In the long term, success depends on smarter oversight of innovation spending and on promoting and celebrating innovation in every sphere of activity.
In Canadian public policy discourse innovation evokes the discourse in the field of health care 20 years ago. Everyone had great ideas and aspirations for health care reform, but as a result of strong stakeholder opposition and electoral expediency, not much has happened since.
There is, however, one difference in the two discourses.
In health care we were far enough ahead that many years of policy drift have not left us far behind sister nations. Not so for innovation. Various metrics suggest that Canada lags in business innovation and productivity compared with many jurisdictions. We cannot afford another set of lengthy conversations that go nowhere.
We continue to benefit, of course, from the greatest natural resource of all — an educated and ambitious population in a stable democracy, augmented each year by an influx of talented immigrants from all over the world. And we are capitalizing aggressively on other natural resources, not least those buried on- and off-shore. But the petrochemically fuelled rise of Alberta and Saskatchewan has thrown into even higher relief the need for knowledge-based businesses in every province. Put simply, building a culture of innovation is crucial to the prosperity of our communities, the well-being of individuals and the unity of our nation, at a time when the divisions among regions are becoming starker than ever before.
In this article I shall outline a few potential pitfalls in the current Canadian discourse about innovation and suggest some broad policy directions that might unlock the potential for innovation among our people, academic institutions, investor-owned businesses and social-purpose enterprises.
The following are some of the pitfalls in innovation discourse.
High-tech obsessions. Perhaps because we are ambivalent about our dependence on natural resources, Canadian commentators often take a narrow-band view of innovation. Canada is not Taiwan or Israel, yet we persist in imagining that invention or refinement of high-tech hardware, whether smart phones or airplanes, is the sine qua non of innovation. Yes, technology has been part of innovation since humankind first made fire and sharpened sticks. But technology is the usual means, not the end in itself.
Perhaps, then, innovation is best understood as a mindset. It involves the fundamentally human quest for better ways to do and create things that are valued by others. It can be disruptive or incremental and sweeps in every imaginable good or service. And it is at once less tangible and far more pervasive than any gadget-du-jour.
Sectoral stereotyping. Business leaders and politicians sometimes scapegoat universities and colleges for the state of innovation in Canada, citing our nation’s high level of research and development (R&D) spending through higher education institutions (higher education R&D, or HERD), measured relative to GDP. Contrary to popular mythology, our high spending on HERD is not primarily due to the federal government’s largesse. Instead, our HERD ratios are heavily subsidized by institutions themselves, and they are therefore underwritten in part by students’ tuition fees and provincial educational spending. It is business R&D spending, or the BERD ratio, that has been and remains disappointingly low, despite some of the most generous subsidies and tax incentives in the OECD.
On the other side of the coin, it does not help matters one bit when some academic purists loudly proclaim that collaboration with industry is inherently a second-class form of research that always carries a dire threat to intellectual independence.
Limited coordination. Everyone agrees that to promote innovation, we must improve collaboration among companies, universities, colleges, all levels of government and nonprofit or social-purpose enterprises. I believe there are signs of a positive culture change in industry and academe, and governments deserve credit for some effective investments to strengthen this collaborative interface.
Building a culture of innovation is crucial to the prosperity of our communities, the well-being of individuals and the unity of our nation, at a time when the divisions among regions are becoming starker than ever before.
Nonetheless, as observed in the overview by the Jenkins Panel, which oversaw the Review of Federal Support to Research and Development, one source of inefficiency is the lack of coordination across different departments of the federal government and the provinces, and even within provinces among municipalities. An underlying problem is “the Canadian disease” — a multiplication of small, stand-alone (boutique) programs across three levels of government. The result is that Canada’s innovation landscape is cluttered with brokers, buffer bodies, boutiques and regional boondoggles. Cleaning up this landscape would save hundreds of millions if not billions of dollars and also make it dramatically simpler for coordination to occur.
Zombie ideas. In innovation discourse, it seems that everyone agrees that nurturing talent is a policy priority. However, discussion of talent is still marred by the zombie idea that prosperity and innovation depend entirely on the STEM disciplines — science, technology, engineering and mathematics. STEM education is essential, but successful societies are built on a much wider base of innovation and creativity. Indeed, a spate of recent articles and case studies of successful companies has argued that even hightech innovation can be catalyzed by an admixture of talented people with degrees in the arts, humanities, social sciences and business.
A related zombie concept is the criticism that basic research is overfunded and irrelevant to innovation. We have seen time and again that basic research, driven by curiosity and arbitrated by peer review, is absolutely essential to human progress. Countless economically important advances, from lasers to lithium batteries, have blossomed serendipitously from new fields first tilled by basic research.
Some policy options flow implicitly from avoidance of the pitfalls outlined here. Others are at or near the top of any list of steps that must be taken if Canadians’ potential for innovation is to be unlocked. Here are a few.
Improve and streamline the system of tax incentives. Reasonable people disagree unreasonably about the current federal and provincial programs of R&D tax credits. The hard reality is that, if these programs were truly successful, Canada’s business R&D spending would not be where it has been and remains. Some pundits defend the status quo for two reasons. First, other nations are starting to use more tax credits to catalyze R&D. And second, tax credits avoid the risk of governments “picking winners.”
The first argument confuses a lake for an ocean. No major nation relies on indirect spending to foster business innovation to the extent that Canada does. The second argument is more compelling, but also flawed. Governments may be bad at picking winners, but overgenerous tax credits allow any loser to pick the taxpayers’ pockets. In brief, the details are debatable, but some serious changes to our tax incentives for business R&D are overdue.
Rebuild a made-in-Canada venture capital industry. The venture capital industry in Canada has not recovered from the combined effects of the Great Crash of 2008, earlier distortions caused by labour-sponsored venture capital funds and the cancelling of the investment set-asides in Canadian pension funds. Ottawa and the provinces are now taking welcome measures to build up new pools of risk capital. Let us hope, however, that there is private co-investment and apolitical management, and that potential returns rather than politics shape investment decisions. And let us also pay special attention to early-stage risk capital, so that young — and not-so-young — entrepreneurs can get a fair shot at seed-stage financing.
Generously support peer-reviewed research. Canada has not won a Nobel Prize since 1993. Perhaps some of the new boutique programs or politicized one-offs so beloved by governments will enable importation of a current or soon-to-be Nobel laureate. One can dimly imagine the cacophony of misguided self-congratulation that would accompany that ersatz milestone.
In reality, the generation of a succession of home-grown winners of pinnacle research prizes is the measure that matters most. That pattern would signal breadth, depth and sustainability of excellence. The absence of that pattern in Canada is not due to some innate lack of ambition or talent. Rather, it reflects the reality that, for many years and across different Canadian jurisdictions, there has been churn and waste arising from our collective inability to agree on and implement a coordinated and multi-year road map for excellence in basic and applied investigator-initiated research.
One priority is a modest increase in total funding to more internationally competitive levels. That in turn would require an end to the self-congratulation on HERD ratios and reversal of the uniquely Canadian perversity whereby the real costs of research grants must be heavily subsidized by many universities at the expense of undergraduate education.
Some measures depend primarily on political leadership. Strong leadership could ensure a consistent funding trajectory without political meddling inside funding envelopes; to avoid one-off allocations driven by pandering to crony X, region Y or sector Z; and to put an end to the brainless bluster about the “irrelevance” of various research projects or disciplines.
There are nonetheless many roses among the thorny tangles here. R&D is a soft target in tough times, and most governments, with Ottawa in the lead, have sustained most of their support for research over the last few years. These decisions are welcome signals that governments are beginning to recognize the vital role that basic and applied research plays in driving innovation, both through new ideas and by creating the environment for educating the next generation of innovators who will lead high-growth Canadian companies on the world stage.
Govern and spend better. As noted, successive federal and provincial governments have created a wide variety of agencies to promote industrial development and innovation. Unfortunately oversight of these entities is uneven. Indeed, even as governments meddle in or even cut funding for excellence-driven research agencies, they grant considerable autonomy to a myriad of bodies that spend money in puzzling ways. A particular problem here is pseudo-governance — the appointment of “boards” that have an uncertain mandate, along with members who lack serious and relevant director level experience.
One of the reasons why the Jenkins Panel recommended the creation of an industrial research and innovation council (IRIC) was so it would provide technical expertise and oversight for proposals coming to a range of federally funded agencies. Predictably, the IRIC proposal has been attacked as creating a new layer of bureaucracy. The truth is a little different. An IRIC would consolidate existing bureaucracies and save money by imposing much tougher discipline on programs and agencies that involve industry partnerships. The problem here, I suspect, is not the policy math but a political calculus.
In brief, the nation needs well-informed and more objective oversight of a much smaller number of better-funded agencies, centres and networks in the innovation arena.
Ensure smarter procurement. We live in a world where free trade is preached loudly and protectionism is practised quietly. Procurement policies have to balance on a veritable razor’s edge, weighing international trade regulations and short-term value-for-money imperatives against the longer-term benefits of nurturing made-in-Canada innovation. It is nonetheless essential that, wherever possible, governments use their purchasing power to catalyze domestic innovation.
Reduce the silos. Interdepartmental and intergovernmental cooperation is essential if Canada is to realize its innovation potential. The optimum model to achieve such co-operation is not clear. It cannot be achieved by appointing blue-ribbon advisory boards that meet infrequently — see the reference to pseudo-governance above. San Francisco and Philadelphia have appointed chief innovation officers.
No Canadian jurisdiction currently has a similar sherpa for science or innovation, and past experiments have not been successful because departments (and ministers) jealously guard their R&D spending quotas. The best option may be a hybrid: each jurisdiction creates whole-of-government machinery, with regular federal-provincial meetings of those charged with steering such machinery. Leaven those meetings with bear-pit off-the-record sessions with industry leaders and academic interlocutors, and there might finally be some serious bunker-busting.
Celebrate and promote innovation everywhere. An innovative mind approaches every situation with a view to doing things differently and better. Innovation is relevant and important for every economic sector, from natural resources to manufacturing, and from financial services to high-technology enterprises. Fresh thinking and improved processes are as vital to the public sphere and civil society as the private business sector.
For many years and across different Canadian jurisdictions, there has been churn and waste arising from our collective inability to agree on and implement a coordinated and multi-year road map for excellence in basic and applied investigator-initiated research.
More than a few politicians and pundits seem to miss these points. They undervalue innovation in the resource and manufacturing sectors, fail to recognize that great creative content outlasts any medium or gizmo and fall repeatedly for self-promoting tripe from company A, institution B or region C that lays claim to special status in the name of innovation.
The reality is very different. Innovation and creativity can be found in every corner of Canada and every endeavour. A positive side effect of this diffusion of innovation is the burgeoning of convergence as the basis for novel enterprises. This is most evident in large urban areas, where concentrations of diverse talent make transdisciplinary innovation readily feasible. Convergent innovation will increasingly be important in the future, not only as a positive creative and economic force, but also in response to the global challenges of unprecedented complexity that are confronting our species on this increasingly hot and crowded planet.
Academics learn in their careers that the conclusion of an article should recap all the preceding arguments and close with a fanfare of self-congratulation about how compelling it all was. In that regard, I am on strike. The points made thus far are already abbreviated, and nothing is to be gained by repeating them in even briefer form. Instead, I shall simply add a small asterisk to everything written above.
Canadian commentators, including this writer, have offered many explanations for the relative under-development of innovation in Canada. Common themes include our resource-based economy, the previously low value of the Canadian dollar, the accessibility of American markets, the preponderance of branch plants, high corporate taxes, oversubsidization of uncompetitive firms and so on. But one could just as easily write a list of all the remarkable advantages that Canada has enjoyed, and continues to enjoy, as regards our potential to be a global innovation leader.
That leads me to the asterisk. It could be that the greatest threat to Canadian innovation, paradoxically, is the new political and media obsession with innovation. One unhappy side effect of this state of affairs is that we already have a secondary industry of consultants, brokers and intermediary entities — much as occurred with health care during the “great reform stall-out” 20 years ago. Governments routinely dress up boutiques and boondoggles in the language of innovation and entrepreneurship. And lobbyists for every institution, region and company already advance their bids for special treatment under the same flags.
What is needed now is aggressive depoliticization of Canada’s innovation agenda, combined with an evidence-based discussion of public policy options that might promote innovation, creativity and entrepreneurship. We particularly need careful attention to the real metrics of R&D and innovation performance, as opposed to the current propagation of sound bites and self-serving mythology.
Above all, I believe that if the economic, educational and research fundamentals of our varied jurisdictions are strong, then Canadians will innovate, compete and win. That suggests we need less innovation chatter, more evidence and rigorous analysis and much more action. The real measure of success will come when innovation is embedded in the DNA of Canada to such an extent that we finally stop talking and writing about it!