and the longest record of an ecosystem-wide study of the impacts of climate change and various toxic substances that impact natural environments, bringing knowledge spillovers to young people and researchers working collaboratively on issues related to climate change. The IISD-ELA is located in a sparsely populated region of Northwestern Ontario where the lakes are not affected by human impacts.

There are several examples of initiatives that link research initiatives and firms together. In Quebec, the Centres Collégiaux de transfert de technologies (CCTT) system actively involves local actors in elaborating training courses and supports research institutes that actively work in the research fields that impact local communities. Likewise, the Marine Institute of Memorial University of Newfoundland has a research model closely tied to rural needs. Rarer are cases where local firms are able to host university-based researchers for opportunities outside of the firm’s model. Nevertheless, these can still exist, especially if firms are able to build a business model around allowing university researchers to use their resources. An example of this comes from rural Japan, where an initial public subsidy for a public good related to marine life created decades of spillover effects. Kamo Aquarium, a local jellyfish aquarium, initially received funding from the local municipality and the prefecture to help navigate some of the challenges associated with a decline in the population visiting the aquarium. Following this initial level of support, the private company linked up with university researchers and local schools in an effort to reconnect with the local community and build interest in their services. The initiative eventually created benefits for the company (increased tourism) and the larger society, including through research that was granted a Nobel Prize for the discovery of cancer biomarkers that use jellyfish luminescent properties.

Box 3.5. Firm-research partnership example from rural Yamagata, Japan

Kamo Aquarium is a well-known tourist destination for its large collection of jellyfish and wildlife. Originally a tourism company, the aquarium gained fame when it started opening its resources for collaboration with university researchers. One notable researcher, Osamu Shimomura, received a Nobel Prize in Chemistry in 2008 for using the green fluorescent protein properties of jellyfish to create cancer biomarkers. Today, a rotating residency exists for doctoral and post-doctoral students conducting research within its laboratories.

In addition, the aquarium has a local community outreach strategy to educate local youth on jellyfish and marine life, collaborating with Yamagata University to organise the Jellyfish Meister training course. The Jellyfish Meister is a local leader whose aim is to interest school children in science by teaching them about the unique ecosystem of jellyfish and biology more broadly. The aquarium also provides its facilities for field training courses linked to Yamagata University as well as local high schools. The aquarium is very motivated to be a leader in the field and therefore has as a mission to deepen its jellyfish expertise. Partnerships with external research institutes help develop the aquarium’s research level and create good publicity for the aquarium.

Source: Murakami, T. (2016[47]), “History and introduction of the Kamo Aquarium”, Der Zoologische Garten, 85(1-2), pp.64-73.

In places where access to university or rural extension programmes may be limited, entrepreneurs in rural areas still benefit from knowledge spillovers resulting from “learning while doing”. For example, the Miitigoog Trust in Ontario provided knowledge on sustainable forest management as part of public procurement contracts requiring consultation and partnership with local Indigenous representatives. In Saskatchewan, Durmur Industries, a firm operating in the defence industry, built local knowledge and spillovers through public procurement contracts that required local participation.

For university-firm linkages to be fruitful, the firms must be motivated to innovate and conduct experiments. Evidence from a recent study in Norway found that many successful initiatives are often determined by the characteristics of firms rather than initiatives from university researchers (Atta-Owusu, Fitjar and Rodríguez-Pose, 2021[48]). When firms are open to collaboration, they are more likely to collaborate with local universities. However, incentives for universities are not always aligned and universities may not necessarily gain as much from collaboration. In Canada, provincial arrangements in Quebec, where universities and research institutes are active in rural communities, demonstrate a strong opportunity for rural innovation. In Scotland, an initiative entitled Interface was established over 16 years ago to formalise engagement between entrepreneurs and research or university institutes. The initiative is used to connect firms to researchers despite the fact that it is often more successful in areas that have close linkages to universities (Box 3.6). In part, the challenge for rural entrepreneurs in accessing such services is a mismatch between researchers and firms. However, initiatives that tend to be tethered to traditional rural universities seem to better support innovation in rural areas.

Box 3.6. Mechanisms to encourage university-firm linkages for innovation in Scotland

Interface, Scotland, United Kingdom

Established in 2005, Interface is a central hub connecting organisations from a wide variety of national and international industries to all of Scotland’s universities, research institutes and colleges. Based regionally throughout Scotland, Interface works with businesses of all sizes in all sectors to match them to Scotland’s academic expertise to help them grow. Interface has established efficient processes that will help save time and money in finding and accessing academic expertise, research, technologies, specialist facilities and funding. It also seeks to facilitate clusters of businesses and academics working together to tackle industry sector challenges leading to transformational outcomes and impacts.

In addition to the proactive matchmaking advice provided by the Interface team (with regionally located specialists across Scotland), Interface is able to provide funding through 3 types of innovation vouchers: Standard Innovation Vouchers of up to GBP 5 000 of funding aimed at encouraging first-time partnerships between a company and a university or further education college; Student Placement Innovation Vouchers, up to GBP 5 000 to fund a PhD or Masters student to work within a business on a clearly defined project and continue the development of a Standard Innovation Voucher award; and Advanced Innovation Vouchers of up to GBP 20 000 of match funding to either encourage sustained relationships with academia and enable existing partnerships to continue the development of a project or for those companies who are beginning their collaborative journey with a higher education institutions (HEI)/further education (FE) college partner. The company must provide a mix of in-kind and cash contributions.

Now in its seventeenth year of operating, Interface’s success story is reflected in 6 261 business-led expertise searches sent to academic partners and facilitated 3 399 business-academic discussions. A 2020 evaluation estimated that Interface’s contribution to the Scottish economy from R&D projects between businesses and academics enabled was GBP88.9 million gross value added (GVA), which supported 1 595 jobs, with expectations to reach GBP222.3 million GVA and 3 193 jobs. The Interface website presents a set of case studies from across Scotland, including rural areas, of how this support has helped transform businesses.

Source: Interface (2022[49]), Interface Online, https://interface-online.org.uk/ (accessed on 15 June 2023).

One particularly unique arrangement of university structures that has been fruitful for regional and rural innovation is the system of community colleges and universities in Quebec. As the only public university network in Quebec, the Université du Québec (UQ) includes ten institutions (universities, research institutes and HEIs). UQ’s specific mission is to: i) promote access to university education; ii) contribute to Quebec’s scientific development and critically participate in developing its regions. The network spanned over 10 institutions in 54 cities in Quebec province alone. In addition, the university system has college-level (pre-university) educational institutions called Collèges d’enseignement général et professionnel (CEGEPs) that support applied research and provide technical support to businesses and training. These institutions are tied to CCTTs that specialise in sectors with a strong link to local community ecosystems. In fact, close to 50% of CCTT clients are located within 100 km of their CCTT (OECD, 2023[50]).

These Quebec HEIs are critical for the province’s entrepreneurial system. In responses received from these HEIs, a rising entrepreneurial education trend is emerging in the province. The OECD (2023[50]) found that 57% of CEGEPs and 29% of universities reported providing entrepreneurial education to students. The CCTTs gather teams of researchers focused on sectors and work on thousands of projects annually while simultaneously contributing to the development of a targeted skilled workforce (Synchronex, 2021[51]). While CCTTs are important actors in the innovation ecosystem, they also face challenges related to scale and distance. In part, they overcome this challenge by working closely with provincial actors. However, there is still more that CCTTs can do in the community, especially in terms of developing skills and strategies with local actors. Because of their ease of access to rural communities through their system of colleges, they are a critical player in the rural ecosystem of entrepreneurs and other government institutions such as Investissement Québec. One particularity of why Quebec institutions may have a stronger connection to rural entrepreneurs is the set of incentives put in place at the university and college levels to encourage academics and researchers to collaborate with external stakeholders. These incentives are either financial or career progression-related.

In the case of the Northwest Territories, promoting formal innovation is challenging at both the federal and territorial government levels. Few opportunities for cluster-based development and no research-intensive universities make science-based innovation policy implausible. There were, however, clear examples of innovation to be found, with some being technologically based. Importantly, many of these were driven by Indigenous communities and regional Indigenous governments (Akaitcho Territory Government, Dehcho First Nations, Gwich’in Tribal Council, Inuvialuit Regional Corporation, Northwest Territory Métis Nation, Sahtu Secretariat Incorporated, Tłįchǫ Government). The Government of Northwest Territories is currently in the process of transforming Aurora College into a polytechnic university and the Aurora Research Centre in Inuvik makes important contributions.

While provincial and territorial innovation policies do not conflict with federal policy, neither do they reinforce it. This can be seen as a problem or a reality. If federal policies and priorities were applied equally well in all provinces, the lack of co‑ordination would not be problematic.

Expanding federal regional support for rural entrepreneurs

This section discusses ways to expand the focus of federal Canadian innovation policy beyond its current structure. It argues for a broader approach that adds policies that support rural innovation, underlying a context that expands the concept of how an RIS works to restore a larger role for entrepreneurs, particularly “system entrepreneurs” who create a local business and social environment in which innovation is encouraged.

Broadening the concept of an RIS includes the support of “system entrepreneurs”

Understanding rural innovation from the point of view of entrepreneurs can broaden the RIS into a system that works for rural areas. For example, one can distinguish between standard perspectives on innovation systems that minimise the role of entrepreneurs and those that keep entrepreneurs as a key element (Isaksen et al., 2018[52]). In this line of reasoning, two types of entrepreneurs are identified; the first is the individual actor that creates a new product or process, while the other they term “system entrepreneurs”, who create an improved local institutional context that in turn acts as a catalyst to increase the likelihood of successful individual creative actions by individual entrepreneurs (p. 36[52]). The regional element of their model comes from significant differences in the capacity of the RIS in which entrepreneurs are situated.

From the perspective of the entrepreneurs, one can consider three types of RIS – thick/diversified, thin/specialised and thin, with each type having a different capacity to support innovation (Isaksen et al., 2018, p. 39[52]). Importantly, as the capability of the RIS declines, the importance of the system entrepreneur increases because it becomes the main way that local support for the creative entrepreneur occurs. In essence, in a region with a thin RIS, an alternative actor is required to improve the local milieu in which individual entrepreneurs operate (p. 39[52]). Importantly, these three types can be thought of as roughly corresponding to metropolitan RIS, RIS in regions with a small to medium-sized city and RIS in rural regions, as outlined in Table 3.1.

In Table 3.1, the regional differences in innovation systems are described. The table suggests that as the capacity of the local RIS declines, the importance of system-level entrepreneurs increases as a substitute for a formal actor that supports innovation. In addition, as the capacity of the RIS decreases, it tends to become more focused on supporting existing core activities in the region and on diffusing technologies from elsewhere into the region. Finally, the last column of the table suggests differences in how a region’s industrial path (core specialisations) will evolve, with thick/diversified RIS regions having the best opportunity to identify and implement new activities and diversify and with thin regions being most likely to extend existing specialisations.

For example, in the context of the six Canadian case studies, Regina/Edenwald is located within a thick/diversified RIS, Kincardine is located within a thin/specialised RIS, while the Gaspé Peninsula and Kenora are located within thin RIS (see more descriptions of each case study area in Annex 3.A). Arguably, the remaining two case studies, Fogo and Inuvik, are situated in regions without an RIS, which implicitly creates one more regional category than is identified by the Indigenous Knowledge Research System (IKRS). Since innovation occurs in all six case studies, the IKRS model provides a way to reframe the role of the standard RIS approach to incorporate rural innovation in a systematic way, rather than it being seen as an anomaly, with system entrepreneurs acting as a substitute for a thick/diversified RIS.

Type of RIS	Characteristics of spontaneous entrepreneurial discovery processes		Possible regional industrial path development
Type of RIS	Key entrepreneurs	RIS changes	Possible regional industrial path development
Thick/diversified	Increasing importance of system-level entrepreneurs	Increasing importance of new and adapted knowledge-creating and diffusion organisations	Path creation and diversification
Thin/specialised			Path extension and diversification
Thin			Path extension
None			Path identification and extension

Source: Based on Isaksen, A. et al. (Isaksen et al., 2018[52]), “Differentiated regional entrepreneurial discovery processes. A conceptual discussion and empirical illustration from three emergent clusters”, https://doi.org/10.1080/09654313.2018.1530143.

Clearly, for regions completely lacking an RIS, the importance of system-level innovators is critical. In the case of Fogo, both the Shorefast Foundation and the Fogo Island Co-operative Society Limited can be seen as system-level entrepreneurs17 because they are both social enterprises that see strengthening and improving their community as a key role. Similarly, in Inuvik, the Inuvialuit Regional Corporation and the Gwich’in Tribal Council play the same system entrepreneur role by providing both economic and social capacity through various for-profit and non-profit subsidiaries. This suggests that it is possible to construct a parallel innovation support system in small, isolated rural regions that can systematically enhance entrepreneurial activity and local innovation.18 It is important to note that Indigenous rights holders’ organisations are responsible for implementing their modern treaties, of which economic development is a goal.

An important extension of the systems entrepreneurial approach is innovation in Indigenous communities. Indigenous entrepreneurship matters because vibrant Indigenous businesses and economies are fundamental to self-determination. Rebuilding Canada’s relations with Indigenous peoples – First Nations, Métis and Inuit – requires rebalancing political and economic power.19 Hence the emergence of the term "economic reconciliation”. Indigenous entrepreneurship supports self-determination by reducing dependency relationships and by increasing decision-making autonomy. As noted by the Royal Commission on Aboriginal Peoples, “self-government without a significant economic base would be an exercise in illusion and futility” (Government of Canada, 1996[53]).

Active consultation and partnership with Indigenous communities at the RIS development stage can be important to ensure that development plans for entrepreneurship and innovation are inclusive and targeted towards the communities they serve. McDonald makes the case that this autonomy, when coupled with sufficient resources, provides Indigenous groups with the opportunity to create a development strategy based on traditional values that is coupled with market opportunities (2019[54]). In a case study on Indigenous First Nations communities in British Columbia, where there are few historical or modern treaties, Kobzik and Krawchenko (2022[55]) demonstrate that when comprehensive community development plans are administered, they tend to prioritise infrastructure, social and economic development. In addition, of the 70 First Nations included in the analysis of the paper, 40% have some kind of First Nations-municipal-regional agreement and methods of community engagement are included in the majority of strategic plans.

For Indigenous people in Canada’s North, there is little chance that an RIS approach to innovation will directly provide solutions to either their development challenges or to adapting to climate change. Incentives to participate in high-technology innovation are also low for Indigenous communities. The OECD (2020[2]) found that intellectual property protection rights and certification systems were not well suited to address the appropriation and commercialisation of Indigenous knowledge and cultural expression; this includes Canada’s Copyright Act, which does not currently integrate the protection of Indigenous knowledge and languages. While some of the innovations from RIS activities carried out at universities in the south have value in the north, new approaches may be needed in order to integrate these into a very different context, necessitating another innovation. There are strong linkages between southern universities and northern communities and a desire to increase the research sector within the North so that more researchers live there. A good example is the ArcticNet initiative, a network of Canadian centres of excellence that brings together scientists, engineers and other professionals in the human health, natural and social sciences with partners from Inuit organisations, northern communities, federal, provincial and territorial agencies and the private sector to study the impacts of climate and socio-economic change in the Canadian North.

In rural remote regions, the presence of “system entrepreneurs” provides vital support to an entrepreneurial innovation process powered largely by either user or customer-driven innovation. The idea is compatible with Isaksen and Karlsen’s suggestion (2016[20]) that the innovation process in rural areas follows a doing-using-interacting approach instead of the common RIS model. More effective innovation policy in rural areas should thus focus on finding ways to encourage both local government and local civil society to engage in activities that support local firm entrepreneurs, including system entrepreneurship as well as providing more traditional business support.

Providing policy support for rural innovation through a “user-driven” approach has two streams:

The first is instituting a form of local capacity building that encourages individuals and communities to search for local solutions to their problems. In a sense, this is a process of creating “system entrepreneurs” who alter local institutions to make them more amenable to new ideas.
The second stream is providing resources to self-identified local innovation leaders, whether firms or from civil society.

Systems entrepreneurs and self-identified local innovation leaders often benefit from being able to participate in networking initiatives where they meet like-minded individuals. Such initiatives can be observed in other contexts outside the OECD, such as through the rural leaders programmes described in Box 3.10.

Building equitable opportunities for rural innovation

Most of the Government of Canada’s departments and agencies have a mandate to support diverse and inclusive economic growth across the country. Like some other federal OECD countries, the Canadian constitution has an equalisation clause that requires the Government of Canada to provide financial assistance to provinces with relatively weak levels of per capita fiscal. Due to economic weakness, provinces with low fiscal capacity are seen to be unable to provide citizens in their jurisdiction with appropriate levels of public services. As a result, the provision of basic public services among the provinces of Canada is relatively uniform, although major gaps in accessing services exist between rural and urban regions in all provinces.

To address geographical inequalities, Canada provides specific programmes to address underlying disadvantages. Targeted initiatives, departments and agencies invest in and prioritise projects that are led by and benefit underrepresented groups through much of their ongoing generic programming. A few examples include projects that prioritise supporting women, black and Indigenous entrepreneurs and language minority communities. Similar initiatives are also observed in the United States, as described in Box 3.7. Successful First Nations in Canada provide an example of the possibilities for governments, industry and Indigenous communities to work together to empower Indigenous economic participation. Fort McKay, Osoyoos, Tsawwassen and West Bank First Nations are leading the way in wholly owned and joint-venture businesses that have markedly improved the living standards of their members. For instance, Fort McKay First Nation’s portfolio includes joint ventures across building and construction, tourism and hospitality sectors, which have raised its average after-tax income to more than CAD 73 000 (approximately CAD 10 000 higher than the 2018 national average) (Municipal World, 2018[56]).

Box 3.7. Encouraging equity and supporting rural access to finance in the United States

The United States Department of Commerce Economic Development Administration (EDA) has taken many steps towards integrating diversity and equity in their programme delivery that span from specific programmes and placing priority on populations and geographies considered traditionally underserved, including minorities, rural areas, tribal lands and those considered in persistent poverty, to directly addressing equity.

Specific EDA programmes are required to set aside 10% of its Public Works and Build to Scale programme funds for investments in priority areas that have been identified as persistently poor, meaning counties with a poverty level of at least 20% for the last 30 years. The requirement, also known as the 10-20-30 rule, streamlines a focus on providing fair and impartial opportunities by ensuring support is reaching systematically disadvantaged areas across all investment opportunities.

The United States Department for Agriculture (USDA) has engaged in a comprehensive review of its policies, processes and programmes to determine how it can advance equity throughout the department. Along with this review, the department has taken steps to be intentional about advancing equity in their programmes. For example, applications in the rural development mission area can receive priority points if their projects are located in socially vulnerable communities that score 0.75 or above on the Social Vulnerability (developed by the Center for Disease Control).

Having recognised the opportunity to do more in this area, the USDA established the Equity Action Plan in light of an executive order to advance racial equity and underserved communities by:

Partnering with trusted technical assistance providers to expand access for underserved communities.
Reducing barriers that prevent underserved producers from accessing USDA farm programmes.
Expand equitable assistance to USDA nutrition programmes.
Increase the share of overall USDA infrastructure investments that benefit underserved rural and Tribal communities.
Increase fair and equitable opportunities for small, disadvantaged businesses.
Uphold federal trust and treaty responsibilities to Indian Tribes.
Institutionalise civil rights and equity as part of the essence and culture of USDA.

In addition to EDA and USDA initiatives, banking institutions play an important role in small communities in the United States. The Community Reinvestment Act, which became law in 1977, promotes financial inclusion and community engagement by incentivising banks that have branches in small communities to reinvest in the community by meeting the credit needs of communities, including low-income and moderate-income areas. It does so by enabling the Federal Research and other financial institutions to evaluate bank performance in communities. The act incentivises the use of smaller-value loans and investments that can have a high impact and be more responsive to the needs of communities.

Among different ways to reinvest in the community, these rural banks offer finance options for rural entrepreneurs that may be more lenient regarding collateral requirements and risk assessment. Banks are at the forefront of reinvestment in the communities, work with local entrepreneurs and develop initiatives to encourage community revitalisation. In some cases, banks that are actively participating in community revitalisation: i) hire locals to develop community reinvestment opportunities; and ii) provide business support opportunities or networks for rural entrepreneurs.

Source: ATSDR (2022[57]), CDC/ATSDR Social Vulnerability Index, https://www.atsdr.cdc.gov/placeandhealth/svi/index.html (accessed on 15 June 2023); EDA (n.d.[58]), Economic Development Districts, https://eda.gov/edd/ (accessed on 15 July 2023); EDA (n.d.[30]), Research and National Technical Assistance (RNTA) Program, https://eda.gov/programs/rnta/ (accessed on 15 November 2022); Federal Reserve (2022[59]), Community Reinvestment Act (CRA), https://www.federalreserve.gov/consumerscommunities/cra_about.htm.

ISED estimates that by ensuring the full and equal participation of women in the economy, Canada could add up to CAD 150 billion in GDP (Government of Canada, 2023[60]). With only 17% of Canadian SMEs owned by women, the Government of Canada developed a Women Entrepreneurship Strategy (WES) with CAD 6 billion in investments and commitments to encourage access to finance, talent, networks and expertise. It includes an Inclusive Women Venture Capital Initiative, a Women Entrepreneurship Loan Fund, an Ecosystem Fund and the Women Entrepreneurship Knowledge Hub. Other similar programmes exist: a Women Entrepreneur Program administered by Farm Credit Canada, a Women in Technology Venture Fund, a Women Entrepreneur programme administered by the Business Development Bank of Canada and a Women in Trade programme administered by Export Development Canada. RDAs in Canada, such as ACOA, FedDev Ontario, PrairiesCan, PacifiCan, CED and provinces across Canada, provide specific support, consulting and advisory services to women.

The Women’s Enterprise Initiative is an example of a distinct Canadian regional programme addressing women entrepreneurs’ challenges. The initiative, in partnership with PrairiesCan and PacifiCan, helps women entrepreneurs start, scale up and grow their businesses. There is a Women’s Enterprise Initiative organisation in each of the four Canadian western provinces (Alberta, British Columbia, Manitoba, Saskatchewan). These non-profit organisations provide a variety of unique products for women entrepreneurs, including business advisory services, training, networking opportunities, loans and referrals to complementary services (Government of Canada, 2021[61]; 2021[62]). CED in Quebec offered a similar initiative that provided over CAD 10 million in support to 38 projects led by women entrepreneurs for 2 years starting in 2020 (Government of Canada, 2020[63]). The project supported included seven associations and organisations already benefitting from the WES Ecosystem Fund.

The Black Entrepreneurship Program, a partnership between the Government of Canada’s ISED, Black-led business organisations and financial institutions, provides opportunities targeted towards supporting Black Canadian entrepreneurs. The programme has an investment of up to CAD 265 million over 4 years to help Black Canadian business owners and entrepreneurs build and grow their businesses. It has three main components, including a Black entrepreneurship loan fund, a National Ecosystem Fund and a Knowledge Sharing Hub that conducts research on the challenges for Black entrepreneurship in Canada, led by Carleton University’s School of Business and the Dream Legacy Foundation (Government of Canada, 2021[64]; Prime Minister of Canada, 2020[65]).

The Economic Development Initiative is an initiative under the responsibility of ISED that supports the development of official language minority communities. It is a partnership between federal agencies, including ACOA, CED, CanNor, Western Economic Diversification Canada, FedDev Ontario and FedNor. It provides financial support to projects that encourage economic diversification, business development, innovation, partnerships and increased support for SMEs in official language minority communities. Through the Economic Development Initiative, agencies can invest in projects focused on the economic development of businesses and communities with diversified linguistic heritages that help develop capacity, expertise and partnerships (Government of Canada, 2013[66]).

In addition, the Government of Canada is providing up to CAD 306.8 million in interest-free loans and non‑repayable contributions for First Nations, Inuit and Métis businesses. The initiative is administered by the Aboriginal Entrepreneurship Program and Métis Capital Corporations and provides access to capital and business opportunities to Indigenous entrepreneurs and business owners in Canada, including in rural areas (Government of Canada, 2021[67]).

Improving access to finance

Financial services and national development banks can support rural access to finance by understanding how rural entrepreneurs assess and manage risk and the opportunities that come with them. For example, in ACOA, the Community Business Development Corporation (CBDC), funded under the CFP, acts as a financial broker for rural entrepreneurs. The CBDC, funded by the ACOA, provides financial help in the form of loans, loan guarantees and equity financing, as well as business mentoring and advice, entrepreneurship development and training in access to skills, and technical help (coaching) (Government of Canada, 2022[68]). The four distinct CBDCs have rural action centres that focus specifically on providing services to rural communities, working as facilitators to find resources for rural entrepreneurs and providing loans and grants through the centres themselves (CBDC, n.d.[69]). In rural places where banks no longer serve rural communities, credit unions and national initiatives need to play a stronger role in assessing risks and providing financial services. However, loans from CBDCs alone may limit rural entrepreneurs’ financial options. Other institutions, such as the Business Development Bank, could consider better assessing risks and opportunities in rural areas that do not inadvertently disadvantage rural entrepreneurs, for example, with higher interest rates than commercial lenders in rural areas. They can instead consider the relative risk markets of rural entrepreneurs and work with entrepreneurs on establishing better conditions related to collateral, bankruptcy and credit limits. In the cases of rural finance, financial institutions with the mandate to support rural entrepreneurs need to consider how banking regulations fit within the context of rural opportunities and entrepreneurs.

In rural Canada, commercial banks are important financial intermediaries but are typically minor players in funding business innovation. Other lenders, such as credit unions, can be more flexible in their lending approaches but cannot provide the crucial equity investments that make loans viable. In Quebec, the two largest unions (CSN and FTQ) have put in place an economic development fund to support economic development and create jobs. They are non-profit organisations that use workers’ collective retirement savings to finance socially responsible and environmentally friendly projects, including investment in rural SMEs.

Because rural markets are thinner and collateral may be more challenging in some types of rural areas, it is hard for entrepreneurs of any type to come up with enough owner equity. Recent research by ISED on rural entrepreneurship has found that opportunity-based nascent entrepreneurship (as opposed to necessity-based) is more prevalent in rural regions. Their analysis suggests that entrepreneurs in rural regions seem to be able to recognise market opportunities and take advantage of them but they need a supportive environment to grow their businesses (Government of Canada, 2021[70]).

There are similar challenges for rural finance across many provinces in Canada and abroad, where peer learning may provide the impetus for local solutions. One promising practice to support equity in access to finance is voluntary contribution funding roundtables or “pitches”, practised in rural Quebec by CED, that place the entrepreneur at the centre of the process by gathering various public and private financial institutions to have direct contact with the rural entrepreneurs. Furthermore, the co‑ordination with the province investment authority, Investissement Québec, actively works with the RDA CED to address challenges in accessing finance. Other initiatives that can support easier access to finance in rural areas include initiatives that specifically target women or Indigenous entrepreneurs. For example, similar challenges are observed in the United States, where incentives are created for community banks to reinvest in the community, such as the Community Reinvestment Act highlighted in Box 3.7.

Access to digital infrastructure

Many of the challenges of rural innovators exist because of the physical attributes of the location where they are operating. Creating physical and, increasingly, digital linkages is increasingly important (Marshalian, Chan and Bournisien de Valmont, 2023[25]). Access to quality digital infrastructure is a challenge in Canada, as in many OECD countries. In Canada, there is a close to 40‑percentage‑point slower average fixed download speeds for rural areas compared to national averages, based on user-tested data in the last quarter of 2020 (Figure 3.8).20 Compared to urban areas, the difference increased to close to 53 percentage points in 2020. Furthermore, when moving to the northernmost hemispheres, the lack of both digital and physical infrastructure results in access to satellite services only (Government of Canada, 2023[71]). A recent study has found that this digital divide limits access to online government services for those in rural areas, women and those in lower social-economic backgrounds (Singh and Chobotaru, 2022[72]).

Figure 3.7. National broadband internet service availability map

Current 50/10 megabits per second (Mbps) areas

Broadband connectivity has an important role in rural areas to boost rural innovation for both digital entrepreneurs as well as traditional firms embracing digitalisation (OECD, 2023[73]). For firms in rural areas, a recent paper found causal evidence of positive effects of universal broadband policies that may lead to economic benefits for firms in rural areas, in particular, in knowledge-intensive sectors, by exploiting geographical discontinuities in broadband availability across the United Kingdom (DeStefano, Kneller and Timmis, 2022[74]). Other academic work has investigated the relationship between broadband availability, the use of cloud computing and various types of innovation for firms in the United States and the enabling effect of cloud computing on firm innovation in the United States that provides concrete evidence of the adverse effects of the geographical digital divide on businesses (Wohan, forthcoming[75]).21

Figure 3.8. Geographic variation in download speeds in OECD and G20 countries

Gaps estimated as percentage deviation from national averages, 2020 Q4

Through the High-Speed Access for All strategy (2019[77]), the Government of Canada has committed to connecting 98% of Canadians to high-speed Internet by 2026 and 100% of Canadians by 2030 and has established a high-speed Internet access dashboard to monitor its implementation. In support of these objectives, the federal government has established a Universal Broadband Fund of CAD 3.225 billion to support high-speed Internet projects (50/10 Mbps) in rural and remote communities. It has also established a Connecting Families Initiative to help low-income Canadians access the Internet (Government of Canada, 2023[78]). As of 2022, 93.5% of Canadian households nationally have access to minimum Internet speeds of 50/10 Mbps in Canada. However, there are major regional differences: for example, only 67.3% of households in the Northwest Territories meet those targets (Government of Canada, 2023[79]).

While policies to promote competition and private investment, as well as independent and evidence-based regulation, have extended broadband coverage (including in rural and remote areas), some gaps may remain. In an assessment of Canada’s broadband approach, Weeden and Kelly (2021[80]) note that it has primarily focused on market stimuli to deliver solutions to address the rural-urban digital divide. They argue that this approach has been ineffective at building hard and soft digital infrastructure and that Canada’s digital rural policy should invest in connectivity, capacity and culture of use through a place-based approach. In areas where market forces have not been proven to be able to fulfil policy objectives (i.e. in terms of broadband coverage or service quality), additional interventions by governments may be necessary. In a report to Group of Twenty (G20) governments (OECD, 2021[76]), the following approaches were encouraged to tailor initiatives to bridge connectivity divides in rural and/or remote areas, in addition to promoting market forces and reducing deployment costs:

Demand aggregation models to ensure the financial viability of projects.
Public-private partnership initiatives.
Public funding to expand connectivity in rural/remote areas, often making use of market mechanisms, such as reverse auctions, to provide funding to market players to deploy their networks in rural and remote areas.
Bottom-up approaches: open access municipal and community-led networks.
Addressing particular “last mile” challenges in rural and remote areas.
Coverage obligations in spectrum auctions (for wireless networks).

Building room for experimentation in programmes and public service delivery

Encouraging innovation for entrepreneurs is a practice of allowing for trial and error. Many entrepreneurs operate on the basis of creating new solutions to old problems, particularly rural entrepreneurs, and on the basis of innovating for solutions to lack of resources (OECD, 2022[24]). Building this culture of experimentation and providing resources to support such entrepreneurs has become the target of several innovation-focused initiatives across OECD countries, as described in Box 3.9. Among other initiatives, federal innovation policies may build experimentation in support mechanisms for public service delivery through:

Direct support for experimentation.
Challenge-based initiatives.
Regulation sandboxes (temporary regulatory waivers for testing business ideas).
Engaging with open consultation and collaboration with third-party actors.

Box 3.8. Innosuisse Innovation Booster

The Innovation Booster programme powered by Innosuisse is designed to specifically support radical ideas in a culture of open innovation. Supporting the primary stage of an open innovation process, they provide the impulse for innovative ideas and help them get off the ground into the market.

The main mission of the programme includes:

Bringing together all interested players from research, business and society on various innovation topics.
Promoting knowledge transfer and encouraging co‑operation with partners along the entire value chain of a topic. Each booster has its own organisation and leading house.
Using design thinking methods and other user-centred methods, the Innovation boosters support companies, start-ups and other organisations to identify and explore problems in interdisciplinary teams and develop new and radical solutions from scratch.
Providing an apt funding amount to finance and support the testing and verification of promising ideas and assisting teams in getting follow-up support to further develop or implement their idea.
Fostering a culture of open innovation to create sustainable competitive advantages for innovative Swiss organisations and SMEs.

Innosuisse selects Innovation Boosters with regular calls for proposals for a four-year period. The selection is based on a range of criteria, which include:

The current and future importance of the innovation topic.
The likelihood that it will give rise to future innovation projects.
The appropriateness of the methods and mechanisms used to promote the transfer of knowledge and technology.
The competency to address the innovation topic and to involve the relevant actors on a national scale.
The plausibility of the budget and cost-benefit ratio, the degree of own-funding and the contribution of third-party funds.
The contribution to the sustainable development of society, the economy and the environment.
Measures to ensure appropriate gender representation in the organisation and at activities.

Key performance indicators on gender are supposed to motivate initiatives to proactively increase the percentage of women on their boards as well as among their speakers and participants. This is especially interesting in some fields which are historically unbalanced with respect to the participation of men and women.

Innovation Boosters are selected under a complementarity principle: Innosuisse supports initiatives that would not easily be supported by the private sector only because of inherent risk, lack of resources or private investments, or unclear economic return. They should all have the potential to involve actors from all over the national territory.

The above criteria should allow Innosuisse to select Innovation Boosters that will create an impact in Switzerland. This includes societal impacts such as an increase in quality of life, addressing major societal challenges, better population health, or economic impacts such as job creation, increase in revenues, etc.

Source: Innosuisse (2022[81]), “Innovation boosters”, Presentation.

An increasing opportunity in many rural areas, physical spaces of experimentation such as Living Labs are gaining ground. These mini laboratories often provide free to low-cost opportunities for entrepreneurs (young or older) to test ideas and join a community of like-minded entrepreneurs. In some cases, such labs allow access to heavy and expensive equipment, such as three-dimensional printers or industrial equipment used to build products.

As one example, a Living Lab in Gaspésie-Îles-de-la-Madeleine was established in 2018-20 to support start-ups within three cultural and tourism organisations in the territory: the Corporation de gestion et de mise en valeur du mont-Saint-Joseph, Exploramer and the Festival Musique du Bout du Monde. The initiative set up a prototyping process of tourist and cultural experiences enriched by technology. One of the objectives was to formalise the deployment of a sustainable techno-cultural community to support the development of the digital economy of Gaspésie and the Magdalen Islands and, ultimately, the retention and attractiveness of the workforce as well as the economic and social development of the region. As another example, Switzerland’s challenge-based programmes are implemented by the national innovation agency, Innosuisse, and is increasingly working on regional collaborations (OECD, 2022[29]) within the context of Innovation Boosters as described by the OECD (2022[29]). Likewise, the Japanese Ministry of Agriculture, Forestry and Fishing supports initiatives from community organisations and universities that look for new and disruptive ideas through challenge-based initiatives in rural areas (OECD, forthcoming[82]).

Experimentation may be further supported by providing temporary relief from regulatory burdens for the purpose of testing the benefits and specific contexts in which programmes can support rural innovation and welfare. For example, in Switzerland, local public-private or public-civil society partnerships temporarily reduce historically protected places for responsible tourism (OECD, 2022[29]).

In terms of public service delivery, open consultation on the policy-making cycle with a wider audience that includes community members and civil society organisations can bring new insight into how to improve public delivery. In rural areas, third-party actors such as civil society organisations can help support the delivery of programmes where government entities may not have enough resources. This strategy is currently used for supporting rural innovation in Scotland and the United States (OECD, 2023[73]; 2023[83]). As Indigenous community development organisations, such as Saskatchewan’s FHQ Developments organisation, engaging with civil society actors and entities tied to local community development can help deliver public services with a bottom-up approach.

Box 3.9. Innovation sandboxes and Living Labs

Regulatory innovation sandboxes

In 2016, the first regulatory innovation sandbox allowed experimentation in the financial technology (fintech) industry. According to a recent study, since then, 73 fintech sandboxes have been established in 57 countries, with more than half between 2018 and 2019 (World Bank, 2020[84]). An innovation sandbox is a type of regulatory sandbox that encourages innovation, holding several regulatory requirements on pause while innovators experiment on whether outcomes of innovations may develop useful innovations that may solve greater issues or prove whether regulations may be needed. Regulators across the globe are using regulatory sandboxes to provide a safe environment for emerging technologies to test regulatory boundaries.

A recent report showed that they tended to serve as a base to test the necessity of regulations, facilitate firm start-up entrepreneurship and foster new partnerships. A few examples include a fintech sandbox in Australia and a digital sandbox in the United Kingdom. Additionally, initiatives in the agri-tourism sector of the Jura region of Switzerland fit a similar definition.

Regulatory exemptions in tourism in the Jura region, Switzerland

While not directly marketed as such, two examples of regulatory sandboxes with the specific target of developing the tourism sector are found in the mountainous region of the Jura in Switzerland.

A first example was built in collaboration with TalentisLab, which requested an exemption from environmental protection legislation limiting ecotourism activities. After an application for exemption and a call for proposals, a new initiative to encourage eco-responsible tourism in the provision of campsite accommodation is being put in place.

A second example involves temporarily lowering prohibition from visiting publicly protected places while visiting local towns. The initiative provides access to a “secret route”1 to groups of tourists who have acquired digital keys. The community of Porrentruy, in collaboration with the RIS agency services, worked on reducing regulations on access to public places that may be of interest to areas with an increase in tourism. This has allowed the town of Porrentruy, whose business was strongly impacted by the COVID-19 pandemic, to gain visibility and attractiveness.

Innovation labs

Another increasingly popular way to encourage innovation are Living Labs, “fab labs” and similar initiatives to bring previously inaccessible tools to budding innovators. The Interreg Europe Policy Learning Platform² is one of the agencies supporting the increased use of such tools that create a place to learn, experiment and enjoy the process of innovation. While the different labs vary, they generally provide a mix of services such as skills, materials and advanced tools to participants that can include university-industry collaborations and provide prototyping services for SMEs.

e-Health Living Lab and smart energy grids, Eindhoven, the Netherlands

As part of the Brainport Development Cluster, the city of Eindhoven also houses an example of a Living Lab that focuses on the development of time-limited trial runs for new products and services. Brainport works with local stakeholders, HEIs, the government and a consortium of private sector parties to experiment with new solutions to pre-existing issues. Through Living Labs, individuals are given a license to test out a new initiative in a short time frame to get quick feedback and determine the feasibility, benefit and scalability of such a project. For example, e-Health Living Lab provides elderly people with the opportunity to try out new medical and healthcare services and a smart energy grids project provides new energy solutions for social housing.

Experimenting in the public sector

The use of “serious games” to support governments and make various options for courses of action visible through systems thinking and futurism has been increasing in the policy arena. This can be a good option to replace conventional brainstorming sessions with sticky notes and drawings on a board.

The European Commission Joint Research Centre (JRC) has worked with experts in these types of games at the Hawaii Research Center for Futures Studies to create the Scenario Exploration System (SES). Participants explore their long-term objectives against scenarios and consider various stakeholders. By creating a realistic journey towards the future, the SES generates a safe space to uncover perspectives and thinking, with a view to simulating possible responses linked to issues of interest to the participants.

The SES is available under a Creative Commons licence, which allows anyone to freely use and modify the game as long as they share the results of their adaptation under the same conditions. The OECD has made details, instructions and templates freely downloadable and available at https://oe.cd/ses.

1. See https://porrentruy.ch/tourisme-economie/visite-de-la-ville/circuit-secret/.

Source: OECD (2022[29]), Enhancing Innovation in Rural Regions: Switzerland, https://doi.org/10.1787/307886ff-en; OECD (2021[85]), Embracing Innovation in Government, OECD, Paris, https://trends.oecd-opsi.org/ (accessed on 15 June 2023); Smart Rural Areas (2021[86]), Penela, https://www.smartrural21.eu/villages/penela_pt/ (accessed on 15 June 2023); Farmreal (2016[87]), Homepage, https://farmreal.pt/en (accessed on 15 June 2023); Deutscher Bundestag (2018[88]), Reallabore, Living Labs und Citizen Science-Projekte in Europa, https://www.bundestag.de/resource/blob/563290/9d6da7676c82fe6777e6df85c7a7d573/wd-8-020-18-pdf-data.pdf.

Enhancing the role of the RDAs

The seven RDAs are one of the vehicles by which the Government of Canada can play a direct role in supporting rural innovation. The agencies already provide both technical support and funding to local governments, organisations and firms in both rural and urban areas. Their programmes already support innovation but the focus on innovation in rural areas has not been as strong as in urban areas. This largely reflects the broader focus on innovation policy in Canada on university R&D as the driver of innovation. At present Community Futures-type organisations are central support mechanisms for new and expanding small businesses in the rural regions where they exist.

Based on the insights and analysis presented in this chapter and the rest of the report, a few ways in which the RDAs can advance the agenda for rural innovation could be summarised as follows.

Policy design

Based on the realities of innovators in rural and remote areas, ensure that policies and programmes for innovation reflect the local economic, labour and social structures. This largely means ensuring that policies and programmes focus on supporting smaller and older firms, initiatives to encourage entrepreneurship (new firm formation) and support mechanisms for getting rural firms to start exporting and scaling up. In addition, there needs to be more high-level support for system entrepreneurs, rural leaders, social entrepreneurs and public sector innovation while focusing less on science and technology innovation. Likewise, all policies for (demand-side) innovation will be challenged by (supply-side) labour shortages. Therefore, all programmes need to consider the relatively stronger challenges for youth entrepreneurs, older workers, Indigenous people and women.

Co-ordination and peer learning

There are many challenges that rural entrepreneurs face that go beyond the scope of work for RDAs. The agencies could address these challenges by establishing regular consultative occasions and co-ordination units that provide vital insight for rural-proofing federal, provincial and territorial governments focused on creating the conditions for rural innovation. These include educational programmes for young entrepreneurs, lifelong learning upskilling programmes, social services (such as child care and elderly care) and programmes to encourage partnerships in skills training among Indigenous populations. In addition, RDAs could provide insight into critical infrastructure projects such as broadband and physical infrastructure like roads, ferries and airports, which are rural entrepreneurs’ critical lifelines. For on-reserve populations, the federal department Indigenous Services Canada is responsible for improved service delivery and eventual transfer of service delivery to self-governing Indigenous authorities.

Many ideas for rural innovation are already available in Canada. They can be enhanced by creating a platform for peer learning between federal, provincial and territorial agencies and enabling rural leaders and system-level entrepreneurs to demonstrate and network across different rural areas. These individuals are also great resources for providing insight into public sector initiatives.

Simplification of government support services for innovation

RDAs provide a large share of the operating budget of many of these organisations but the business Community Futures organisation’s ability to directly fund loans to local firms is limited by the size of its existing revolving loan fund and is unable to provide equity finance, although it can provide subordinated loans.

There are few venture capital funds in rural areas and rural-focused angel investors are rare. Nevertheless, they do exist in some places such as Kenora and Regina and some Indigenous groups play a similar role by taking equity stakes in rural enterprises. But a new venture-type entity is needed for higher rates of commercialisation of innovation in rural areas. The entity could be structured as a social enterprise to support commercialisation but keep the benefits in the community, just as the Business Development Associations created through Community Futures now do. RDAs could operate a new programme that provided seed funding to a “venture-type” rural entity that made equity investments in its region. The long-term success of the BDC revolving loan funds offers the assurance that such a policy could have limited risk and would fill a missing gap that current equity investment firms are not interested in filling.

Overcoming challenges of scale through linkages and networks

In Canada, RDAs operate across provinces and territories and, in doing so, create a macro area functional approach, while at the same time, the legacy institutions of the CFP provide a co-ordination mechanism that creates a level of support that opens avenues and access to financial and in-kind resources in view of supporting innovation and entrepreneurship.

For policy and programme design in rural areas, the scale of interventions for innovation is often more important to consider than in urban areas, particularly in countries with large, sparsely populated areas. In its Northern Sparsely Populated Areas report (2017[89]), the OECD identifies growth in opportunities for sparsely populated regions as intrinsically linked to immobile assets such as resource endowments, coastal topography or national parks. The challenge for these areas is to focus on how to add value around these factors through skills, innovation, infrastructure and the development of a business environment. In many European countries, building on regional comparative advantages is often supported through what is referred to as a “smart specialisation strategy”. This type of strategy is a co-ordinated territorial approach that engages with major stakeholders in building on local comparative advantages. It can provide a platform in which regional development can take a place-based functional approach, engaging relevant stakeholders to support regional development and diversification.

In some cases, local efforts to build scale can be in the form of support for entrepreneurs in overcoming challenges related to distance and access to services. RDAs can easily support these initiatives through networks linking rural entrepreneurs together. One example is the Scottish Rural Leaders Programme, which brings young entrepreneurs from rural regions together to support each other, build business networks and work on solutions. A second example comes from rural Japan, where peer-to-peer partnerships in the sake industry help circulate knowledge, create linkages in supply chains, build firm-to-firm collaborations and promote regional branding. A third example is the European Union’s LEADER programme, which focuses on a bottom-up, area-based approach to supporting rural development and innovation. These initiatives are further described in Box 3.10. Lastly, building scale is also enabled through the use of university systems, such as the Quebec CCTTs and university-firm partnerships that can overcome the challenge of scale through the building of a network.

Building an ecosystem of experimentation

RDAs can have a substantial impact on reinforcing innovation by engaging in programmes that build experimentation as part of regular solutions for new challenges. In the spirit of a changing environment, RDAs can incorporate funds for public sector experimentation in service delivery, as well as encourage regular challenge-based programmes to engage with local innovators on finding solutions to service delivery challenges. In addition, working with the local governments, it may also be possible to create opportunities for rural entrepreneurs by discussing regulatory sandboxes in a testing environment while supporting the proliferation of “fab labs”, incubators, accelerators and similar initiatives that build on local skills and ideas for solutions to local challenges.

Re-enforcing Indigenous values in RDA innovation

While many Indigenous businesses are like any other, they can also have unique features such as an emphasis on communal goals, strong links to the land and alignment with Indigenous culture, values and worldviews (Peredo et al., 2004[90]; Croce, 2017[91]; Hindle and Lansdowne, 2005[92]). Recognition of these oft-present characteristics is important in order to design relevant and culturally-acceptable policies and partnerships. Moreover, diverse Indigenous peoples in Canada have specific rights to lands, resources and self-determination, impacting individual and community-led business activities.

All RDAs across Canada also have a mandate to support Indigenous entrepreneurship through the Government of Canada’s inclusive growth agenda and, more specifically, its Innovation and Skills Plan and Investing in Regional Innovation and Development framework. As well as serving non-Indigenous communities, CanNor is unique as it was mandated to support Indigenous economic development at the time of its creation and it operates targeted Indigenous programmes, including the Northern Indigenous Economic Opportunities Program, which includes two streams: community and opportunities planning, and entrepreneurship and business development. A third stream is under development, which would establish a research agenda and target research proposals that can contribute to the territorial Indigenous business ecosystem, major economic sectors or broader regional priorities.

For Canada’s RDAs to be successful in meeting their priorities for Indigenous economic development, they will need to develop strong relations with Indigenous communities and leaders, and adopt a flexible approach to programme delivery. As one positive example, CED introduced flexibilities to its regular programming (i.e. Regional Economic Growth through Innovation and Quebec Economic Development Program for Indigenous-controlled Non-profit Organisations and SMEs). The design of these more flexible intervention parameters resulted from engagement sessions with various Indigenous representatives and are aligned with government priorities. They allow for an intervention with Indigenous communities and beneficiaries that is more tailored to their needs.

Box 3.10. Building linkages to overcome challenges of scale

Scottish Rural Leadership Programme, Scottish Enterprise, Scotland

Since 2006, Scottish Enterprise, an RDA in Scotland, has been running an annual Rural Leadership Programme that engages with business leaders and owners from rural Scotland. The participants come from a wide range of sectors in Scotland, including agriculture, tourism and hospitality, goods and drink, energy, horticulture and the services sector. The programme was developed in partnership with Highlands and Islands Enterprise and the South of Scotland Enterprise. The programme has over 700 leaders that have gone through it as of 2022 and it is expected to grow to close to 900 by 2025.

The programme provides a core 6-month session that builds the capacity of individuals as leaders through workshops, one-on-one coaching to support a growth mindset, building industry and parliamentary connections, and widening personal networks. The rural team at Scottish Enterprise hosted two Global Connection events during the pandemic, connecting rural leaders in Scotland with counterparts in Australia, Canada and the United States.

Peer-to-peer partnerships in the sake industry, Yamagata, Japan

Led by the private sector, in rural Yamagata, business leaders set up a strategy to simultaneously promote linkages between rural sake producers, regional branding and an export strategy that can promote the regional products. Through a local (prefectural) branding initiative, the Yamagata sake industry was given Geographical Indicator (GI) status, which is an indicator of the producer’s quality of land, resources and processes. This was a first for the industry (sake, a branch of food and drink). The uniqueness of the Yamagata sake GI is that, although GI protection is normally given to limited local areas, sake GI is given over the whole area of Yamagata prefecture.

As a part of the strategy to attain branded status, the Yamagata Sake Brewery Union association initiated a study that involved focus groups of breweries to help them learn and improve each other’s skills. This peer-to-peer partnership is rarely seen in the sake industry as they are competitors for the local market and brewery skills are kept as family secrets. However, in the case of Yamagata, with a shrinking domestic sake market, they changed their market strategy to a collaborative one, now intending to grow international export markets. This export-driven strategy has changed the mindset of the Yamagata sake industry and resulted in a lasting peer-to-peer partnership study group.

European Union’s LEADER programme

The acronym LEADER derives from the French phrase “Liaison entre actions de développement de l'économie rurale” which means “Links between activities for the development of rural economy”. It was introduced in 1991 by the European Commission in response to the failure of traditional, top-down policies to address problems faced by many rural areas in Europe. The idea was to engage the energy and resources of people and local organisations as development actors rather than beneficiaries, empowering them to contribute to the future development of their rural areas by forming area-based local action group partnerships between the public, private and civil sectors. From 2007, LEADER was extended to fisheries policy and made a mandatory component of the European Union’s rural development policy. From 2014, the applicability of the LEADER approach was further extended to community-led local development in rural, fisheries and urban areas.

The LEADER approach or method is based on seven specific features: i) a bottom-up approach; ii) an area-based approach; iii) local partnerships with public, private and civil society; iv) an integrated and multi-sectoral strategy; v) networking, including with non-rural areas; vi) innovation in how services are delivered; and vii) co-operation between territories and internationally.

Source: Based on Skills Development Scotland (n.d.[93]), Rural Leadership Programme, https://www.skillsdevelopmentscotland.co.uk/what-we-do/skills-planning/skills-action-plan-for-rural-scotland/rural-scotland-blogs-and-newsletters/rural-leadership-programme/; OECD (2022[94]), Adapting Regional Policy in Korea: Preparing Regions for Demographic Change, https://doi.org/10.1787/6108b2a1-en.

Implicit in the Northern Sparsely Populated Areas report (OECD, 2017[89]) is the consideration of a functional area approach to smart specialisation strategies (Box 3.11). Whereas smart specialisation strategies build on local comparative and absolute advantages through consultations and co‑ordination with local experts, elected offices, the public sector, businesses and academics, a functional area approach builds on approaches that focus on access to labour and incorporate access to services such as education, health and social services. This approach contributes to a strategy that places rural mobility patterns at the centre of the policy discussion. It encourages thinking outside of administrative boundaries to areas that are in use and accessible to local communities.

Box 3.11. Smart specialisation in Norway

In the European Union, smart specialisation1 is an innovative approach that aims to boost growth and jobs in Europe by enabling each region to identify and develop its own competitive advantages. This is a partnership and bottom-up approach and smart specialisation brings together local authorities, academia, business spheres and civil society.

Nordland County Municipality has a smart specialisation strategy (2014-20)2 adopted in 2014. This is still valid in anticipation of a new strategy. The focus businesses were:

Seafood: fisheries, fish processing, aquaculture, the food and feed industry.
Industry: process industry which produces metals, minerals, chemicals, metallurgical products and machines, with the mining industry and the hydroelectric power industry as the main suppliers.
Experience-based tourism based on a strong tourism industry with nature as the important framework, and the Lofoten Islands as the cutting edge in the national tourism industry.

In an evaluation of the strategy by SINTEF and Nordland Research Institute (n.d.[95]), the researchers found that the development policy focuses on place-based strengths, diversifying industrial structure and increasing business research interactions and co‑operation. In a co‑ordinated place-based approach, the strategy developed and encouraged policy and public support to co‑ordinate on a regional level above only local co-ordination efforts. Among other outcomes, the initiative increased the region’s capacity for research and innovation offerings and the use of innovation hubs to drive company collaboration.

Similarly, in the Helgeland region of Norway, an initiative to mobilise research-driven innovation in industry focused on enhancing the use of research knowledge in innovation processes in enterprises and clusters as part of a broader smart specialisation strategy, which included a focus on industry, tourism and seafood. The main mechanism was through a tool referred to as knowledge brokering. Knowledge brokering is designed to introduce SMEs to opportunities in collaboration with R&D institutions and to do R&D internally. Not surprisingly, there was a strong synergy between knowledge brokering and another low-level instrument SkatteFunn, which is a tax-deductible R&D relief programme.

1. See https://s3platform.jrc.ec.europa.eu/about-us.

2. See https://s3platform-legacy.jrc.ec.europa.eu/documents/20182/91578/fh.ashx.pdf/3e6d55ab-78f7-499e-8a63-8084676ed787.

Source: SINTEF/NRI (n.d.[95]), First among Smart Regions in Norway. Evaluation of Nordland's Innovation Strategy for Smart Specialisation 2014-2020, https://nforsk.brage.unit.no/nforsk-xmlui/handle/11250/2724399.

Conclusions and findings from case studies

While they are not comprehensive in scope, the study benefitted from six case study visits and research based on qualitative interviews. As such, much of the findings of this report reflect priorities captured through these case studies. The analysis provides an initial glimpse of challenges perceived in different types of rural areas such as those in the remote North, coastal or island communities, highly agriculture-intense areas, those accessible to urban areas and finally, communities that identify as rural within the boundaries of an urban city. Further information on each of the case studies can be found in Annex 3.A.

While some innovation in rural areas follows the common research-driven approach to creating a solution described in the RIS, a large amount does not. The RIS approach works where there is already a technology that is appropriate to the problem, the presence of sufficient individuals with the skills to follow a science-driven approach, an existing set of supportive institutions, such as university laboratories, adequate levels of funding to carry out a multi-year effort and most importantly a problem amenable to the RIS approach. DoT Technologies, Prairie Lithium and LM Wind Power are clear examples of science-based rural innovation.

In each of the sites visited there was clear evidence of innovation, both by firms, civil society and local governments. Most of these innovations were developed to deal with problems facing the community for which there was no available solution to be purchased or transferred elsewhere. While most innovations were locally focused, several innovations had clear potential to have an impact far beyond the regions. Some of these innovations had an external market focus from their inception, including DoT Technologies in Edenwald, Saskatchewan, LM Wind Power in the Gaspé Peninsula, Quebec, Taalrumiq’s high fashion clothing from Tuktoyaktuk, Northwest Territories, and the Shorefast Hotel in Fogo, Newfoundland and Labrador. Others were more locally focused initially but their approach has potential for other places, including the Miisun collaborative forest management strategy in Kenora, Ontario, Bruce Power’s support for locally based suppliers in Kincardine, Ontario, or the agri-focused venture capital fund in Regina, Saskatchewan.

Accessible rural areas such as Kincardine and Regina provide interesting examples of growth-oriented rural development and policy discussions where the objective is for rural areas to emulate the innovation processes of dynamic urban areas. In contrast, remote rural areas such as Fogo Island, the Gaspé Peninsula, Inuvik and Kenora provide interesting examples of innovation and development that are instead grounded in an authenticity of rural identity that is in many ways not focused on the same values as urban areas. A summary of the analysis of approaches to rural innovation is provided in Table 3.2.

Typology	Accessible rural	Remote rural
Case study areas examples	Kincardine (Ontario), Regina (Saskatchewan) Trifecta Model of Dynamic Rural Growth	Fogo Island (Newfoundland and Labrador), Gaspé Peninsula (Quebec), Inuvik (Northwest Territories), Kenora (Ontario) Slow Innovation Rural Flourishing
Type of innovation policy	Cluster development, extension of urban innovation policies: entrepreneurial fostering in school, contextual creative problem-solving, physical spaces for exploring entrepreneurial ideas, etc.	Building collaborative models, refocusing urban innovation policies for remote rural economies: entrepreneurial fostering in school, contextual creative problem-solving, physical spaces for exploring entrepreneurial ideas, often as a multi-purpose facility or shared between communities, etc.
Framework conditions	Easier access to labour, finance, government resources	Significant challenges in access to labour, finance models not well adapted, access to government services are limited
Overcoming challenges of scale	Solutions available through the extension of urban infrastructure and local labour market areas	Infrastructure and interregional/national migration incentives
Assets	Creative class, natural amenities, entrepreneurial context	Artisanal tinkering, natural amenities, cultural attachment to place, strong tourism industry
Innovation processes	Division of innovative labour Creative class spillovers Slow innovation processors relevant to traditional rural sectors	Slow innovation External technological inputs Experimenting as a requirement for survival Design integration/appropriateness
Innovation outputs	Productivity Intellectual property New products Spin-offs or start-ups	Meaningfulness Aesthetic experience Productivity or mobilising underutilised assets

In each of these cases, there are areas that seem to have more of a dynamic and developed innovation ecosystem. In Kincardine, the existence of a stable, long-term large employer with a long-term government contract means stable income and demand for jobs. In consultation with the local elected governments, this model for development also benefitted from a co‑ordinated approach that was encouraged by reinvestment in the community. The model relevant to Kincardine is easier to describe, explain and discuss with respect to development policy as employment and income growth objectives are accepted without debate. While the success of the Kincardine model is evident, it is not easily reproducible. Nevertheless, places like Regina, which is technically a rural area within a metropolitan area that benefits from accessibility to metropolitan skills, services and opportunities, can be more easily supported by policy interventions that build on the importance of promoting circulation and access to skills and firm-to-firm interactions.

The model relevant to Fogo Island, the Gaspé Peninsula and Inuvik is much more difficult to describe, explain and discuss because it deals with objectives that are less easily quantified and are less commonly included in debates of rural development policy. However, the focus on innovation does provide concrete examples of how this alternative model can contribute to development objectives in resource-constrained environments. While the Kincardine model is not applicable or translatable to places like Fogo Island, the Gaspé Peninsula or Inuvik, dynamic rural growth models may benefit from some of the “slow innovation” processes that characterise remote rural areas.

Far more firm-based rural innovation follows the doing-using-interacting approach described by Isaksen and Karlsen (2016[20]). This does not mean it is not a purposeful process but involves a different approach. For example, the Fogo Island fishing co-operative knew that to be competitive in both the crab and the sea cucumber global markets, it needed a processing technology that lowered costs, improved quality and allowed increased production volumes. Working collaboratively with the Fisheries and Marine Institute of Memorial University and another university partner, both new machines and a new processing line were designed in an iterative process focused on satisfying the co-op’s requirements. At a smaller scale, Innovate in Inuvik works with artists to determine what part of their production process can be automated and how new technologies can allow them to extend their artistic capacity in new ways. The goal is to make them more successful in the market and allow them to operate a viable business.

Social innovation is particularly important in rural areas because it fills in the gaps caused by a truncated market economy that provides only a limited number of goods and services and local governments that have to few resources to deliver any more than essential services. In rural and remote regions, high levels of social capital may be more important for economic and social development because it can increase social innovation. In Canadian rural regions where there are significant numbers of Indigenous people, especially both the provincial and territorial North, social innovation is especially important as a way to expand economic opportunities in societies that have different social and economic norms and as a bridge between Indigenous and non-Indigenous firms and governments, as is the case in Kenora where there is a joint effort to construct a shared hospital and where Miisunn provides a model of shared forest management.

The current federal innovation policy has an inherent urban bias because of its strong focus on the RIS approach and because a very large share of federal funds flows through universities. In every place, the innovations observed were supported by a significant infusion of external funds that provided firms, civil society and governments with the additional resources they needed and the time to create a new product, process or way of delivering services. While rural areas may have adequate access to credit for conventional purposes – buying a car or home, or starting a conventional small business – rural financial intermediaries are largely limited to standardised consumer and business debt instruments. There is a definite lack of equity capital and also a limited capacity to evaluate the unconventional investment opportunities that are the hallmark of innovations. Support from the federal government, especially from the RDAs, was especially important for improving economic conditions and constructing essential infrastructure. While evidence of federal support for innovation in rural areas was available, it did not appear to be provided in a systematic way and there was considerable variability among the RDAs in how that supported innovation. Other agencies supporting research, such as the Natural Sciences and Engineering Research Council of Canada and the three core research funding councils, had some presence in rural areas that had a higher education institution but were not actors in most places that did not have one.

In most cases, provincial and territorial innovation policies follow the national government approach as doing so increases their access to federal funds. Quebec and Saskatchewan are more strategic in their approach, allowing them to better support innovation in rural areas. In both these cases, there has been considerable reliance on crown corporations to either attract external support for innovation through procurement policy or use the corporations to bring innovative production to rural regions, especially in Saskatchewan. Social innovation is now part of the 2022-27 Quebec Research and Investment in Innovation Strategy. To support research and investment in innovation, Employment and Social Development Canada established a Social Innovation and Social Finance (SI/SF) Strategy with CAD 755 million from the Social Finance Fund to support charities, non-profits, social enterprises, co‑operatives and other social purpose organisations in accessing flexible financing opportunities. Greater access to social finance through the Social Finance Fund will help them grow, innovate and enhance their social and environmental impacts.

Annex 3.A. A review of provincial and territorial innovation and further information on case study areas

This part of the report provides a brief overview of each of the communities visited and a description of innovations observed. These innovations are, for the most part, locally developed solutions to a significant problem or are responses to a perceived local opportunity. Few evolved from standard regional innovation system (RIS) approaches and many were brought about by local civil society. Communities are discussed in visiting order, from first to last.

Provincial and territorial innovation system

Newfoundland and Labrador

In Newfoundland and Labrador, responsibility for rural development resides with the Ministry of Industry and Economic Development. This body is also responsible for the broadband portfolio of the province. Several regional development officers support regions in their ability to access a portfolio of community and economic development programmes, such as loan assessments and community development initiatives. Other departments contributing to economic development activities cover immigration, population growth and skills education, advanced education, skills and labour, and municipal and provincial affairs.

In Newfoundland and Labrador, the provincial innovation system largely follows the standard science-based, technology-focused approach based on formal research and development (Phillips and Castle, 2022, pp. 119-125[8]). This innovation architecture is focused on the St John’s metropolitan area, with the Memorial University of Newfoundland as the central hub that connects federal and provincial support with a variety of technology firms operating primarily but not exclusively in key natural resource sectors. The Atlantic Canada Opportunities Agency (ACOA) is identified as a key player in this process, providing support both to the university and innovative technology-oriented businesses (Phillips and Castle, 2022, p. 120[8]). The oil and gas industry has also been a major source of support for innovation efforts partly driven by the need to adapt technologies for the specific drilling environment and partly due to provincial requirements for ancillary investments, such as in Indigenous communities, as specified in drilling leases. The Newfoundland and Labrador Oil and Gas Innovation and Business Development Fund22 is a 10-year, CAD 60 million fund with an annual budget of CAD 6 million to facilitate collaboration, investment and industry growth required to position the province globally as a preferred location for oil and gas development. The needs of rural communities are neither articulated nor prioritised in this fund (Krawchenko et al., 2022[46]).

Currently, the province uses the Department of Tourism, Culture, Industry and Innovation as the lead agency supporting innovation. While responsibility for innovation policy has been located in a number of departments over time, the core programmes have remained relatively stable since 2000, although the level of funding has varied with provincial royalties from oil and gas extraction (Phillips and Castle, 2022, pp. 119-120[8]). Because the province is geographically large, with a small highly dispersed population, only one metropolitan area and highly dependent on resource industries, innovation is challenging, especially outside the St. John’s area. This includes all phases, from conceiving a potential opportunity to acting on creating the concept and bringing it to commercial fruition.

In sum, the province has developed an innovation architecture that largely follows the national science-based, technology-oriented approach, which has worked well in St John’s because it has the implementation capacity. Certainly, benefits from St John’s-based innovations have spun off to other areas of the province in the form of technology transfer and higher provincial tax revenue that funds public services. In addition, parts of Memorial University, particularly the Marine Institute, play an important role in supporting customer-driven innovation in the fisheries sector, as observed in Fogo Island. Similarly, ACOA provides essential financial and technical support to both rural firms and new entrepreneurs through its direct lending programmes and ongoing support for Community Futures organisations. Crucially, rural areas in the province are facing a critical workforce shortage, which can only be addressed by innovations in processing to reduce labour requirements and increase productivity. The province has recently introduced regional innovation pilot projects in a number of rural areas (Phillips and Castle, 2022, p. 129[8]), which may provide a path to a more geographically balanced innovation policy.

Northwest Territories

The Northwest Territories (NWT) have their own challenges based on geography and human settlement patterns. Compared to the provinces, the territorial North lacks the population, research capacity, investment capital and consistent commercial interest needed to create and sustain an innovation ecosystem (Coates and McPhee-Knowles, 2022, p. 342[96]). With devolution, territorial governments have gained authority; however, they are heavily reliant on federal transfers compared to the provinces, which impacts their capacity. The majority of the NWT are covered by modern treaty lands and Indigenous peoples in the NWT have established co-management regulatory regimes. In addition, there are only a couple of reserves and the majority of Indigenous peoples live in hamlets. The need for innovation in the North is particularly high because of the combination of climate, small dispersed populations, high transport costs and the need for infrastructure adapted to permafrost conditions. Climate change has exacerbated the need for new solutions as permafrost thawing alters transport and building conditions.

The lead department for rural development in the NWT is the Department of Industry, Tourism and Investment. The region’s primary rural economic development strategy, the Sustainable Livelihoods Action Plan23 is the responsibility of a different unit, the Department of Environment and Natural Resources. The government has made efforts to articulate its respect for local knowledge. A policy24 was made to this effect in 2005 and the NWT has a higher relative proportion of approaches addressing the needs of rural communities than other regions in Canada (Krawchenko et al., 2022[46]).

While the government of the Northwest Territories does not have a formal innovation policy embedded in a department, it is developing an Action Plan on the Knowledge Economy. In a recent legislative address, the minister responsible for the action plan identified important innovations in the NWT that are part of the knowledge economy, including the Inuvik satellite stations (one public and one private) that manage uploads and downloads for a large share of polar-orbiting satellites, the expanding Arctic research programme at the three campuses of Aurora College and the Innovate Centre for Arts, Crafts and Technology in Inuvik that focuses on helping Indigenous craft producers use modern technologies to increase their productivity to allow them to move to full commercial scale. Financial support from CanNor, the Natural Sciences and Engineering Research Council of Canada and other federal agencies played important roles in these activities.

The standard innovation policy approach faces substantial challenges in the territories (Coates and McPhee-Knowles, 2022[96]). In part, this is because the opportunities for scale do not exist and there are insufficient scientific or financial resources; a simple technology transfer from the south will not be enough (Coates and McPhee-Knowles, 2022, p. 345[96]). Innovation will be crucial in the NWT if it is to advance environmentally, socially and economically. A clear opportunity lies in innovation by Indigenous people. “Indigenous economic development corporations and Indigenous-owned companies speak of taking the long-term view of economic transition that is important to many forms of innovation” (p. 345[96]). The Inuvialuit Regional Corporation is a clear example of this with its mix of profit-oriented and social enterprise programmes. The corporation was established to manage the Inuvialuit Final Agreement. It has subsidiary bodies such as the Inuvialuit Development Corporation (for-profit arm) and the Inuvialuit Community Economic Development Organization, which runs the “country food” programme. Construction companies and forestry companies may not be inherently innovative, but they can be managed in ways that increase employment and skill development opportunities for Indigenous people while still generating a profit, as observed in field research. The “country food” project is an innovative social enterprise that provides free high-quality game to Inuvialuit settlements by buying carcasses from Inuvialuit hunters, processing them in a modern central facility that uses solar energy to power container-size freezers and distributing boxes of family-sized portions to the six Inuvialuit communities.

Ontario

Ontario has a strong innovation policy that operates both at the provincial and regional levels. While innovation policy has evolved as provincial governments change, it has largely focused on manufacturing and is cluster-focused (Mastroeni, 2022, p. 224[97]). There has also been a clear focus on supporting applied research centres, typically located at universities, and on skill development programmes and supporting start-ups (p. 224[97]). Mastroeni suggests that while Ontario’s innovation policy has always recognised the value of federal innovation funding support, there has been little effort to align provincial programmes with federal priorities (p. 242[97]). In part, differences in the political orientation of provinces and the federal government impact the lack of co‑ordination.

Ontario does not have a rural development strategy but has a ministry with rural in its name, the Ministry of Agriculture, Food and Rural Affairs. As a concept within Ontario, rural appears to be associated with a more traditional lens of agriculture and food, similar to Alberta. Rural is not integrated into sector approaches, although a few broad rural programmes are delivered by a variety of ministries, including a broadband strategy (Krawchenko et al., 2022[46]).

Ontario has the majority of the research-intensive universities in Canada and the provincial university and college system is large and well-distributed across the southern part of the province, particularly along the Highway 401 corridor between Windsor and the provincial border with Quebec. However, in Northern Ontario, there is a limited presence of both universities and colleges, limiting the effectiveness of a provincial innovation ecosystem built around higher education institutions (HEIs).

The Ministry of Research and Innovation currently directs the provinces’ innovation policy and programmes; some version of this ministry has been in place since 2005. A central element of the province’s innovation approach is the Ontario Centres of Excellence, established in 1987 and renamed the Ontario Centre of Innovation (OCI) in 2021. The main function of the OCI remains trying to better connect university research to industry needs while providing financial support for innovative R&D conducted at provincial universities, colleges and hospitals. A unique element of the support is the Voucher for Innovation and Productivity, which is provided to for-profit firms to facilitate their collaboration with academic researchers. The cost-sharing voucher (maximum of 50% of project costs) can only be used for R&D purposes but because the firm has greater control over the specific R&D activity, it increases the likelihood of the research leading to commercialisation. The OCI also currently has funding programmes for pre-commercial development of fifth-generation technology standard for cellular networks (5G) technologies and autonomous vehicle development focused on winter driving conditions.

The province operates 17 regional innovation centres (RICs) that support entrepreneurs and early-growth innovation and technology companies in developing marketing strategies, preparing financial plans to attract investment funding, and developing staffing strategies. Most of these are in Southern Ontario. Individual RICs emphasise different approaches to how they deliver support that best fit the needs of the region but all can provide basic support to new and growing firms and help them identify sources of government support from different federal and provincial agencies, as well as potential private sources of debt and equity finance.

Ontario has both a core set of provincial programmes that support innovation and a distinct set of regional institutions that provide more focused support to specific regions. In general, the innovation ecosystem is designed to take advantage of provincial strengths in university, college and hospital institutions and build on Ontario’s strong manufacturing industries and proximity to key United States markets. Very limited attention seems to be paid to the possibility of rural innovation in the more remote rural parts of the province, particularly the provincial north. Of the two case studies, the provincial ecosystem most clearly benefits the town of Kincardine, which is near several major research universities, even though it does not have one, while Kenora receives more limited support, even though it hosts a branch office of one of the RICs.

Kenora, Ontario

The main manufacturing sector in the city of Kenora remains forest and wood products and, while it is considerably smaller than at its peak several decades ago, it has modernised both in terms of forest management and production technologies. Federal resources, mainly through FedNor, have supported the process, as have Natural Resources Canada and other departments. But, because natural resources are a provincial responsibility and, in particular, because most of the land in Northern Ontario is Crown land under the direct control of the province, provincial policy through the Ontario Ministry of Natural Resources and Forestry has the dominant role.

However, the innovation ecosystem in Ontario has a largely urban orientation that relies on collaboration between higher education and firms as the main way to drive innovation. While Kenora has branch facilities of Confederation College, they offer limited courses and have only a small local staff. Lakehead in Thunder Bay is the closest medium-sized Ontario university to Kenora, which is over 480 kilometres away. Kenora is much closer to the major metropolitan area of Winnipeg, which is in a different province, making Kenora ineligible for Manitoba’s provincial support systems, even though it is only a little over two hours to Winnipeg while the provincial border is less than an hour’s drive away.

Kincardine, Ontario

Kincardine fits clearly into the focus of Ontario’s innovation policy. The Bruce Nuclear Generating Station (Bruce Power) and its surrounding cluster of nuclear-related support firms create a technology cluster that can easily link to major proximate universities in Hamilton, London, Waterloo and even Toronto. Each of these cities also has RICs and this provides opportunities for firms to take advantage of access to both higher education and provincial government support mechanisms. The large number of science, technology, engineering and mathematics (STEM) employment opportunities in Kincardine attracts a highly skilled labour force that also has the opportunity for entrepreneurship and there are examples of new firms initially formed in Kincardine by individuals who moved there to take advantage of opportunities to serve Bruce Power.

Critically, one of the challenges of the model of innovation latent in Kincardine, as well as several other small communities including Fogo Island, is innovation in the face of one or two dominant employers. In the case of Kincardine, Bruce Power conducts some research activities within its nuclear reactors when going through a cleaning period (for example, to make isotopes used in the treatment of cancer patients) and critically provides ample opportunity for engagement with local actors and reinvestment into the community to encourage a dynamic innovation ecosystem. However, it does so under the unique condition of low to no competition and a long-term contract for the provision of public services. This stable condition, while not replicable in most other industries, limits competition and innovation within the same industry. However, given the nuclear industry’s large fixed costs and regulatory limitations, such a condition is nearly inevitable. Given this context, innovation is still possible despite the dominance of few employers. In part, this has been facilitated by open and clear partnerships with local elected and public sector officials, the active reinvestment of the large firm into developing a mutually beneficial ecosystem of support industries for the nuclear firm (for example, through the use of robotics for nuclear testing and validation) and a high‑level commitment for local sourcing of supply chain materials (such as packaging for nuclear equipment exports).

Quebec

Quebec arguably has the most coherent provincial innovation policy. It has a provincial overlay that establishes a broad strategy across multiple sectors and a regional layer that focuses on specific local opportunities. While Quebec’s innovation policies are not the same as those of the federal government, it has constructed the structure of its provincial organisation to closely align with that of the federal government to facilitate access to funding (Gingras, 2022, p. 205[98]). As a result, Quebec seems to capture a larger share of federal R&D outlays to universities than its share of the national population would suggest (p. 212[98]). Quebec’s support for innovation came from the recognition in the 1980s that it had few firms that were significantly engaged in R&D and that its competitiveness was declining as a result (p. 209[98]). The policy response was to use the existing provincial system of universities and colleges as a way to stimulate applied public R&D by higher education units on key sectors through co‑ordinated team research that linked individuals at more than one institution on a single topic (pp. 209-210[98]). The Quebec Research and Innovation Strategy (Stratégie québécoise de la recherche et de l’innovation)25 focusses on skills, research and commercialisation but makes no mention of rural opportunities or priorities (Krawchenko et al., 2022[46]). Quebec does, however, integrate innovation to a degree into its regional planning through the use of “signature innovation”26 projects. This is regional/territorial development framing and includes smaller, rural communities by default. Quebec also has a Quebec Energy Transition, Innovation and Efficiency Master Plan,27 which makes no mention of rural priorities (Krawchenko et al., 2022[46]).

Compared to Ontario, the only other province with a somewhat similar size population, Quebec has a more integrated system of universities and colleges that are more broadly distributed across the settled territory. Regional universities have developed specialised programmes that reflect local opportunities, for example the Université de Québec à Rimouski specialises in fisheries and is one of the networks of Universities of Quebec specially designed to connect with territories (OECD, 2023[50]). Similarly, community colleges (CEGEPs) have core academic programmes but have one or more Centres collegiaux de transfert technologique or technology transfer centres (CCTTs) that combine applied research with industry support and workforce training. Programmes at CCTTs are also specific to regional economic development opportunities and support the integration of entrepreneurship. For example, the CEGEP in the Gaspé Peninsula has 3 CCTTs wind power, fisheries and social innovation that co‑ordinate their activities with other CEGEPs with similar interests.

Within the provincial government of Quebec, there is the will and the ability to co‑ordinate the actions of various departments and agencies to work toward induced innovation. The federal-provincial dynamic is well co‑ordinated. Innovation policies in the province are not only different from federal ones; the provincial government supports federal initiatives (Phillips and Castle, 2022[8]). In the Gaspé Peninsula, the wind turbine cluster was driven initially by the creation of procurement requirements in a large tender request by Hydro Quebec for wind turbines that specified turbine blades and towers would have to be manufactured in the peninsula. The wind power CCTT was created in parallel to support the development of a new cluster that could strengthen the regional economy. Financial support was provided by the province and by the federal regional development office CED. More than a decade later, the turbine blade facility has expanded to be the largest local employer and a number of small firms specialising in turbine installation and repair have emerged in the community as well as few turbine component manufacturers. In a small rural labour market that is largely dependent on seasonal employment, the cluster offers high-paying stable jobs.

In Quebec, while federal funds play the largest role in funding R&D, it is clear that the provincial government determines innovation policy and federal policies are used to support provincial goals. As in most provinces, there is a tension between urban-focused clusters that rely on a strong integration among firms, government and universities and fostering innovation in more peripheral rural areas. However, in Quebec, only Montreal has the capacity to support this approach to innovation, which has allowed a broader perspective on innovation policy. Possibly because of the unique cultural conditions in Quebec, the provincial government has developed an effective innovation policy that can be implemented across much of the province in small and medium-sized communities. It, too, relies on interaction among government, firms and higher education but at a lower level of capacity and complexity. The result is still cluster-based development but at a smaller scale and lower level of technology that is appropriate for conditions in rural localities.

Saskatchewan

Saskatchewan provides a powerful example of how conventional science-based innovation policy can not only co-exist with but also be reinforced by innovative actions driven by the actions of firms, civil society and local governments. Phillips and Ballantyne observe that Saskatchewan would seem to be an unlikely place to find innovation; yet there has been a long history of significant innovations occurring across the province (2022, p. 265[99]). They attribute this to the province being both reliant on global export markets for much of its output and being far from these markets, so transport costs are significant. This has forced firms in the province to continuously innovate to increase productivity to remain competitive. In addition, the province has relied on both government and civil society to support economic development in creative ways through the extensive use of crown corporations and co‑operatives (Phillips and Ballantyne, 2022, p. 266[99]) .

Saskatchewan’s lead ministry for rural development is the Ministry of Trade and Export Development. There is no specific rural development document or strategy. Saskatchewan’s Growth Plan28 is the primary economic development document outlining priorities for all families and communities in the province. This document identifies that the Ministry of Government Relations, Municipal Infrastructure and Finance will support CAD 2.5 billion in revenue sharing and CAD 30 billion in infrastructure for Saskatchewan communities over the next decade.

A large share of the innovations in the province are in resource industries (agriculture, forestry, mining and energy) and in first-stage processing since these are the strengths of the provincial economy. In addition, the province has been a leader in developing credit unions as a core part of the financial intermediation process and in expanding their role beyond consumer finance. Farmer co‑operatives continue to play a key role in rural areas and are an important mechanism for producers to directly fund R&D that is directed to their needs. In the 20^th century, the provincial government played a central role in the economy through direct ownership of major firms. Even now, public ownership of utilities remains common and while many crown corporations have been privatised, this was after they reached a point where it was clear they could be viable commercial firms.

Conventional university-focused innovation policy is mainly found in Regina and Saskatoon, both of which have research-oriented universities and colleges. However, to a great extent, the formal R&D undertaken in these cities is geared toward application in rural areas. The University of Saskatchewan has a strong strength in agricultural research and the University of Regina has developed an incubator/accelerator programme with a strong focus on agriculture as well as an agriculture technology-focused venture capital fund. Outside the cities, there is a strong tradition of farm-based user innovation where individuals experiment to develop better methods for producing crops or create new types of machinery to increase their productivity. The Humboldt area has a strong farm machinery cluster based largely on SMEs that had their origins in farmer innovations (Phillips and Ballantyne, 2022, p. 275[99]). The most recent example is the autonomous DoT Industries tractor CNH Industrial, a multinational farm equipment manufacturer, has recently acquired.

Formal provincial support for innovation is relatively modest when compared to other provinces but it is more focused and highly reliant on federal and provincial funding (Phillips and Ballantyne, 2022, p. 270[99]). Biosciences, particularly agriculture, is the main focus, but there is emerging competency in mining and energy in uranium, potash and heavy oils, with most of these companies having their origins as crown corporations (2022, pp. 270-271[99]). With limited resources and a small local market, the focus on core competencies in Saskatchewan has led to innovations developed both by formal R&D and by firms and individuals that complement each other. Federal support has been central to this process, with the core federal R&D funding agencies supporting science-based innovation and PrairiesCan and other agencies supporting smaller-scale innovations outside the two major cities.

Case 1: Kenora, Ontario

City of Kenora

The city of Kenora is located on the shore of Lake of the Woods in the Northwestern corner of Ontario, close to the Manitoba border. The city is also the administrative seat for the Kenora District and census division, which encompasses 37% of Ontario, with an area of 407 000 km². The city hosts the administrative offices of three First Nations communities located in the district. The city has a population of about 15 000 inhabitants, while the district has a population of about 65 000. Local government exists in the organised settlements in the district, including reserves, but the district itself provides no government functions.

Kenora is located on the Trans-Canada Highway, with a by-pass around the city and on the Canadian Pacific Railway East-West main line, which passes through the city. It is about a 2.5-hour drive from Winnipeg, Manitoba, the closest major urban centre and the source of most people with seasonal homes in the region. Since Kenora is the largest city in Northwestern Ontario, it has both federal and provincial government offices and is a regional healthcare centre. The local Northwestern Ontario Innovation Centre branch office is located in Kenora. In addition, the city hosts administrative offices for a number of First Nations bands. First Nations and Métis people each make up about 10% of the city population but are a larger share of the region’s population. Kenora has a branch campus of Thunder Bay-based Confederation College that provides access to some academic and technical post-secondary courses. It also hosts a provincially funded Contact North site that allows online access to a large variety of programmes and services offered by universities and colleges across Ontario.

In the 20^th century, the economy of the city was dominated by the forest sector, including a large pulp and paper mill that was the largest private sector employer in Kenora before it closed in 2006. As the second-largest community in Northwestern Ontario, Kenora also provides important retail and public service functions for the local population and communities in the larger region. Lake of the Woods has historically been a major tourist destination. As Winnipeg has grown, the importance of both seasonal cottage owners and shorter-term visitors has increased in Kenora and nearby lakes. In the summer, the population of the area around Kenora and the city roughly doubles due to visitors and the need for short-term labour to serve visitors.

Peak employment in the mill was about 1 200 employees but, when it closed in 2006, it employed about 320 people. The mill’s capacity had been reduced over the years as demand for its paper fell. When the mill closed, it provided the city with about CAD 2 million in property tax revenue and was estimated to have a total local economic impact of CAD 26 million. Despite the closure, the forest sector remains important. Weyerhaeuser opened a new engineered lumber mill in 2002 that makes laminated strand construction components and there are several existing sawmills. Further plans are in place to relocate and reopen the Kenora Forest Products sawmill that closed in 2019.

Closure ultimately led to a new effort to redevelop Kenora to increase tourism’s contribution and attract new types of businesses looking for a high-amenity environment. Major efforts to improve both the waterfront and Main Street have been undertaken but with only limited impact. Notably, the effort brought together city leaders and leaders of the local First Nations bands to try to find common opportunities across their shared geography. There is a recognition that future joint activity remains necessary and better mechanisms for collaboration are required. In particular, better integration of the local labour force is needed both to meet employers’ needs and ensure adequate employment opportunities for First Nations members. This includes improving skill development opportunities that are connected to actual employment opportunities.

Kenora has clear geographic advantages but also geographic challenges. Lake of the Woods is a major visitor attraction in the summer, both for conventional tourism and seasonal homeowners. The forest products industry and mining both provide additional development opportunities. However, the community and region are isolated from the core economic and political power centres of Ontario, which can cause problems in ensuring that provincial policy is compatible with the development needs of the region. Proximity to Winnipeg, a major population centre, can offset some of this distance penalty, especially for seasonal visitors and access to higher education, but only the provincial government of Ontario can address the infrastructure and social programme needs in Kenora.

Currently, the economy is highly seasonal, with a clear drop in economic activity and population in winter months as summer home residents leave. A large seasonal population has several consequences. First, they create competition for a small stock of housing and typically can afford to pay more than permanent residents, exacerbating the housing shortage. The second is that summer residents can lead to a summer spike in demand for some public and private services, which can lead to excess capacity being created that is underutilised in other months. In turn, this leads to less efficiency and lower productivity in the local economy. In addition, summer residents are often not very engaged with the local society, as their main focus is on the community where their main residence is located.

Examples of innovative activities

FSET

FSET is a small digital service provider specialising in supporting telecommunications services in isolated communities with a particular focus on law enforcement information technology, particularly “real-time” access to records, digital evidence management and systems integration. It also supports small hospitals, remote school systems and local governments with similar products. Their particular niche is providing institutions in very small remote communities with access to current technology so their procedures and records comply with the large province-wide regulatory and data systems they are part of.

Notably, FSET worked directly with Starlink (and SpaceX) in 2020 to enable the isolated reserve of the Pikangikum First Nation to become the first community in Canada to have Starlink services. Pikangikum is located 250 km north of Kenora on Turtle Island and has about 2 000 residents. Before installing the Starlink system, the entire community shared a single 1-gigabyte connection.29 Since then, FSET has helped install 4 289 Starlink kits in 109 remote communities in northern Canada.

All Nations Hospital

The city of Kenora began working with local First Nations and Métis governments in 2017 to build a single hospital that will serve all residents in the regions. Typically, through the Ministry of Health, the provincial government builds hospitals in non-Indigenous communities, while the federal government builds specific healthcare facilities and hospitals for Indigenous people. With this process, the region would wind up with two smaller hospitals that would each be sized for one portion of the total population. Building a single hospital would be both more cost-effective and allow a larger set of services to be provided locally. Planning for the new All Nations Hospital has already reached the point of submitting the main proposal to the Ontario Ministry of Health in 2021 for its analysis. Since both the city and First Nations endorse the process and the plan accommodates the needs of both groups, the remaining hurdle is securing provincial and federal support to allow the hospital to open in 2027.

Sustainable forest management

The province of Ontario controls the vast majority of the land in Northern Ontario as Crown land but can make it available for specific uses, such as timber harvest. First Nations in the north still have unresolved land claims on some of this land and have long objected to previous forest management practices. Ontario now requires all proposals for forest management to meet sustainability objectives. Three distinct entities were developed 14 years ago to put in place an innovative forest management approach in the Kenora District of Northwestern Ontario. The approach combines the interests of a number of First Nation bands in having forests on their traditional lands managed to achieve a better balance of harvested wood and non-wood benefits in the form of wildlife, other plant species and environmental and cultural sustainability with the needs of local wood processors to have a stable supply of wood for their mills.

The three entities are:

The Miitigoog Trust is a not-for-profit organisation that is jointly held by eight First Nations bands with land claims stretching over significant portions of the Kenora Forest and Whiskey Jack Forest in Northwestern Ontario.
The Miitigoog Limited Partnership is the entity that links the forest management interests of the Miitigoog Trust with the timber needs of the local mills. The Miitigoog Limited Partnership holds the license to manage forests that the Ontario Government issues. It consists of two categories of members: a general partner and limited partners. The Miitigoog General Partner LLC is the specific entity that brings together the First Nations members with the local timber processing industry. It has 2 types of shareholders, with each group holding 50% ownership. The first is the Miitigoog Trust, which provides four directors drawn from the bands that are current members of the trust. The second is made up of local wood processors that also have four directors chosen from their members.
Miisun, a wholly owned subsidiary of the Miitigoog Trust, provides actual day-to-day management of the forests and has a road construction arm that develops and maintains logging roads as needed. The objective of Miisun is to generate revenue for the trust while respecting traditional First Nations values for forest use and its practices are certified by the Sustainable Forestry Institute, an international organisation that accredits forest management firms.

Miisun conducts annual timber harvests on the land according to the terms of each management plan and market conditions and makes this wood available at prevailing market prices to firms that participate through the Miitigoog General Partner function. The firms have first right of refusal; if they do not purchase all the wood, the balance is sold through other markets. Profits earned by Miisun are transferred to the Miitigoog Trust for distribution to member bands or other purposes. While timber processors pay market prices for wood, they can benefit in other ways. The first is they have a stable relationship with the forest managers, which can facilitate a more predictable supply of wood and more consistent quality since the general partner is directly engaged in setting the terms of the management contract. In addition, they can use the connection to Miitigoog to certify the sustainability of the wood they supply and may find it beneficial to highlight their engagement with First Nations in timber management when marketing their products.

The success of the model, which was first introduced in 2010 in the Kenora Forest, is shown by: the stable participation of the forest products companies; the increasing number of First Nations who are participating as limited partners, with five new members joining between 2012 and 2021; the ability of Miitigoog General Partner to obtain management rights to the Whiskey Jack Forest in 2012; the introduction of a successful road construction enterprise in 2014; renewal of the Whiskey Jack Forest Management license in 2020; and renewal of certification as complying with the principles of the Sustainable Forestry Institute in 2021.

IISD Experimental Lakes Area (IISD-ELA)

Located in Northwestern Ontario, the IISD-ELA is a laboratory established in a rural, remote area, initially through public funding and increasingly through collaborations with the private sector and international research initiatives. Since 1968, IISD-ELA’s scientists have collected the most comprehensive datasets on freshwater lakes in the world, used for regional and global climate modelling, and its effects on freshwater lakes and the plants and animals that depend on them.

The work focuses on understanding the impacts of climate change, agricultural runoff, water management and contaminants such as mercury, organic pollutants and other chemical substances. It is a natural laboratory with 58 small lakes and watersheds set aside for scientific resources. More recent collaborations have been on the impact of algal blooms, oil spills, pharmaceuticals in water and mercury pollution. The centre serves jointly as a research laboratory and a policy platform to help provide evidence for policy making in Ontario, Canada, and internationally.

Case 2: Regina, Saskatchewan

The rural municipality of Edenwald and the city of Regina, Saskatchewan

This case study has two distinct elements since Edenwald is located within the metropolitan area of Regina, making it rural within a metropolitan region. Consequently, it benefits from the city of Regina’s strong support of agriculture and its own actions. Within the rural municipalities (RMs), the site visits took place in the town of White City and the unincorporated community of Emerald Park.

In 2021, the Regina metropolitan area had a population of about 250 000 people, making it the 18^th largest census metropolitan area (CMA) in Canada. Within the CMA, the city of Regina had a population of 226 000, with the balance residing in 6 RMs, including the RM of Sherwood that contains Regina, while the others are adjacent to Sherwood. In Saskatchewan, RMs are self-governing entities that have local administrative and taxing powers devolved from the provincial government. The review focuses on the adjacent RM of Edenwald, which had a population in 2021 of just over 5 000 people. The RM is an example of a rural region within the boundaries of a metropolitan area. Its location has provided it the opportunity to link to urban services available within the city of Regina and take advantage of close links to the core agricultural industry of the province.

The economy of Saskatchewan remains highly resource-dependent, with mining and energy accounting for 26% of GDP and agriculture contributing about 10% in 2020. The agricultural sector currently provides over 7% of employment in Saskatchewan and in 2020 agri-food exports of CAD 16.9 billion accounted for 23% of Canada’s total agri-food exports and over 55% of Saskatchewan’s total exports. Saskatchewan has 40% of the arable land in Canada but is also the province most distant from global markets and is landlocked. Because of climatic conditions, farms have a limited range of crop options, most of which are commodities where prices are set globally. With high transport costs for Saskatchewan producers, the profitability of farming in the province hinges on maintaining high productivity rates driven by creating and adopting new technologies. This high dependence on farming has led both major cities in the province, Regina and Saskatoon, to see supporting farming as vital to their economic growth.

The Greater Regina Area (GRA) extends beyond the metropolitan area. Regina is located in Treaty 4 territory, the ancestral lands of the Cree, Dakota, Lakota, Nakoda, Saulteaux and homeland of the Métis. Individual bands reside on reserves mainly distributed across rural territory in southern Saskatchewan. Increasingly, First Nations in Canada are embarking on self-directed development initiatives that adopt innovative modern investment approaches to build band wealth and improve economic and social opportunities for members.

The historic importance of agriculture to the GRA was identified in the city’s economic growth plan for 2020-30, which was released in 2019. While the GRA already had core strengths in traditional areas of grain marketing, agricultural finance and fertiliser production, opportunities were identified in bringing new technologies to farming and new opportunities for adding value to major commodities. In addition, Regina hosts two major agricultural trade shows each year that attract international exhibitors and visitors. Facilities already exist for hosting other events, especially if Regina can be identified as a leader in fostering agricultural innovation. Thus, while Regina is a medium-sized metropolitan region in OECD terms, it is a source of innovation that is specifically designed to be used in rural areas.

In 2021, Economic Development Regina worked with key industry stakeholders to develop Regina’s Agriculture and Food Innovation Strategy, which recognises opportunities both within the city and across the GRA. The strategy identifies several key objectives, including: providing new locally developed and manufactured technologies to primary producers to improve productivity; expanding first-stage processing, which can increase local value-added; capitalising on the city’s world-class transportation and logistics infrastructure; stimulating agricultural-related innovations; and working with Regina’s post-secondary education institutions (including the University of Regina and First Nations University of Canada plus the Regina campus of Saskatchewan Polytechnic) to prepare the local workforce for employment opportunities generated by the agriculture and food sector.

Regina hopes to expand its rail and road transport infrastructure to allow an increased volume of shipments and better logistics management. Stimulating agricultural-related innovations is a central task for the strategy. With its existing agricultural trade shows, significant potential exists to host other agriculture-focused events as Regina establishes itself as a leader in agriculture and agrotechnology. Thus, while Regina is a medium-sized metropolitan region in OECD terms, the innovation it generates is specifically designed to be used in a much broader area.

Examples of innovative activities

Cultivator

Conexus, the Saskatchewan Credit Union central agency, founded Cultivator in 2019 as a technology innovation hub with a particular interest in agriculture. The facility, located on the University of Regina campus, provides three levels of support for founders in any sector: “start”, for emerging businesses trying to validate their concept, “grow”, for firms that have an initial product on the market but are in early production stages and “scale”, for firms with about CAD 1 million in sales that are trying to expand. In addition, it hosts the Agtech Accelerator, which is jointly funded by Conexus and Emmertech, a United Kingdom venture capital fund. The accelerator is affiliated with all three Saskatchewan universities, Innovate Saskatchewan, Innovate UK and has a variety of farmers as advisors, with the objective of bringing new innovations to farming and related industries.

The explicit focus on innovative agricultural technology targets global solutions, even though it is located in Regina rather than one of the major cities of Canada. The accelerator hosted its first cohort of 16 entrepreneurs in 2021 with 11 Canadian and 5 British firms. Each participant received a CAD 100 000 equity investment and participated in a 14-week programme, with the first and last week taking place in Regina and the rest virtual meetings. Each firm made a final presentation on the main stage of Canada’s Farm Show, one of the largest farm exhibitions in North America, to test farmer interest.

Precision AI

Precision AI is a robotics-based precision agriculture firm founded in Regina Saskatchewan in 2017. It is prototyping drone-based precision spraying of herbicide in fields using artificial intelligence. Only targeting weeds reduces the amount of herbicide used, providing cost savings and better environmental quality with equivalent weed control. The technology advanced quickly enough to receive an initial round of funding from government programmes and local investors in 2020, while in 2021, the company raised CAD 20 million in an initial seed round from venture capital investors. The company’s precision-spraying autonomous drone system, the first generation of commercial production drones, was released in July 2022, which allows the firm to start developing the data to meet pesticide use regulations in Canada and the United States.

Agtech Growth Fund

Innovation Saskatchewan operates the Agtech Growth Fund (AGF) to accelerate the commercialisation of innovative technologies that support farming in Saskatchewan, including supply chain activities. The provincial government introduced the fund in 2020 to provide up to CAD 1 million annually with a clear focus on the farming sector that had not been as present in prior provincial R&D programmes. Funding is restricted to firms with a Saskatchewan presence that have innovative technology that addresses a significant agricultural challenge in the province. AGF will provide up to 30% of the proposed development and commercialisation budget, with investors providing at least 50%. By 2021, the AGF and a related fund, the Saskatchewan Advantage Innovation Fund that supports commercialisation, had committed about CAD 1.2 million to 6 firms. In 2021, the state of South Australia created a similar fund with AUD 800 000 of annual funding and similar investment objectives.

File Hills Qu’Appelle Tribal Council and FHQ Developments

FHQ Developments is the Regina-based for-profit investment arm of the File Hills Qu’Appelle Tribal Council (FHQTC) made up of 11 First Nations bands in southern Saskatchewan. The FHQTC has over 16 000 citizens and 435 000 acres of reserve land within Treaty 4 Territory. In addition to FHQ Developments, which focuses on various equity investments, including partnerships and acquisitions, the FHQTC has two other main arms: Keseechiwan Holdings, which manages its casino investments, and FHQ eCommerce, which develops and sells online payment platforms, data management systems and digital solutions for firms and governments. The FHQTC is also involved in a range of non-profit activities that provide band members with housing, healthcare, labour force training and other social services.

FHQ Developments was founded in 2010 to expand economic development opportunities for member bands by using government procurement requirements to develop business relationships with federal and provincial contractors. Initially, this consisted of “fee-based income” from satisfying government requirements for Indigenous participation along with some employment opportunities for band members. Because FHQ Developments retains all of the revenue it generates, it became able to move to an “equity partner” relationship and develop its own companies that could subcontract with partners over time. This provided an improved revenue stream, better employment and training opportunities for Indigenous staff, increased capacity development and a sustainable business model that can demonstrate significant impact beyond the bottom line.

FHQ Developments’ investment strategy has three elements: building Indigenous workforce capacity, sustainability and maximising impact for its beneficiaries and customers. The result is a three-pronged Indigenous economic development model. The first part is a portfolio of 11 companies, mainly in construction, that generate income, build capacity and employ Indigenous talent for FHQ Developments. The second is reinforcing First Nations' economic development activity by supporting entrepreneurs and building an Indigenous ecosystem for greater success and participation. The third and newest part is a subsidiary, Tokata HR Solutions, which recruits, trains and coaches Indigenous talent for in-demand industries. A significant part of the approach is identifying emerging career opportunities in Saskatchewan through investors and partners of the strategy, then with Indigenous talent from elementary, high school, post-secondary and active career seekers to establish appropriate career paths.

Rural municipality of Edenwald, Emerald Park and White City

Most of the land in the RM remains in farming but there are several small settlements that are integrated into the Regina CMA labour market, with Balgonie, Pilot Butte and the town of White City, with a population of about 3 700 inhabitants, being the largest. Notably, Emerald Park’s population of about 5 000 is a mixed-use unincorporated area adjacent to White City. While these communities are mainly residential in nature, they have a significant manufacturing presence that hosts firms requiring some combination of a large amount of inexpensive space and easy road access for bulky shipments, limited infrastructure or that are engaged in manufacturing processes that are not suitable for more urbanised areas. Both communities are about 15 km from Regina. Emerald Park hosts two large industrial parks both with good access to the Trans-Canada Highway and provincial roads, while in White City, commercial activity is mainly distributed along the Trans-Canada Highway and Saskatchewan Highway 48. Both communities host manufacturing firms but their presence is larger in Emerald Park, in part because the industrial parks provide a more suitable location.

Innovative manufacturing occurs in both communities and examples of various forms of innovation can be found, including science-based research that led to an innovative manufacturing process, innovation by a farmer who was seeking better solutions to his farm equipment needs and who turned into a serial entrepreneur and innovation that was first developed in a large urban area and transferred to a rural firm that acts as a contract manufacturer, but which in turn had to adapt available production processes and in turn train other companies that act as secondary contractors.

Examples of innovative activities

Prairie Lithium

The firm was founded by Zach Maurer, a former oil field worker from the conventional oil production area near Estevan in southeastern Saskatchewan. His initial career objective was to work in the Canadian oil industry but, when prices collapsed in 2014, he reconsidered his options. While he found work as an environmental consultant working on oil field remediation, his background in geology and his knowledge of the Williston Basin led him to consider the possibility of extracting lithium from some of the brine layers in the basin and then reinjecting the residual brine back into other strata that had been depleted of oil and gas. Since this was a relatively novel idea, there was little scientific analysis to assess the concept’s potential or identify an appropriate technology. In 2017, he enrolled in a Master’s programme in hydrogeology at the University of Regina to investigate the potential for extracting lithium from brine without relying on evaporation. His research suggested that if a deposit with a high enough concentration of lithium could be identified, the process should be feasible.

In 2019, he formed Prairie Lithium and raised sufficient funds to hire a chemist with expertise in separating chemicals from brine and start the process of identifying locations and strata most likely to have high concentrations of lithium. The business is located in the industrial park in Emerald Park as it provides easy access to scientific resources in Regina and is suitable for handling relatively large shipments of brine from test wells for separation. In 2020, it began acquiring drilling rights in areas thought to be potential sources of lithium-rich brine. For the business to be viable, deposits with high lithium concentrations and a chemical separation technology were essential. In 2021, Prairie Lithium identified a scalable technology for separating lithium that was independently verified and resulted in a patent. In 2021, it also drilled its first test well in an area it believed had high potential for hitting a stratum with a high concentration of lithium in the brine. Once the well was successful, work started on scaling up the separation technology in a form that can be located at a well site instead of in an industrial park.

SeedMaster/DoT Technology

In 1991, farmer/entrepreneur Norbert Beaujot developed a new approach to seeding grain that was suitable in a prairie environment for farmers interested in adopting no-till cultivation. Over time, he refined the seeder and added new technologies as he gained experience in its use. In 2002, he established his firm, SeedMaster, in Emerald Park to fully commercialise his evolved air seeder. Full production began in 2004 and the plant was expanded in 2005 to increase capacity. Over time, as electronic control technology improved, SeedMaster drills were improved and their size and capacity increased. SeedMaster products are now sold in the three prairie provinces of Canada, in several northern states in the United States and in most states of Australia.

By 2010, Beaujot was working on a new concept: an autonomous power platform that could be coupled with a number of crop cultivation devices, such as a seeder, herbicide sprayer or grain cart. This would replace or supplement a tractor and remove the operator from the field, allowing greater precision in placing seed, fertiliser or sprays. An additional benefit would be that a single operator could control multiple pieces of machinery, reducing labour requirements and increasing planting speed. In 2014, DoT Technology Corp. was created and shared space with SeedMaster to produce a prototype autonomous diesel power platform. By 2017, the unit was coupled to a SeedMaster air seeder and was capable of planting fields; other manufacturers had also created a compatible sprayer and granular nutrient applicator. This placed DoT Technology as a leader in achieving a viable autonomous tractor.

In 2020, DoT Technology was acquired by Raven Industries, a South Dakota-based precision agriculture components and systems manufacturer. While Raven already had a kit that would convert an existing tractor to autonomous operation, DoT Technology offered a more integrated approach. Raven established a new office and production facility in Emerald Park, enhanced and refreshed the DoT Technology platform and began marketing it as ONMiPOWER. There are now about 20 units in operation on farms in North America. In 2021, CNH Industrial, one of a small number of global farm equipment manufacturers, acquired Raven, largely because of its leading role in autonomy and precision agriculture.

Durmur Industries

Durmur Industries is located in White City and began operations in 1987 as a sheet metal fabricator specialising in cabinets for the food preparation industry. Over time, its focus shifted to metal fabrication for the defence industry as a component supplier for major prime contractors. This involved a major upskilling of the workforce, investments in International Organization for Standardization (ISO) quality assurance processes and continuous adoption of new technologies. In its defence-related work, Durmur typically partners with a foreign defence contractor to satisfy Canadian content requirements in the request for proposals. The prime contractor provides requirements and specifications. Sometimes, this means bringing in new technologies with the support of the prime contractor. Durmur has to determine how to implement these new technologies within the context of their production systems. It may have to either custom-build or modify machinery to meet product specifications using its inhouse engineering capability. Increasingly, the work involves robots and advanced programming and simulation processes to achieve better robot performance. The resulting process innovation can lead to quality improvements as well as cost savings, making Durmur more profitable and a more attractive partner for future contracts.

Case 3: Inuvik, Northwest Territories

Inuvik

With a 2022 population of 3 500 inhabitants, Inuvik is the second-largest city in the Northwest Territories and the largest city in Canada north of the Arctic Circle. It is the regional centre for the much larger but sparsely populated Western Arctic region that is the traditional home of the Inuvialuit people. The municipality of Inuvik itself is also within the traditional homeland of the Gwich’in First Nation. Until 2018, Inuvik was the most northern settlement in North America that could be reached by road. Now, the Inuvik‑Tuktoyaktuk Highway, completed in 2017, extends the road to the Arctic Ocean.

The Canadian government established the town of Inuvik on previously unsettled land in 1953. Inuvik is the largest settlement in Canada north of the Arctic Circle and is situated on the Mackenzie River 97 km south of the Beaufort Sea. It had a population of 3 137 in 2021, with the majority (63.7%) being Indigenous and relative population shares of Inuvialuit (63%), First Nations (31%) and Métis (6%). Inuvik was initially developed as a Canadian Forces base and administrative centre for the larger region. While the base was closed in 1986, the current increase in tensions with Russia has led to a new interest in restoring the military presence.

The area around Inuvik has significant oil and gas reserves, both onshore and offshore, and these were partially developed in the 1980s. However, production was largely discontinued for economic, political and environmental reasons in the early 1990s. Currently, the local economy largely depends on tourism and government functions, including a regional hospital, Aurora College, regional offices for the territorial and national government, and the main administrative functions of the Inuvialuit and Gwich’in people. Inuvik is also a major logistics hub that supplies smaller, more remote communities with goods and, to a lesser extent, services. It is the site of a major satellite telecommunications complex that focuses on downloads of data from circumpolar satellites, which is then sent for processing in Europe and North America.

Energy is expensive, especially since local gas wells are no longer being developed. Most electricity is produced by diesel generators. The harsh winter climate makes heating expensive and any loss of power can be catastrophic. In the summer, solar power is used to reduce the amount of diesel imported since long days provide high levels of panel output. In addition, housing is a critical constraint with very little market rent housing and a large share of the population living in public housing with subsidised rents. Since access to public housing is restricted to low-income households, there are disincentives to work since it can lead to eviction from public housing.

While Inuvik is a small town, it is the main service provider for a larger region. Road access is along the Dempster Highway to Whitehorse, Yukon, a distance of 814 km. Internal access within the region is challenging. For example, the Inuvialuit people are located across six settlements, with only two having all-season road access. This means that four can only be reached by air or barge during the summer or, in some cases, along winter roads when rivers and lakes freeze. Climate change is causing major infrastructure problems for roads, housing and utilities designed in an era when the permafrost was more stable. While the existing infrastructure design was innovative when it was put in place, it is no longer fit for purpose and new innovations will be required.

Examples of innovative activities

Increasing penetration of solar power

There are multiple applications of solar arrays in Inuvik. In the summer, solar power is a viable source of electricity, especially in periods when the sun never sets. Solar provides sufficient energy for many summer demands and this allows lower diesel imports and a longer operating life for diesel generators. However, solar has little value in the winter when hours of daylight are limited or non-existent.

Community greenhouse

A community greenhouse in Inuvik provides opportunities for households to grow seasonal vegetables for their own consumption. The greenhouse also provides surplus produce to two local food banks. It recently installed a portable hydroponics unit powered by a solar array to cool and light the facility in the summer. This model will help them investigate the potential for a larger, more permanent unit that could provide supplemental sources of fresh produce in winter months.

“Country meat” processing facility

The Inuvialuit Regional Corporation has established a small game processing facility employing five full‑time workers. It gathers a variety of game from Inuvialuit hunters and processes it for distribution to beneficiary households across the six member communities. In the summer, solar power provides electricity to run container-size freezers that hold unprocessed game and packaged meat. In most other Inuvialuit communities, another container-size freezer holds the meat transferred from Inuvik to the community. The processing facility currently employs six full-time employees. Plans exist to expand the processing capacity to allow for the retail sale of fish and reindeer meat, which would be sourced from a herd owned by the Inuvialuit. The facility already improves the well-being of members because the donated meat improves their food security and preserves traditional diets. Because the facility buys game from beneficiaries, it also provides hunters with a modest supplemental income.

Indigenous self-government

Both the Inuvialuit and the Gwich’in have signed “final agreements” with the Government of Canada and have achieved a high level of autonomy in terms of economic activity. The Inuvialuit Final Agreement, signed in 1984, was the first modern treaty signed by the Government of Canada and became a template for subsequent settlement agreements, including that of the Gwich’in. This has allowed them to build both wealth and relatively high levels of employment for beneficiaries, partially through a combination of direct investment and federal procurement regulations that help them partner with private sector companies on government contracts. As their wealth and capacity increase, they are able to play a larger role in the business sector and gain a bigger share of the revenue.

The Innovate Centre for Arts, Culture and Technology

The Innovate Centre focuses on allowing makers of arts and crafts to adopt modern production techniques, which can help them produce traditional products in new ways – a form of innovation. Automating and mechanising production elements allow for faster and cheaper manufacture, which improves market opportunities and can help increase sales to a point where volumes are high enough to make a business viable. The centre was established by Aurora College with CanNor and territorial government support. It provides a “maker space” with a variety of new production technologies, including lasers, three‑dimensional (3D) printers and other computer-controlled equipment. The centre’s main goal is to support people engaged in craft production to a point where they can establish a commercial enterprise. As of 2022, it already had ten participants who had reached this stage and about 50 more casual users, some of whom were working toward commercialisation. The centre buys a large variety of the products its users need to carry out their work in bulk and resells them at cost. This reduces users’ cost of production, improves their potential profit margins while allowing artists to sell at a lower price and helps to ensure there is a timely supply of inputs.

Taalrumiq (Christina King)

Taalrumiq, also known as Christina King, is an Inuvialuit and Gwich’in textile artist and fashion designer from Tuktoyaktuk, Inuvialuit Settlement Region, Northwest Territories. She creates high fashion clothing and fine art based on traditional materials and designs. She relies heavily on Instagram and other social media outlets to market her products directly and also participates in fashion shows and markets in major southern cities, including Ottawa, Toronto and Winnipeg. While her enterprise is successful, her attempt to establish a local business in Tuktoyaktuk was limited by the high cost and slow speed of local Internet, the high cost of transport for input materials and finished products, and the lack of support for small businesses and entrepreneurs.

Case 4: Kincardine, Ontario

Kincardine

The municipality of Kincardine was created in 1969 by the amalgamation of the former town of Kincardine and two townships, Bruce and Kincardine. In 2021, the population of the municipality was about 11 400 inhabitants, with the largest settlement being the former town of Kincardine. The community is located on the shore of Lake Huron at the foot of the Bruce Peninsula. It originally had an economy based on agriculture and, since the 1930s, on seasonal tourism, particularly cottage owners. Kincardine does not host a local university nor offer any significant post-secondary educational training. It is about a three‑hour drive from central Toronto and about a two‑hour drive to either the Kitchener-Waterloo or London metropolitan areas. This places it at the limit of a rural adjacent region. Both the London and particularly the Kitchener-Waterloo regions have strong universities and technical colleges that can support skill development and research needs but are too far away for daily commutes.

In 1970, Ontario Hydro, at that time the Crown corporation that supplied most of the province’s electricity, began constructing the first of eight nuclear reactors in the former Bruce Township. Currently, six of the eight units are producing power. Construction was completed in 1987 and a major reactor refurbishment process began in 2012 that will not be completed until 2060. The Bruce complex now provides about 30% of all electricity produced in Ontario. The facility employs about 4 000 permanent workers and, during refurbishment construction, employment is typically 3 500 but can reach 6 500, making it by far the largest employer in the region.

The reactor complex is now operated by Bruce Power, a private corporate partnership that leases the facility and sells power back to the provincially owned electricity provider. There is work underway to establish an Indigenous relations supplier network: membership is shaped around the Canadian Council for Aboriginal Business Progressive Aboriginal Relations programme (Bruce Power, 2023[100]). Also, the Saugeen Ojibway Nation and Bruce Power have developed a collaboration agreement to jointly market new isotopes in support of the global fight against cancer (Bruce Power, 2023[101]).

The Bruce Power refurbishment fundamentally altered the dynamics of Kincardine. An existing housing shortage driven by the large share of homes owned by summer residents has been exacerbated by the influx of construction workers at the plant. In addition, Bruce Power has implemented a policy that requires supplier firms to have a physical presence near the site. This has led to an influx of not only skilled trades workers but also a variety of professional service firms that contract with Bruce Power to provide management engineering, environmental and other consultant services. The influx of new residents has greatly increased the share of skilled workers and professionals in the community and increased average household incomes. However, there has not been a significant increase in the housing stock to date. In addition to contributing to the tax and employment base, the diversification of the local economy has also increased the innovative capacity of the area.

Kincardine is similar to the common “company town” or “single-industry town” found across Canada and other OECD countries. A single large firm dominates the local labour market, typically a mining or forest products company, but first-stage food processors are also common. Economic growth in the community is conditional on the firm’s prospects. The firm can play a large role in shaping local government policies and influencing housing availability and the local education system. For Kincardine, Bruce Power is offering a long period of economic stability; the province has thus decided to support the long process of refurbishing the reactors rather than shutting the plant down. However, the powerful presence of the facility can also limit other development opportunities. Moreover, the current level of employment will decline sharply once new construction ends, albeit several decades from now.

Examples of innovative activities

Catapult

Catapult is an incubator and accelerator that works with local universities and businesses to help entrepreneurs with a foundation to build their companies. With a strong share of young entrepreneurs and partnerships with universities and training centres, the initiative provides a locale for establishing a business, training and coaching services and access to resources, including training and upskilling to the local community. Examples of incubated and accelerated entrepreneurial innovations and business ideas include rural medical supply delivery services, local and organic farm-to-table services and nuclear packaging services.

Georgian College

Georgian College is the only full-service college in the region. It specialises in allied healthcare, trades and technology and the marine sector. With a high demand for upskilling from employers, Georgian College, often partners with the nearby Catapult, working with Tarumi businesses to help upskill, primarily in trade industries. Some programmes are now in business, in addition to the many resources already available online. The college also provide training for fire services and has expanded training in the trades over the past few years. The new training services offer options for individuals and companies looking to train workers without going to the metropolitan south. Georgian College also supports entrepreneurs in partnering up with R&D universities.

Nuclear Promise X (NPX)

NPX began operating in Kincardine in 2018 with a staff of 10 that has now grown to 30. Its main client is Bruce Power, where it provides support for ongoing digital technology modernisation of power control systems and operations. In 2019, it also began a similar collaboration with the Nuclear Innovation Institute. NPX also offers technology that provides real-time performance monitoring of a variety of industrial equipment other than nuclear. It will provide plant modernisation services to industrial facilities that want to upgrade their process monitoring technology. Beyond its core activity, NPX also produced face shields for community workers during the early stages of the COVID crisis and is using its 3D printers to supply user-friendly pill bottles to local people with Parkinson’s disease.

The Nuclear Innovation Institute (NII)

The NII was created as a non-profit subsidiary of Bruce Power to investigate innovative opportunities for the use of the technologies associated with nuclear power. Its main current activity involves efforts to use reactors to produce medical isotopes by irradiating cobalt and lutetium-177 for use in cancer treatment and other medical purposes. The work is undertaken with partners Kinetrics and Framatone, two German firms that are conducting medical trials with the products. In addition, the municipal innovation group at the NII that investigates and supports innovative approaches in the region’s public sector has created the Smart Beach system that uses sensors, smart buoys and cameras to provide real-time information on rip tides. The large number of drowning deaths on Lake Huron provided the impetus for the activity and a pilot system is deployed in Kincardine with plans for eventual deployment to recreational areas throughout the Great Lakes.

Case 5: The Gaspé Peninsula, Quebec

The Gaspé Peninsula

The city of Gaspé is part of the regional county municipality (RCM) of La Cote-de-Gaspé and is the largest community in the Gaspésie-Îles-de-la-Madeleine region of Quebec. In 2021, the city had a population of 15 063 inhabitants, which was a 3.4% increase from the 2016 census number. However, in the 1970‑91 period, the city had a population of over 17 000, while the larger region had a stronger economy and birth rates were considerably higher. The local economy is driven by a mix of resource-based industries (fishing, forestry, agriculture), public services (health and education), tourism and manufacturing. The regional hospital is the largest employer, followed by the school system, while the largest private sector employer in the city and region is LM Wind Power, a wind turbine blade manufacturer.

The Gaspé Peninsula, part of the region, contains 5 RCMs that are lined by Route 132, which runs along the north coast of the peninsula east from Sainte‑Flavie to Gaspé and then south along the coast to Matapedia where it turns north to return to Sainte‑Flavie, completing the loop. Almost all settlements in the region are located along Route 132 and generally, less than a 20-minute drive separates communities. While the labour force in any specific community is small, its local labour market is considerably bigger because it includes communities roughly a one-hour drive in either direction along Route 132.

The closest university is the Université du Québec à Rimouski, which offers courses from the Gaspé Campus in regional and territorial development, social work, health, business management and education. Additionally, the CEGEP de la Gaspésie et des Îles serves the region as a source of higher education for students pursuing a university degree and as a source of technical skills for students oriented to skilled trades. Currently, it has an enrolment of about 3 000 students across all programmes and locations. In addition to the main campus in Gaspé, the CEGEP has satellite campuses in three other communities in the region and Montreal. Importantly, the school strongly supports economic and community development in the region. It hosts three College Centres for the Transfer of Technology (CCTTs), in the areas of wind power, fisheries and social innovation. The Quebec government supports the CCTT programme to diffuse advanced technologies and innovation into communities by creating applied research facilities across the province that are connected to higher education providers, each with a specific mission important to their region.

Economic development in the region is challenged by a number of factors beyond the declining workforce. Because the peninsula is far from a major urban centre, it faces high transport costs for moving goods in and out and difficulty in attracting and retaining skilled workers. Both the natural resource and tourism sectors are seasonal, with a relatively short peak tourism season in mid-summer and shoulder seasons in early summer and early fall. This results in a high proportion of jobs being both seasonal and part-time, as well as offering low wages. Consequently, both labour force participation and employment rates are lower than the provincial and Canadian averages. Employers have faced worker shortages that have limited their expansion in recent years, even as a large share of the potential workforce is unemployed. A combination of skill mismatches, wages that are below reservation wage levels, the preponderance of seasonal work, and other barriers, including housing shortages that limit relocations, contribute to this phenomenon.

Tourism is expanding, both in the variety of opportunities being offered and in terms of efforts to expand the season. Most of the hospitality and tourism businesses are family-owned and have limited capacity. Expansions are difficult to justify since external sources of finance are scarce and the risk of insufficient demand is real. While the region is experiencing more tourism in terms of visitor days, this does not necessarily translate into a significant revenue increase at specific establishments. Small operators cannot easily keep clients for more than a day or two since they have a limited offer. In addition, most people travel by personal transportation means on one-to-two-week family vacations and, inherently, are not large spenders at any single location. Currently, few towns have a large enough number of tourism opportunities to hold people for longer stays. On the other hand, the entire Gaspésie region benefits from renown as a destination, particularly within Quebec, and the Route 132 loop offers a distinct opportunity for a stronger regional tourism marketing project.

Examples of innovative activities

LM Wind Power

LM Wind Power originated from a decision by the government of Quebec in 2001 to diversify its electricity production base beyond hydro into another form of renewable energy. In 2003, Hydro Quebec, the provincially owned electricity company, released the largest single tender for wind turbines to that date for bids. A requirement for proposals was that they include a blade factory and a tower fabrication facility in Gaspé. The Danish company LM Wind Power was part of the winning bid and opened the turbine blade factory in Gaspé in 2005. LM Wind Power was bought by General Electric (GE) in 2017. With this purchase by GE, Gaspé planned to produce for the United States markets. The ambition of the provincial government was to use procurement policy to establish a major wind power cluster in the Gaspé Peninsula. While smaller than initially hoped, the current cluster has generated new innovative firms that make wind power components and provide services to turbine operators, despite the location in the Gaspé Peninsula being a long way from the major North American markets for onshore wind turbines. In 2016, the government of Quebec had decided not to launch any new bids for wind power energy. Since then, the entire blade production is exported.

Since opening, the facility has continually invested in process innovations to allow it to produce larger blades on a faster production cycle. As a result, despite its remote location, it has maintained a customer base and is currently the only surviving wind blade manufacturer in Canada. Support from the province was instrumental in the early years but a change in government in 2014 led to reduced support for wind power, causing the company to become more focused on remaining competitive by engaging in a series of process innovations that allowed it to reduce costs while gaining the capacity to make larger size blades. As of now, there are also new plans with the local government to improve physical access conditions for the large turbines’ access to a nearby seaport, ensuring easier access to global markets. The CCTT provides additional support for these innovations and for the cluster at the Gaspé CEGEP, which is focused on wind power. Employment has been of around 200 workers for over a decade but a major expansion of the plant is underway that will increase employment to about 500 and shift the focus to producing 107‑meter blades for offshore wind farms. This expansion reflects GE’s purchase of LM Wind Power in 2017, which allowed the company to be more fully integrated into GE’s wind enterprise and gave it access to investment capital and GE technical expertise that facilitated innovation.

Kuma Brakes

Kuma Brakes opened in Gaspé in 2015 to produce brake pads for new and replacement brakes for wind turbines, for which GE certification was critical. The process of creating brake pad material that was effective and durable took the company founder Christian Babin, a former technical educator, over ten years. His research was supported by small grants from CED and other government agencies and by partnering with Laval University faculty, specialists at the National Research Council Canada and industry experts. The firm employs 12 people and uses a highly automated production process to improve quality and increase productivity.

CCTT System of Research and Innovation Centres

While many countries and states/provinces have invested in centres to support applied research and innovation, the 57 sites distributed across all parts of Quebec appear to be particularly well thought out. Each site focuses on a specific topic/area that is important to the region in which it is located. The centre conducts applied research in its mission area and works with businesses on how to implement new initiatives that can increase their competitiveness. Further, because each CCTT is hosted by a CEGEP, there is a strong connection between innovations in products and processes and efforts to ensure that the local workforce can acquire the skills needed to bring production to market. Further, because the individual centres are in a network, there is the opportunity to collaborate on particular projects that are important to multiple regions or to investigate projects that span multiple research areas jointly. Project-specific research grants and the support of local governments complement core funding from the province.

Mount-Saint-Joseph Regional Park

This regional park has been used by residents of the small community of Carleton-sur-Mer on the Baie-des-Chaleurs on the south coast of the Gaspé Peninsula to be the focal point for an expanded tourism programme. The town has had a stable population of about 4 000 people for the last 20 years but the core industries of agriculture, forestry and fishing are declining in sales and no longer providing the same level of employment. The regional park at Mont-Saint-Joseph provided a location to add multiple features, including new biking and hiking trails, a number of geodomes located at the peak that can be used for overnight stays, rock-climbing areas and new interpretation guides to provide education about local flora and fauna as well as guided tours. In addition, winter activities have been expanded, including snowshoe and snowmobile trails, to lengthen the tourism season. In addition, businesses in Carleton-sur-Mer invested in improving their facilities and providing new town-based activities to further enhance the local offer, such as concerts and festivals.

Mont-Saint-Joseph Regional Park is an accredited site of the Association des parcs régionaux du Québec. The corporation shares the values this association promotes: inclusion, solidarity, quality and innovation. From a sustainable development perspective, the investments made in recent years also considered local population needs in terms of infrastructure.

Case 6: Fogo Island, Newfoundland and Labrador

Fogo Island

Fogo Island is located off the northeast corner of the island of Newfoundland and is accessible by a 45‑minute ferry from the main island. It has a total area of 238 km² and, in 2021, had a population of about 2 200 inhabitants. The main economic activity is fishing and related first-stage processing. Before the “cod moratorium” imposed by the Government of Canada in 1992, the dominant species was cod, which was processed in local fish plants before export. Since then, the fishing industry has diversified into crab, shrimp and, more recently, sea cucumber harvesting as well as minor amounts of other local fish species. As with most resource industries there has been a steady substitution of capital for labour, both on fishing boats and in the fish plants, which increased the size of investment needed for boats and processing equipment and reduced the need for labour. Financing these investments is challenging, given the small size of the local economy and the limited absence of commercial lenders. While government programmes can bridge some of the funding gap a major problem for local businesses is the difficulty in assembling equity capital.

Examples of innovative activities

Fogo Island Co-operative Society, Shorefast Foundation and Fogo Island Inn

Fogo Island has a long history of collective action that dates back to the 1960s when the local population was organised to resist efforts by the provincial government to relocate the population to the island of Newfoundland in response to a decline in the inshore fishery. With support from Memorial University of Newfoundland and a series of National Film Board films featuring life in Fogo Island, the community developed the Fogo Process as a way to channel community interests into strategic behaviour. The Fogo Process led to the creation of the Fogo Island Co-operative Society, which was created by local fishers to collectively bargain for better prices. The co-op started by creating a shipyard to build bigger boats so that fishers could fish for species farther offshore following the collapse of inshore cod stocks. Fish plants were subsequently built to process these new species (crab and shrimp). This vertical integration into a single social enterprise reduced the inherent conflict between boat owners and plant operators and provided a foundation for future innovations. Decades later, Zita Cobb, who grew up on Fogo Island, recalled the Fogo Process when she decided to create the Shorefast Foundation in 2004 as a non-profit entity to stimulate economic recovery on Fogo Island. Shorefast is an operation of the Fogo Island Inn but it has several other programmes to support community activity.

Fogo’s growing tourism industry received a major boost when the Fogo Island Inn opened in 2013 and immediately attracted attention and visits from people living in major cities in Europe and North America. The resulting exposure, in turn, stimulated visitors who came to see the island and view the inn but did not stay there. Currently, the tourism sector is characterised by Fogo Island Inn, offering a small number of visitors a very “high-end” curated experience where inn staff provide for virtually all guest needs and manage local exposure and a more traditional tourism offer that is based on small entrepreneurs who operate independent enterprises (e.g. camping, rooms in bed and breakfasts, apartments). In particular, there are several heritage-renovated rental houses that fill a middle market. This latter form of tourism is challenged by a relatively short tourism season, a limited tourism offer that can only keep people on the island for a few days and too few resources to upgrade accommodations and restaurants to current hospitality standards. The Fogo Island Inn hires community hosts to orient guests on the island; hosts are paid but unscripted. When tourism is done well, it is a key activator for other sectors; the inn’s prioritisation of local purchasing has supported such a model. For example, it has been an activator of local agriculture and its associated business, Fogo Island Workshops, has activated local craft purchasing, commissioning makers to knit goods, make quilts, etc.

The Fogo Inn and the three fish plants operated by the Fogo Island Co-operative Society are the major employers on the island, accounting for between 250 and 300 jobs each and over 60% of the value of Fogo output. Interestingly, both are not-for-profit entities that have as objectives improving economic and social conditions on Fogo. Both face the challenge of relying on distant places for their customers and face international competition, in addition to common problems from a limited local labour supply, high cost of housing facing new workers and an essentially seasonal business where wages are limited by difficulties in increasing productivity.

A shrinking population and a workforce that is both ageing and that has low formal skills are an increasing challenge. Over time, the fishing industry has greatly reduced its labour requirements by adopting more sophisticated processing machinery that requires a greater level of formal education to operate and also more technical skills to maintain. An ageing workforce has also required investments in reorganising workflow to reduce the amount of lifting and other more strenuous activities to retain older workers. Similarly, the Fogo Island Inn faces challenges in recruiting local workers both for more skilled management and technical occupations. Attracting workers from within the province or the rest of Canada is made difficult by the seasonal nature of operations, a shortage of affordable housing, limited public and private services, transportation infrastructure challenges and the fact that the rural/remote lifestyle appeals to a select subset of the population. As an example of the local workforce challenge, in 2020, Fogo no longer had a doctor resident on the Island for the first time in 200 years.

Fogo Island is an amalgamated municipality: the Town of Fogo Island, which contains ten cultural communities/settlements. The island has ten small communities, with the municipality of Fogo being the largest. Prior to 2011, when all of the local governments merged into the island-wide single Town of Fogo Island, there were four municipal governments in the larger towns and a regional council for the remainder of the island. This is a rare example of municipal amalgamation in the province and was brought about by the provincial government agreeing to take over a significant amount of local municipal debt upon merger and the growing local recognition that the combination of falling incomes, decaying infrastructure and declining population was challenging small municipal governments.

Modernising fish processing technology

The co-op now operates three fish plants on Fogo and has carried out a series of process innovations to introduce new technologies as the market for fish evolved. Notably, in 1992, when the cod moratorium ended the main product the island produced, there was a switch to crab production and processing. However, the hand processing of crabs led to high costs and poor quality, which triggered a search for a way to mechanise the process, which is a classic case of user-driven innovation (Norden, 2006[102]). The co-op worked with the Fisheries and Marine Institute of Memorial University of Newfoundland and a metal fabrication firm on the Avalon Peninsula to produce the first version of a machine that could break open a crab and split it into halves to make further processing easier. This was the first commercial crab deshelling machine, allowing the co‑op to become a leading supplier of high-quality crab to international buyers. Most recently, a new species, sea cucumber, has become marketable and the same three partners have developed a sea cucumber processing machine that has already been upgraded once and has the potential for further improvements as the international market grows.

Economic Nutrition labelling

Shorefast has developed a way for local people to better understand how specific firms provide benefits to the local economy. It has reinterpreted the standard nutrition information label found on packaged food to show that any purchase in one of their businesses can be broken down into two parts: what the money is used for – labour, supplies, administration and profits – and where that money goes – local, provincial, rest of Canada and international. They are currently piloting it to expand to other places and businesses.30 Economic Nutrition labels are developed for all of Shorefast’s activities and are also made available for consumers to view at the point of purchase. An example of the Economic Nutrition labels is provided for one of Shorefast’s subsidiaries, Growler’s Ice Cream in Annex Figure 3.A.1.

Cod pots

Cod is typically caught using gill nets, which can cause damage to the fish or the ocean bottom and result in bycatch. An innovative alternative is the cod pot developed in 2007 with joint support from Shorefast, the Fogo Island Co‑operative Society Ltd. and the Marine Institute. The pot is a variation on a lobster trap that allows the cod to swim in but not swim out. The result is a live, undamaged fish at harvest that can be sold at a premium price. The pots used on Fogo are made locally by individuals who make and repair nets, creating an additional economic impact. More recently, Shorefast spearheaded the social business Fogo Island Fish, which prioritises handline fishing for cod, one by one, in the traditional way (single line and hook off the side of a small boat). Fish are flash frozen at peak freshness and sold to discerning restaurants on mainland Canada. The premium handline fish fetches a high price, allowing Fogo Island Fish to pay fishers well above market rates for their catch.

Municipal merger

Typically, merging municipalities might not be considered an innovative approach to government. The merger on Fogo Island has two innovative aspects however that may offer lessons for other places. The first is the necessity to have some pre-existing trust among the merger candidates. On Fogo, much of this came from the Fogo Process and the reality of a single high school that served all communities, including those from protestant and catholic areas, and allowed students to mingle with people from other settlements, which reshaped beliefs on cohesion. However, the willingness of the provincial government to absorb a portion of outstanding debt provided another incentive that allowed people to commit to merging despite an inherent desire to maintain independence by communities that had a long history of independence.

Annex Figure 3.A.1. Economic Nutrition Label, Shorefast (Fogo Island, NL, Canada)

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Notes

← 1. User-driven innovation refers to innovation initiated as a solution to an underlying challenge of entrepreneurs within the process of delivering a product or service. Demand-driven innovation refers to more general market demand from customers and clients that can include the creation of new services or products to satisfy customer demands.

← 2. “The North” in Canada has a particular meaning and can be usefully partitioned into the provincial north and the territorial north, with both categories being distinct from rural southern Canada where the OECD typology and other typologies usually apply.

← 3. Other federal agencies important for the innovation agenda include: the Business Development Bank of Canada, the Canadian Space Agency, the Competition Tribunal, the Copyright Board of Canada, Destination Canada (formerly known as the Canadian Tourism Commission), the National Research Council Canada, the Natural Sciences and Engineering Research Council of Canada, the Social Sciences and Humanities Research Council of Canada, the Standards Council of Canada and Statistics Canada. In 2023, Canada also created the Canada Innovation Corporation to strengthen business R&D support and commercialisation.

← 4. This is similar to the Office of Technology Assessment operating around the same time in the United States.

← 5. First Nations citizens who are governed under the Indian Act fall under federal jurisdiction for healthcare, education and all forms of social provision that are for the rest of the population a matter of provincial and territorial responsibility. Their reserve lands and collective wealth are under federal control, managed “in trust”, unless they participate in certain federal programmes that provide for a degree of independent economic management and funding arrangements. Despite the dominant role of the federal government, Section 88 of the Indian Act provides that provincial and territorial laws of general application apply to individuals who are governed under the act. Some First Nations and a smaller number of Métis are also parties to modern treaties and have created governing institutions pursuant to those treaties. In other places, First Nations governed by the Indian Act are building alternative institutions with the long run goal of removing themselves from Indian Act jurisdiction. This has resulted in a wide range of evolving forms of self-government.

← 6. In ACOA, like in other RDAs, this includes a relatively large programmes such as the Regional Economic Growth through Innovation, which works on building framework conditions to help to start and grow businesses and non-profits in Atlantic Canada (Government of Canada, 2023[104]).

← 7. In part, this large deviation is due to COVID relief funds being delivered by Community Futures.

← 8. Only CanNor official reports spending on Indigenous-specific programmes. However, this does not exclude the fact that Indigenous communities may still benefit from other programme spending.

← 9. CanNor does not fund any CFPs.

← 10. Further information available at myswitchboard.ca.

← 11. For more information, see https://findbusinesssupport.gov.scot/.

← 12. For more information, see https://www.ontario.ca/page/aboriginal-peoples-relationships.

← 13. For more information, see https://ccednet-rcdec.ca/en/toolbox/local-people-local-solutions-guide-first-nation-co-operative.

← 14. The strategy says: “The City of Kenora and this 5-Year Tourism and Economic Development Strategy recognize the historic connection of Indigenous peoples to this place as original inhabitants of the area. It is also recognized the importance Indigenous peoples and communities have in the current and future growth and development of Kenora’s tourism sector and local economy”.

← 15. The six studies covered as case studies included a considerable share of rural conditions in Canada. All are small population settlements, with populations between 15 000 and 2 000 inhabitants. In terms of OECD rural typology, one is rural within a metropolitan region, two are adjacent rural and the other three are rural remote, but the degree of remoteness exceeds the norms used for constructing the OECD typology. In several locations Indigenous people are a considerable share of the population and their presence provides another dimension for innovation to occur, both in terms of a distinct society that seeks its own development path within the larger economy and through innovative collaborations between Indigenous people and their non-Indigenous neighbours.

← 16. For example, Indigenous governments that have been established consequent to the negotiation of a comprehensive land claim agreement (a modern treaty), such as the Tłįchǫ Government in the Northwest Territories and the Nunatsiavut Government in Labrador; both have economic development officers and are networked to business development contacts in other organisations, financial institutions and government departments and agencies. It is also important to note that the pan-Canadian network of Aboriginal Financial Institutions (AFIs) fills an incredibly important role in providing access to finance for Indigenous businesses and other business support services. There are three types of AFIs across Canada: i) the Aboriginal Capital Corporations; ii) Aboriginal Community Futures Development Corporations (ACFDC); and iii) Aboriginal Developmental Lenders. Each serve a slightly different purpose. Community Futures (of which the ACFDC are a part) are a network of 267 offices across Canada focused on rural development that provide business financing to small local businesses (e.g. small business loans, tools, training and events for people wanting to start, expand, franchise or sell a business). They work in partnership with other business lenders, educational institutions, not-for-profits and community governments. Only a few of the CFPs are Aboriginal-exclusive. Unlike most AFIs, CFPs can also deliver economic development strategies. See the OECD’s work on Linking Indigenous Communities with Regional Development in Canada (2020[2]) for a comprehensive overview of AFIs and related Indigenous business development and financial services.

← 17. A systems entrepreneur can be described as an entrepreneur or community actor that works on a systems (network) base, often engaging with an ecosystem of actors in a community or place that can include public, private and non-profit sectors to solve challenges that are engrained in the system. These challenges are often rooted in relationships that involve social, economic and environmental factors rather than one-issue challenges that can be reduced to cause-effect relationships (Schlaile et al., 2020[105]).

← 18. Isaksen et al. (2018[52]) provide three case studies of regions in Norway to illustrate their model. In each model, they identify the role of the local RIS and provide examples of an entrepreneurial discovery process that is partially driven by the actions of the RIS but also by entrepreneurial behaviour both by firms or individuals and by civil society organisations, including social enterprise. Their focus is on the behaviour of local clusters, which they use as a proxy for local comparative advantage. In each case, the clusters they examine were strongly supported by Innovation Norway, the national agency supporting innovation, and there was at least one active higher education institution supporting the main clusters in each region as well as several producer organisations. They also note ways in which systems entrepreneurs better support emerging firms (p. 43[52]). Importantly, in the smallest region with only a “thin” RIS, firms have longstanding relationships with distant universities and organisations that provide technical expertise (p. 41[52]). This clearly parallels the ongoing relationship between the Fogo Island Co-operative Society and the Fisheries and Marine Institute of Memorial University of Newfoundland.

← 19. This sentiment was expressed, for example in Canada’s Royal Commission on Aboriginal Peoples (1996[53]); it was viewed as the core element underpinning the hundreds of recommendations contained in the report.

← 20. For more information on how the figure was calculated, please refer to Caldas, Marshalian and Veneri (2023[106]).

← 21. The authors consider propensity score matching and endogenous treatment effect models to control for innovation orientation and find evidence of cloud adoption enable various types of innovation using the 2018 Annual Business Survey of the United States.

← 22. For more information, see https://www.gov.nl.ca/iet/funding/innovation-and-business-development-fund/.

← 23. For more information, see https://www.ntassembly.ca/sites/assembly/files/td_498-183_0.pdf.

← 24. For more information, see https://www.enr.gov.nt.ca/sites/enr/files/documents/53_03_traditional_knowledge_policy.pdf.

← 25. For more information, see https://www.economie.gouv.qc.ca/fileadmin/contenu/documents_soutien/strategies/recherche_innovation/SQRI/sqri_complet_fr.pdf.

← 26. For more information, see https://www.quebec.ca/habitation-territoire/amenagement-developpement-territoires/developpement/fonds-programmes/fonds-regions-ruralite.

← 27. For more information, see https://transitionenergetique.gouv.qc.ca/fileadmin/medias/pdf/plan-directeur/TEQ_PlanDirecteur_web.pdf.

← 28. For more information, see https://publications.saskatchewan.ca/api/v1/products/103260/formats/114516/download.

← 29. For more information, see https://www.fset.inc/pikangikum/.

← 30. For more information, see https://shorefast.org/economicnutrition/#:~:text=Economic%20Nutrition%20is%20an%20initiative,piloted%20for%20more%20widespread%20use and https://fogoislandinn.ca/contact-us/economic-nutrition/.

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