If innovation was measured in the output of reports about innovation, Canada would be a world champion.
We serially investigate the problem, going over the same terrain and offering many of the same old solutions.
This has been going on since at least 1991 when Harvard University economist and competitiveness guru Michael Porter issued his seminal report: Canada at Crossroads.
“Technology development and adoption are areas where Canada suffers from significant weaknesses,” Mr. Porter wrote. “Stimulating more research and development and faster adoption of technology in the private sector must be a priority objective of government.”
His observations are unfortunately just as relevant nearly three decades later.
Now, a new report has been added to the pile.
This one is worth a careful read because it comes from Germany’s much-admired and emulated Fraunhofer network of public-private research institutes. The Montreal-based Institute for Research on Public Policy commissioned Jakob Edler, executive director of the Fraunhofer Institute for Systems and Innovation Research, to analyze this country’s innovation policies.
Spoiler alert: Mr. Edler isn’t impressed. Whatever we’re doing isn’t working. He points out that Canada continues to suffer from under-investment in corporate research and development, productivity growth is weak and we’re not producing the kind of innovation that addresses the “grand challenges” Canada faces.
“The bottom line is that the country’s innovation potential has not been realized,” Mr. Edler says in his just-released report, A Costly Gap: The Neglect of the Demand Side in Canadian Innovation Policy.
“Canadian innovation policy needs to significantly change course.”
Unfortunately, Canada has been getting a course correction with virtually every change of government or, worse, benign neglect. And another shift could well follow this October’s federal election. New governments have a bad habit of jettisoning a previous one’s signature initiatives, including the good ones.
The missing piece in the decades of self-reflection about innovation in Canada is demand for innovation, according to Mr. Edler. Current policies – including R&D tax credits, direct spending and billions of dollars in grants to universities – are successfully generating a steady supply of knowledge, technology and innovation. But too few companies are embracing and using it.
There is a clear market failure, mainly on the demand side, he argues. What Canada needs is more balance.
“Policy that keeps focusing primarily on strengthening the supply side but leaves the demand side to market forces will limp toward better innovation performance for the economy and society rather than forcefully taking on the economic and societal challenges ahead,” he says.
Mr. Edler’s solution is controversial: more state intervention. Ottawa should use its substantial purchasing power to acquire new technology, lower risks and encourage more innovation. Procurement is now the “most fashionable” demand-side tool among European countries, the report says. It could also involve “pre-commercial” public procurement, where the government identifies a problem and pays companies to develop potential solutions, without necessarily committing to purchasing them.
Large purchase contracts of things such as ships and aircraft could, for example, include incentives to use Canadian innovations.
Likewise, the federal government could have developed a homegrown payroll system instead of buying the problem-plagued Phoenix system from IBM.
Governments could use tax incentives or subsidies to encourage companies to purchase emerging technologies and train workers to use them, “signaling the government’s political will to create a market.”
Governments can also sponsor demonstration projects of new technology, reducing uncertainties for private sector buyers.
Ottawa has started doing some strategic procurement of pre-commercial innovation. But so far, it’s on a relatively small scale and there’s no clear commitment to sparking big ideas and major purchases.
Ottawa is also spending nearly $1-billion developing five industry “superclusters” across the country, matching dollar for dollar what companies and institutions spend on projects in designated sectors.
People have to get over the notion that intervention is about picking winners, Mr. Edler says. Rather, it’s about fixing market failures and creating conditions that allow winners to emerge, and thrive.
Another key piece of the innovation conundrum is to align policies with clearly articulated societal objectives. These might include a focus on reducing greenhouse gas emissions, shrinking the vastness of Canada with better transportation infrastructure or coping with an aging population. Spending gobs of money on innovation without a clear objective is money wasted.
It’s time to get to work, and stop writing about it.