Mark Goldberg

Fox Group Dispatch

Building a more innovative economy

Through the weekend, a couple articles appeared about innovation:

According to the Global Competitiveness Index from the World Economic Forum (WEF) [pdf, 12.2MB], Canada’s ranking dropped in the past year from 13th to 15th place. According to the WEF, Canada’s level of innovation and business sophistication have deteriorated and could be slowing down productivity improvements. This has occurred despite the government having placed special emphasis on Innovation by transforming the Industry portfolio to Innovation, Science and Economic Development (ISED).

While the Star article correctly observes that Canada’s overall 15th place ranking is being dragged down by a 24th place standing under the Innovation and Business Sophistication Pillar, Canada’s worst score is actually a 41st place finish under the banner of “Macroeconomic environment.”

How are these rankings developed? For macroeconomic environment, the WEF examines:

  • General government budget balance as a percentage of GDP
  • Gross national savings as a percentage of GDP
  • Annual percent change in consumer price index (year average)
  • Gross general government debt as a percentage of GDP
  • Institutional Investor’s Country Credit Ratings

For the Business Sophistication Pillar, WEF examines its executive survey, asking about: Local supplier quantity; Local supplier quality; State of cluster development; Nature of competitive advantage; Value chain breadth; Control of international distribution; Production process sophistication; Extent of marketing; and, Willingness to delegate authority.

For the Innovation Pillar, WEF again uses its Executive Opinion Survey, asking about: Capacity for innovation; Quality of scientific research institutions; Company spending on R&D; University-industry collaboration in R&D; Government procurement of advanced technology products; Availability of scientists and engineers; and, Patent Cooperation Treaty patent applications.

The connection between the two newspaper articles comes from a quote in the Star, taken from the WEF report: “To be truly innovative, a country should not only file patents and support research and development in science and technology, but should also provide a networked, connected environment that promotes creativity and entrepreneurship, fosters collaboration, and rewards individuals who are open-minded and embrace new ways to perform tasks.”

How do we encourage the development of “a networked, connected environment that promotes creativity and entrepreneurship”? The Globe and Mail article builds on the December NEXT Canada release of a McKinsey report, Tech North: Building Canada’s first technology supercluster [pdf, 2.2MB]. The report sets out a “proposed blueprint with catalyzing ideas to help kickstart a Toronto-Waterloo technology supercluster.”

We believe initiatives such as global talent visas, innovation procurement by governments, student and startup passports to incubators and university faculties within the corridor, risk-capital matching funds, new transport linkages and others can kick-start a virtuous dynamic circle within the corridor.

The Tech North report targets a number of the points in the Innovation Pillar of the WEF Competitiveness Index. Keep in mind that there are a number of competing regions across the country that are each seeking to reinforce their standing as an innovation corridor. The high cost of electricity and housing aren’t helping the case for the Toronto-Waterloo corridor.

Last week, ISED Minister Bains made a number of funding announcements to colleges and universities [Georgian, Waterloo, UQAT, Laurier, Windsor], and to Canadian operations of Japanese and Mexican automotive manufacturers [Honda, Nemak].

The press releases for the university announcements each spoke of the “historic investment by the Government of Canada is a down payment on the government’s vision to position Canada as a global centre for innovation.” The automotive funding was through the government’s Automotive Supplier Innovation Program and the Automotive Innovation Fund.

Still, I suspect that we need to ensure that the overall environment supports entrepreneurs to emerge and execute their plans in Canada, rather than providing targeted subsidies to a handful of companies.

In order to build a more globally competitive economy, Canada will need to consider more than the Innovation pillar in the WEF Index. We need to improve the macro-economic conditions and address the shortcomings in what the WEF calls business sophistication. That could mean taking steps to get the government’s house in order for balancing budgets and controlling government debt. Tax policy needs to encourage entrepreneurs to succeed in Canada, rather than relocate to other jurisdictions. The innovation agenda needs to be a consideration across all departments, not just ISED.

Laying the groundwork to create the right conditions that enable winners to succeed may not make for a photo opportunity, but that is the kind of truly historic investment needed to position Canada as a global centre for innovation.

[Update: January 18, 2017] Bloomberg has released its 2017 ranking of the World’s Most Innovative Economies. In that article, Canada fell from 19th to 20th place.

The 2017 Canadian Telecom Summit [June 5-7, Toronto] will look at “Competition, Investment and Innovation: Driving Canada’s Digital Future.” Early Bird savings for conference registrations are in effect until the end of February.

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