OTTAWA – Canada’s record on innovation is improving, but experts say governments can do more to support new and emerging businesses.
The Conference Board of Canada, an Ottawa-based think-tank, has given the country a C on its latest innovation report card.
That’s an improvement from a D rating in the previous report, yet Canada still ranks only ninth among 16 peer countries, while corporate spending on research has fallen to the bottom of the list.
Conference Board CEO Daniel Muzyka said Canada’s improvement in the ranking is due to better numbers on venture capital investment and entrepreneurial ambition, a new measure that takes account of the number of working-age Canadians reporting entrepreneurial activity such as setting up a new business.
“While Canada’s overall ranking is slightly better, it masks downward trends in some key innovation drivers and highlights the need for the private and public sectors to improve their innovation game in a much more competitive environment,” said Muzyka.
Public spending on research declined from 0.89 per cent of GDP in 2009 to 0.81 per cent in 2013, according to the report.
In the same period, private spending on research and development has fallen from 1.02 per cent of GDP to 0.82 per cent, half of the 16-country average.
University of Waterloo professor Margaret Dalziel said Canada’s poor showing comes from its reliance on natural resources, where research spending is low relative to revenues, and the dominance of well-established, large corporations that look for incremental upgrades rather than disruptive change.
Dalziel, who teaches at the school’s centre for entrepreneurship, said federal and provincial government have made the mistake of using broad programs such as tax credits to stimulate innovation and could do more to encourage the private sector.
“If you have a big, general program that’s open to all, you’re not just going to be funding what’s emerging,” she said. “You’re going to be funding what’s routine.”
Transformative ideas, she said, are unlikely to come from the kind of focused research that goes on at older companies with set ways of doing business, regardless of their size.
Rather, she said, governments should stimulate new and emerging businesses, but by having focused programs and not just throwing money at them.
“If we just gave children a bunch of money instead of sending them to school, it would be a disaster,” she said.
Dalziel said the idea is to have programs that build networks between entrepreneurs, provide mentorship and education opportunities and make connections with researchers and policy-makers in the public sphere.
Similar programs already exist, but governments are reluctant to pursue them to a greater degree because of the relative complexity when compared with a tax measure, she said.
“The government is going to need to innovate if it wants to support transformative businesses,” she said.
University of Calgary professor Richard Hawkins, a fellow at the school’s Centre for Innovation Studies, said governments should focus on doing what the private sector won’t do, whether that’s building networks or funding early-stage research.
Instead of using fiscal policy and focusing on outcomes, he said, it’s important to create an environment where new ideas can be easily pursued.
“There’s no standardized solution for innovation,” he said.
Governments shy away from getting too heavily involved in the nuances of supporting innovation because they’re often concerned about looking too interventionist— picking winners, in other words, he said.
“But if they don’t act at all, then they assure that we get losers,” he added.