Tinkering with Canada’s existing innovation policies will not transform the national economy into a creative economic power. Governments need to rethink their approaches and look for innovative innovation policies, writes Ken Coates in the Hill Times.
By Ken Coates, February 2, 2022
For the last 30 years, the world has been awash in the rhetoric of innovation. National and regional governments have committed billions of dollars to building truly innovative economies. The Government of Canada is revising—not for the first time—our nation’s approach to innovation, but will the new approach be innovative?
Innovation is complicated. Governments need the workforce, businesses, research capacity, and public acceptance necessary for the development of a technology-enabled economy. Achieving such an outcome requires government funding, careful co-ordination between the state, business, and institutions, strong global awareness, and an ability to act decisively.
It is no surprise to discover that Canada is, at best, mid-range globally in terms of technological and commercial innovation. We do reasonably well on some measures, such as government support for basic research. We are far from nimble technologically or commercially. Our regulatory burdens are at the high end among competitor nations. Indeed, in most measures of innovation, investment, and activity, Canada’s performance is unremarkable and, in some areas, disappointingly dull.
For several decades, national innovation policies followed a simple “innovation equation”:
Expand Post-Secondary Education + Improve Basic Research + Invest in Commercialization
Done properly, these investments result in Job Growth + Economic Prosperity.
This approach was popularized by Silicon Valley and emulated around the world, including in the successful innovation environments in Waterloo, Ont., Ottawa, Montreal, Vancouver, Calgary, and in the emerging centres of Prince Edward Island, Sherbrooke, Que., and Kelowna, B.C.
The ubiquity of the innovation equation can be seen in hundreds of government announcements about college, polytechnic, and university spaces, money for major scientific facilities, research grant programs and student funding, new applied technology programs and institutions, start-up incubators, R&D financial support, and strategies for scaling up business. There is no shortage of money for innovation.
Innovation investments are as commonplace as cold winter winds on the Prairies. They support a comforting narrative: that governments are preparing the country for the vicissitudes of the 21st century economy. When we hit the big time—JDS Uniphase, Nortel, Blackberry, Open Text, Ballard Power, Shopify, among others—governments rush to celebrate their success. The country loves high tech startups, like current shooting stars Maple, Bolt Logistics, and ApplyBoard, for they demonstrate Canadian competitiveness.
But observers know the problems. Canadian innovations, often government funded, are frequently sold outside the country. Many highly skilled Canadian trainees build their careers in other nations. Few Canadian companies scale up into the 95/5 firms (international sales/Canadian sales) that demonstrate global competitiveness. Government tax breaks underperform. Grant programs have cumbersome processes, and a predication toward caution rather than risk taking. Companies continue to underinvest in new technologies and digitization, limiting productivity gains.
Governments devote a great deal of money to their innovation agendas. A series of Innovation Superclusters received more than $1-billion each in government funding, with industry and other partners matching those investments. The announcements were greeted with loud political hosannas. But the early excitement has not been followed by major commercial developments, although these may come.
For a country that routinely spends great sums on innovation, Canada maintains a traditional economy, largely dependent on natural resources and manufacturing for our continued prosperity. Tinkering with Canada’s existing innovation policies will not transform the national economy into a creative economic power. Governments need to rethink their approaches and look for innovative innovation policies.
This will require a review of the innovation equation because the traditional spending has not produced the technology-centred economy that promoters promised outside a few centres. There are many creative ideas on how to reform our approach to economic and technological transformation, but they are falling on deaf ears. The federal government’s fascination with a Canadian version of DARPA, the U.S. government-funded high-risk research initiative, has been widely panned and is unlikely to produce significant results.
Canada must review our approach to financing corporate R&D, ensuring that the granting and support systems operate at the speed of contemporary business. Measures are needed to slow the outflow of key personnel, ideas, patents, and companies. The current emphasis on basic research should be balanced by greater priority to applied development. More significantly, the country should shift from the attempt to define a national innovation strategy to greater support for local and regional initiatives. Canada absolutely must prioritize the support of entrepreneurs and wealth creation, generally. The latter is a serious national weakness.
Innovation-based economies are emerging across Canada. In addition to the best-known centres, localized developments are underway in Victoria, B.C., Whitehorse, Yukon, Saskatoon, Sask., Halifax, N.S., and St. John’s, N.L. But we are not keeping up with international developments and are not keeping pace with our competitors. Canada can do much better. Our economic future depends on our ability to take a truly innovative approach to economic and technological innovation. That our strategies have become dull, imitative, and predictable is the antithesis what is needed for 21st century economic competitiveness.
Ken Coates is Canada Research Chair in Regional Innovation at the Johnson Shoyama Graduate School of Public Policy, University of Saskatchewan. He is a distinguished fellow with the Macdonald Laurier Institute, with responsibilities for Indigenous and northern issues.