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Growing consumer interest in functional foods and nutraceuticals has been seen as a significant business opportunity for the agri-food sector. Many of the new firms in this sector are small and medium sized enterprises (SMEs). These SMEs often face difficulties in obtaining financing for their functional food and nutraceutical innovation activities. We develop and implement two models to show what factors affect a firm's decision to seek external financing and the level of financing obtained. Firm size, being privately held and engaging in contractual arrangements, have negative impacts on the likelihood of a firm seeking external funding, while firms which are intensively involved in the functional food and nutraceutical sector, with greater prospects for business expansion and/or are involved in partnerships are more likely to seek external financing. Larger firms and those involved in functional food and nutraceutical research and development receive a greater amount of capital when they decided to raise capital. However, firms focused on functional foods and nutraceuticals, as opposed to more diversified firms, and those involved in product development and concept scale-up receive less capital. Our findings highlight the importance of public support in addressing the capital requirements of functional food and nutraceutical firms and underscore the considerable burden in this respect borne by smaller sized firms.

The agri-food chain today is significantly different from that of twenty years ago. Changing consumer demands, knowledge intensive technology, North American integration and globalization have all contributed to the evolution of the different segments of the chain, which include input suppliers, agricultural producers, food processors, and food distributors. The purpose of the performance report series is to create a picture of the economic health of the entire agri-food chain and its various segments, and to identify the challenges and opportunities that they will face in the future. To get a full picture of each component's and the whole chain's economic health, these reports will measure economic performance from several different perspectives; profitability, competitiveness, investment, productivity, innovativeness, etc. Traceability is the process of tracking or tracing the flow of products through a supply chain. Traceability systems can vary from simple traceback systems to systems that provide identity preservation and quality assurance. This report examines the extent of traceability in the Canadian dairy processing industry. The authors use a mail survey and Principal Component Analysis to better understand the drivers, the challenges and the costs and benefits experienced by firms which have implemented traceability systems. The report finds that most dairy processing plants had implemented a system of product traceability and are able to trace forward and backwards.

A summary report of the presentations and the discussion at the national workshop on innovation in the Canadian economy and the Canadian agriculture and food sector held on September 26-27, 2002 in Guelph, Ontario. This report is the second product of a joint collaborative agreement between the Research and Analysis Directorate of Agriculture and Agri-Food Canada (AAFC) and the Department of Agricultural Economics and Business of the University of Guelph. The first product of the collaborative agreement was the organizing and holding of the workshop. This report provides a summary and a synthesis of the presentations and the discussions at the workshop.

This document contains the PowerPoint presentation given by the authors at the 2002 WCC-72 meetings, regarding innovation in the Canadian Agri-Food sector. Definitions relating to the dimensions and process of innovation as well as a case study are presented.