ARCHIVED - Value of NRC-IRAP Clients Five Times Greater than Non-clients, New Pilot Study Shows

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April 07, 2007— Ottawa, Ontario

Companies that tap NRC's industrial support programs deliver substantially greater shareholder value than those that don't, according to a landmark pilot study recently completed by NRC in collaboration with Statistics Canada.

The study – comparing the progress of roughly 700 NRC-IRAP clients in the Pacific Region against more than 370,000 similar non-clients across Canada – is the first ever benchmarking study to measure the quantitative impact of NRC-IRAP.

Photo-montage illustrating NRC-IRAP clients.

"The pilot study yields overwhelming evidence that NRC-IRAP clients are outperforming non-clients in almost every measure of business success," remarks Denise Guillemette, project lead and Manager of Strategic Research and Intelligence with NRC-IRAP.

Among various gauges of business success, both the value and growth of shareholder equity are where NRC-IRAP clients truly stand apart from non-clients, the study shows.

At an average shareholder equity of $5.1 million in 2002, the NRC-IRAP clients were more than five times more valuable than non-clients, which averaged only $880,000 in equity. And during the period between 1998 and 2002, average shareholder equity for the NRC-IRAP clients soared almost 170%. That's more than four times the rate of growth for small non-clients.

NRC Gives Young Firms a Huge Step Up

The NRC Industrial Research Assistance Program (NRC-IRAP) is Canada's premier innovation assistance program for small- and medium-sized enterprises (SMEs).

NRC-IRAP provides non-repayable contributions to Canadian SMEs that intend to use new technology in services, products and processes in Canadian and international markets. NRC-IRAP also provides mentoring and invests in research and pre-competitive development technical projects. NRC-IRAP's partner organizations also receive contributions to provide technical and research assistance to Canadian SMEs.

"While we tend to gauge success on revenue and job growth alone, shareholder value may well contribute to the longevity of emerging technology companies," suggests Guillemette. "They have to be able to survive a long product development cycle during which they could well have no earnings."

The findings on shareholder equity confirm what NRC-IRAP staff has known for decades. Companies that receive support from NRC-IRAP have an edge in capital markets because, when NRC sees the merit of the research and helps guide it, investor confidence rises.

"A company that receives NRC-IRAP support is far more attractive to prospective investors," adds Guillemette. "They can feel comfortable that we've undertaken considerable due diligence to mitigate risks before authorizing NRC-IRAP funding."

In addition to shareholder equity, the NRC-IRAP clients surpassed non-clients in revenue and employment growth as well as R&D expenditures and personnel. R&D investment among clients averaged $906,000 in 2002, or more than double the R&D outlays of non-clients.

As a benchmarking exercise, says Guillemette, the methodology works and the results are sufficiently robust and defensible. She was pleased that the client data set was based on a significant statistical population of 700 organizations.

The findings also provided NRC-IRAP with the confidence to extend the regional pilot exercise to a full-blown national study. As a result, the national study will explore the more than 10,000 clients who received NRC-IRAP contributions and advice between 1993 and 1999. The study will then trace the progress of those that survived during the five-year period up to 2004.

In parallel with the national study, NRC plans to conduct several socio-economic impact assessments of NRC-IRAP as the program officially marks its 60th anniversary this year. A complete toolkit of analytical methods will be put to work, including benefit-cost, input-output, econometric, risk and sensitivity, and comparative analyses.

These assessments will be spearheaded by Frederick (Rick) Kijek, an economic analyst with 25 years experience in both the public and private sectors. Kijek joined NRC last summer, becoming the organization's first ever full-time economist.

"We are developing multiple lines of evidence to support the socio-economic impact of NRC-IRAP investments," explains Kijek. "Once completed, we will apply the same methodologies to measure the impact of NRC's research programs."

"At the end of the day, we intend to deliver the quantitative results NRC needs to prioritize its future investments."

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