A road map to more innovation and commercialization


September 4, 2012

We live in an age where innovation is constant and entrepreneurship is at a premium. Yet when it comes to productivity and innovation Canada is in the hypoxic “dead zone.” Our productivity is staggeringly low. Commercialization of new ideas is a real problem. As the Conference Board of Canada points out, “Despite a decade or so of innovation agendas and prosperity reports, Canada remains near the bottom of its peer group on innovation, ranking 14th among the 17 peer countries.”

Yet the federal government spends more proportionately on R&D than almost all OECD countries ($7 billion annually) and sees little commercial dividend from the investment. What’s going on here?

The simple answer is that we are subsidizing the rest of the world and it’s got to stop.

As the Canadian Advanced Technology Alliance (CATA) argues, government-sponsored R&D provides “feedstock for other nations’ growth.” In other words, we’re doing the research and the thinking, but other countries are commercializing those ideas and, in the process, reaping huge rewards. CATA contends further that the gulf between academic research and business application seems to be growing, not shrinking. The Jenkins panel report (released in October 2011) also lamented that “while Canada produces IP in abundance, it is less adept at reaping the commercial benefits. Too many of the big ideas it generates wind up generating wealth for others.”

The problem doesn’t stop there. When we do invent something we also do a lousy job of protecting the intellectual property rights that should go along with it. Our laws regarding intellectual property are weak and so is the legal and judicial enforcement of those rights. As a consequence, very few patents get registered in Canada. And when our major competitors, especially in the United States, take a run at our companies who are technology innovators, we get taken to the cleaners.

The Canadian International Council (CIC) has criticized the government’s indifferent approach to the retention and accumulation of intellectual property. Others express concern about the lack of protection of IP in emerging markets like China — clearly an area where the conventional rules of the past do not meet the challenges of the present or future.

We don’t need more studies of Canada’s innovation and productivity problems. We need concerted action.

As a first step, we need to give business firms in what the government has deemed to be priority sectors for innovation — health and life sciences, information technologies, aerospace, energy and natural resources — a more direct role in guiding and administering government programs intended to promote commercially viable technology transfers.

The most alarming findings from market research conducted by the Jenkins panel were that more than half of the businesses polled were not aware of the federal R&D programs. Two-thirds complained that the application processes were too burdensome.

Second, put an end to the alphabet soup of different money pots, especially in Industry Canada, and replace it with a “one stop shopping” approach and more targeted support. And if innovation is really a priority, the Prime Minister should put it in the hands of an R&D czar reporting directly to him, to implement one stop shopping, provide clear priorities, get rid of redundancies, direct more industry involvement in the allocation of government research funding to ensure a focus on distinct commercial applications, and draw in industry success stories to be emulated. At the same time, the government should also provide more consistent tax incentives, while promoting more direct linkages between academic research and commercial benefit generally.

Third, let’s have some focus. Biotechnology is frequently cited as a priority sector, and yet the chronic lack of venture capital in Canada means that we have more stranded research than product development. The prestigious science journal Nature indicated that investments over the past decade in the life sciences and biotechnology can yield better returns than those in other forms of technology. And yet, during the same period, new start-ups in all fields in Canada dropped by more than 50 percent (from 1,007 in 2000 to 444 in 2011.

Fourth, create incentives to keep IT jobs here. Canadian companies worry about the impact that a steady transfer of IT jobs and related technology offshore will have on the productivity of Canadian businesses. Because much of IT can be done from remote locations, there is no real incentive to retain employment in Canada. Thus incentives must be given to stimulate and retain IT employment at home as an alternative to outsourcing.

Fifth, get smart. Not all innovation or efficiency comes from government-sponsored R & D. Sharper business practices and competitive market pressures can often be the best prod for productivity. Greater exposure to and involvement with supply chains in major emerging markets can provide that tonic. Programs like QC100 in Quebec, intended to promote peer learning for CEOs of medium-sized companies with global expectations, should be expanded and drawn more directly into discussions that shape policy priorities.

Sixth, stop hoarding. As Bank of Canada Governor Mark Carney has said, now echoed by Finance Minister Jim Flaherty, our corporations are hoarding cash reserves when they should be upgrading plant and equipment and IT systems. We desperately need a change in the “cultural” mindsets of our business leaders – less risk averse investment and marketing, less focus on quarterly returns, more on long term strategies targeting new markets, staying power, new partners, etc., while stimulating better innovation and productivity.

The sad fact is that Canada’s R&D issue has been studied and blue-ribbon paneled to death, and all we get are more studies and Councils on Innovation, on S&T, etc. that produce yet more studies.

It’s clear what needs to be done. Let’s get on with it.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.

About the Authors

Derek Burney was Canada’s ambassador to the United States from 1989 to 1993. He led the Canadian delegation in concluding negotiations of the Canada-U.S. free-trade agreement.