As Canadian governments extricate themselves from gaping deficits, they will need again to make the kind of tough choices that put us on the general path to fiscal probity in the 1990s. While these choices imply some mixture of increased taxes or spending restraints, we know that periods of strong economic growth can also make the public debt burden more manageable relative to Canadians' capacity to shoulder it.
How then can we foster growth? Innovation is the key to our potential success on this score. The question today, however, is how to ensure a stronger innovation performance during an era when our ability to add to the “building blocks” of innovation through, for example, research and development tax credits, public expenditures on science and technology, or training and education, will be severely tested.
It is time, therefore, to focus more specifically on how to produce superior returns from these investments. One way is to focus on the specific domestic “mix” that can strengthen innovation here in Canada.
We can probably enhance the potency of this mix by removing policy barriers to innovation; more clearly specifying our expectations of our investments innovation; and paying more attention to the human and social elements in our approach to innovation.
Governments have paid attention to the general conditions that can facilitate the emergence of global innovative “winners” in our economy – and should certainly pay more attention to the global barriers that they continue to face globally. But research has shown that governments can also foster growth and innovation by removing the conditions that permit “losers” that do not innovate to persistently drag down the performance of the economy as a whole.
What characterizes those sectors and activities? Often, they are sheltered from competition. They have been propped up by subsidies, or regulation, for too long without showing signs of either becoming viable commercially or of efficiently providing a clearly needed public benefit. The question here is not about the legitimacy of public intervention, but rather whether the specifics of such intervention actively discourage innovation.
At the same time, we should stop thinking of competition as something that occurs in a supposedly “flattened” world in which we cannot shape some key conditions of our own success. As the striking example of Canada's financial services industry during the last crisis demonstrates, we can also build our standards as a positive force for resiliency and competitiveness.
So, how can innovation help us turn the many economic, social and environmental challenges we face, into opportunities to improve quality of life in Canada and abroad? The pursuit of clearly evoked goals can help break down silos between industries, occupations, and fields of research that often hamper innovation.
In that light, we should also think beyond narrowly defined science and technology. Science and technology are the foundation of future economic success, but innovation in culture, design, education or business and government processes can add value too.
We also need a more specific focus on the inventors, innovators and the entrepreneurs who turn ideas into business propositions. Fascinating research exists that should be tapped on what motivates individuals to foster new ideas. For that matter, research also shows the importance of the workplace environment overall in fostering innovation – innovation is not simply a matter of “if you build it, they will come,” but also of interaction among human beings, again with striking results if approached right. For related reasons, we need a clearer strategy on the role of the protection of intellectual property rights at home and abroad in fostering innovation.
In short, gathering the building blocks of innovation and expecting it to occur is not a sufficient strategy for the times. It is like expecting one will operate a successful restaurant by building a state-of-the-art kitchen and gathering the ingredients, without paying much attention to the staff, the recipes, or to creating an engaging atmosphere. Given the fiscal straits emerging out of the recession, it's time to ask again what's cooking in Canadian innovation.
Daniel Schwanen is an economist at The Centre for International Governance Innovation in Waterloo, Ont.