Innovation, productivity, and competitiveness

Innovation, productivity, and competitivenessEarlier this week, the Information Technology & Innovation Foundation (ITIF) released a new report, Assessing Canadian Innovation, Productivity, and Competitiveness [pdf, 1.2MB; Executive Summary, 2.7MB].

The key takeaways identified in the report are:

  • Canada lags peer competitors on key innovation indicators, particularly in the areas of research and development, intellectual property, and innovation outcomes.
  • Canada’s productivity performance has been dismal. For comparison, American labour productivity growth was 160 percent faster than Canada’s from 2002 to 2020 — and America’s growth in that period was actually low in historical terms.
  • From industry to industry, Canadian labour productivity growth is quite divergent, with some sectors growing substantially and others actually declining.
  • Canada’s competitive position in advanced industries is weak, as its global market shares have fallen dramatically over the last 25 years. It now has 42 percent less advancedindustry output as a share of its economy than the global average.
  • Canada’s crisis cannot be adequately understood or addressed by looking only at broad macro factors such as tax rates, infrastructure, and education. Policymakers must develop economic strategies focusing on firm, sector, and technology levels.

The Canadian Innovation, Productivity, and Competitiveness report is the first to emerge from ITIF’s new Canadian Centre for Innovation and Competitiveness. Pointing at China becoming the world’s largest manufacturer and advanced industry producer, the report says that “the demise of Nortel and the concomitant rise of Huawei were just an opening salvo.” The report also observes that Canada has not been successful at migrating the billions of dollars invested at research universities into a robust innovation economy.

More could be done to encourage universities to play a stronger role in supporting private sector innovation. The SR&ED tax credit could be redesigned to be a spur to R&D increases. Canadian policymakers could stop looking to Europe as a regulatory model for emerging technologies and instead look to the United States for ways to grow a globally vibrant technology economy.

The report lays out 10 principles to guide policy efforts for improving Canadian innovation, competitiveness and productivity. A few of these are worth highlighting here. It is notable that ITIF says Canada needs to “See big and medium-sized businesses as beautiful.” How often to we see politicians vilify success and profits, instead of celebrating these as desirable attributes, beneficial to employees, shareholders and the economy at large? ITIF also calls for Canada to “Focus less on industrial recruitment and more on supporting companies already in Canada.” The third principle that I will highlight recommends that we “Reject the precautionary principle and embrace the innovation principle.”

Canadians are feeling that the economy is in a crisis. Young people no longer expect to be more successful than their parents. Home ownership is out of reach for many. As ITIF notes, many people consider “that the continuation of the status quo economy will lead to a less-prosperous Canada.”

The report’s conclusion leads us to ask if there is an opportunity for leaders in the private and public sectors to leverage the momentum of a growing consensus, to make bold changes to transform Canada’s economy. The status quo is not an option.

Which political party will adopt a more complete innovation-driven economic agenda to drive productivity and competitiveness?

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