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POLICY & PRACTICE

Canada excels in science, but not so much in innovation

After five decades of telling ourselves the same story, can we start asking different questions about innovation?

By CRESO SÁ | MAY 01 2018

When it comes to generating reports on science and innovation policy, Canada is undoubtedly a powerhouse. Earlier this month, the Council of Canadian Academies released Competing in a Global Innovation Economy: The Current State of R&D in Canada, the latest installment in this tradition. The report was competently written, although predictable in its main conclusions.

That is because over the past half a century, we have perfected the art of telling ourselves basically the same story, albeit drawing on different assortments of evidence overtime as international datasets on things like R&D, publications, citations, and patents have become more readily available. Simply put, the story is: Canada excels in science, but not so much in innovation. The self-congratulatory part of the argument quickly turns into self-immolation, as we fail to capitalize on research that is well-regarded internationally by growing technology behemoths that create wealth in this country.

The story is popular as it usually prefaces advocacy for a variety of solutions, be it direct investments in industry R&D, greater focus on STEM in academia, an emphasis on funding R&D in enabling technologies, a revamping of the intellectual property regime, or even public subsidies of one kind or another for technology entrepreneurs. And no, advocates of those solutions are not simpletons who believe they have found a silver bullet that will solve our national embarrassment over innovation. However, they forcefully argue that their favoured recommendation is critical to addressing the problem, and so the story then gets re-told time and again.

Still, there is surely value in monitoring the situation and learning about where we have improved or have fallen behind in research and technology development, and the CCA report delivers those messages persuasively. They were well summarized here. However, this policy debate in Canada remains awfully unimaginative and incapable of generating original ideas or solutions.

That is because as much as reports on innovation take an apparently cosmopolitan outlook by invariably drawing on data from the OECD and comparing Canada to a number of “peer” countries, this decades-long conversation is really about the long shadow cast by the U.S. largesse.

This is fairly evident in how the innovation problem has been framed in Canada over the past few decades: whether it is the old concern over the large American multinationals that have long established branch plants in Canada but choose to carry out its innovative activities down south; the impact of innovation on the labour productivity gap between the two countries; recurring discussions over our lack of a unified approach to handle university intellectual property (with the U.S. Bayh-Dole act being the frequent starting point of the conversation); or the current concern with our inability to “scale” technology start-ups (like, you know, those companies in Silicon Valley).

If problems are framed from this perspective, solutions are no different. Granted, most of the academic thinking on innovation originates in the U.S., and Canada is not alone in the world in trying to emulate American successes in science and technology. In terms of policy alternatives, there have been recurring proposals to borrow from the Bayh-Dole Act and to create a Canadian version of the Small Business Research and Innovation (SBIR) program, for example. And the recently announced federal supersclusters, as Minister Navdeep Bains flippantly announced to much derision, is about creating “made in Canada Sillicon Valleys.”

However, there is an obvious limitation to this approach when you are 10 times smaller and economically interdependent with the 800-pound gorilla. As the CCA report points out, we are currently worried about Canada’s inability to scale technology firms, which is attributed to the lack of talent with the skills and experience to grow start-ups into global companies and to foreign acquisitions. In other words, we don’t have as long a roster of experienced tech CEO types and the deep pockets of investors that one finds in Silicon Valley or the Boston area. We are trying to play the U.S. game of creating and dominating tech industries globally out of R&D activities – a game they play with much larger and richer teams.

Of course there is no point in going into a state of denialism about this and rejecting the importance of technology sectors or innovation for the economy. And obviously, there are lessons to be learned from the U.S. leadership in these areas. However, the way we think about and frame policy issues constrains our imagination, as well as what we can conceive of as alternatives. After five decades of telling ourselves the same story, can we start asking different questions about innovation?

ABOUT CRESO SÁ
Creso Sá
Creso Sá is director of the Centre for the Study of Canadian and International Higher Education (CIHE) at the Ontario Institute for Studies in Education (OISE), University of Toronto.
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  1. David / May 1, 2018 at 16:22

    Could Dr Sa share what he believes is Innovation? Quasi-serious question

  2. Kamiel Gabriel / May 2, 2018 at 14:33

    Thank you Creso. You have nailed it on the head by pointing out to our “sport” in Canada by talking about our dismal performance in innovation, but not providing some creative solutions or asking different questions. Like yourself, I found the latest CCA report to add very little to a renewed or different set of questions/solutions.
    In my recent book: The Anatomy of Innovation: What makes innovation succeed in the 21st century (available in English and French from Amazon.ca), I distilled the impediments to innovation to three main reasons: 1) Lack of connectivity between the innovation “actors”; and due to cast geography in Canada, 2) Lack of unified IP policy that sets the rules straight and minimize confusion that discourages many of industries and private sector players to work with university researchers, and 3) Lack of setting goals and focus that sees flourishing enterprises fall back and wither.
    Clearly, we need to address such issues head on and ask different questions. I salute your courage to point this epidemic problem in Canada!

  3. Brian Cox / May 3, 2018 at 14:27

    You should analyze countries like Sweden, small economies, but they create global brands. What make it work there? Is it government programs or the attitudes of the business leaders?

  4. Philip Hultin / May 3, 2018 at 14:53

    The problem may reflect the different nature of the investment pools available to exploit new research discoveries. Obviously, there is much less money available in the Canadian economy than in that of the US, but we also face the fact that individuals and organizations in Canada who do have money to invest in innovation prefer to put their money into the global market, primarily in the US. Canadian investors don’t particularly care about building the Canadian tech sector, they just want maximal returns in as short a period as possible. In contrast, US investors can’t imagine NOT putting their money into US-based technology companies.

  5. Robert McFarlane / May 4, 2018 at 15:01

    I recall studying in early 1980’s about Innovation (the commercialization of new technology, processes and services) under Professor Kristian Palda who had published on showing why it was misguided to simplistically compare Canada’s R&D intensity ( R&D/GDP) to that of other OECD countries and conclude Canadian R&D intensity was low thus justifying Government intervention to subsidize more R&D (i.e. “The Science Council’s Weakest Link”). The basic premise was that one must adjust for the sectoral structure when comparing economies of different countries. Notably the U.S. (or even more so regionally for California and Mass.) has a high weighting of military defence industries which tend to have high R&D intensity whereas Canada has proportionally much larger natural resource and public sector (e.g.) where R&D intensity is low. So one needs to normalize such factors before jumping to conclusions of how and whether the Government should intervene in the economy to correct a “high tech deficit”. At the time “Chosen Instruments” by Governments were popular and failed miserably (anyone remember Canada’s Telidon?). Over ensuing years I note that Canada’s policy discussion has focused much more on R&D and less on Innovation. We need more focus on how to address the barriers and promote the diffusion and adoption of innovation throughout the Canadian economy, whether originated domestically or internationally. That does not mean science research and R&D our unimportant, but it means Government intervention to fund such investments is insufficient to drive innovation. One simple point so far ignored by Federal Government is U.S. tax reform which not only reduced the U.S. corporate tax rate to below that of the Canadian rate but also made capital investment by corporations fully tax deductible. This contrasts to the ongoing Canadian approach of only allowing the deduction of deprecation (CCA) of capital investment over time and varying the deprecation rate for favoured or less favoured classes. Keeping all other factors equal, which economy would one expect will have increased capital formation going forward? Since capital investment into new technology leads to productivity gains then which economy do you think will be more innovative and grow faster than wool dour otherwise? Lower taxation of capital investment allows the market to reallocate resources to investments of highest return. Targeted subsidization usually requires a bureaucratic assessment of such potential which rarely is quicker or better than the market allocation. Which approach will lead to quicker and better results? While detailed research may provide the coefficients of the extent of the correlation, common sense tells one the relationship between tax rate on capital investment is important and therefore the speed of Canadian policy response critical. Canada’s policy response so far is to have politicians continue to hand out more cheques and to say we should not be reactive. How about being proactive?

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