Embracing innovation policy like we mean it

David Crane is an award-winning journalist who has spent much of his career writing about Canadian innovation policy and its implications for Canadians.

Successive governments have each come to office recognizing that Canada falls short as an innovation nation. And each has proposed its own innovation strategy to do something about it. But overall, the results have disappointed.

The Mulroney government had its Prosperity Initiative. The Chretien government gave us its Innovation Strategy. The Harper government followed with its Moving Forward in Science, Technology and Innovation. And the Trudeau government came forward with its own Innovation and Skills Plan.

Yet despite these initiatives, and the billions of dollars spent, we are still struggling to become an innovation nation. And while governments like to boast about how much money they allocate to science and technology, we have little information on what is actually accomplished, and why we remain an innovation laggard.

Typically, there is little indication of what outputs governments expect — or what it would take to achieve those outputs — when programs are announced. For example, in 2019 the Trudeau government published a report, Building a Nation of Innovators, which boasted of the “meaningful impacts” it said were “already being felt across the country” as a result of its policies. By staying on track, the report claimed, “the Innovation and Skills Plan will succeed in branding Canada as one of the top five most innovative countries in the world.”

Yet there was little information on what had to happen to achieve this — strong on aspiration, and weak on the “how”. And, despite tax cuts, generous grants, and other supports, business spending on R&D remains low, with the Canadian business community far behind its counterparts in competing nations. According to the OECD, Canadian business spending on R&D in 2020 was just 0.95 percent of GDP, putting Canadian business 20^th among the 38 OECD nations, and 22^nd if China and Taiwan are included. Canada was the only G-7 country where, between 2015 and 2022, business spending on R&D as a percentage of industry value-added, actually declined.

In the 2022 Global Innovation Index from the World Intellectual Property Organization, Canada ranked as the 15^th most innovative nation, the same ranking as in the 2016 report. Even worse, on the most important innovation measures, Canada came in even lower: we ranked 20th in business sophistication, and 24th in knowledge and technology outputs. In the IMD Global Competitiveness Ranking, Canada fell from 10^th spot in 2016 to 14^th spot in 2022.

So we remain far away from ranking fifth in innovation, despite our aspirations. ISED has a website to track progress in the Innovation and Skills Plan. Its targets are ambitious — for example, to boost business R&D spending to $30 billion by 2025, compared to $24 billion in 2021. Much of the recent and modest growth in business R&D spending is from the R&D branch plants of foreign multinationals developing intellectual property for the foreign parents for commercialization elsewhere.

The best recent study on Canada’s poor innovation performance was published by the Canadian Council of Academies in 2009, Innovation and Business Strategy: Why Canada Falls Short. The main reason for Canada’s poor innovation performance, this panel of experts found, was the weakness of innovation in Canada’s business community. The urgently needed improvement in Canada’s productivity performance — the basis for our standard of living — depends on a much more innovative business sector in Canada, with ongoing innovation a core part of its overall business strategy.

The report voiced concern over the lack of world-class Canadian multinationals and the failure of Canadian companies to develop the technologies even for its natural resource industries. That so much of Canada’s economy was based on commodities, or depended on foreign-owned branch plants, also meant that Canadian businesses lacked one of the most dynamic sources of innovation — direct contact with end-users or customers. Canada remains a branch-plant economy. In the meantime, the takeover of many young Canadian tech companies by foreign multinationals continues to sap the long-run innovation potential of Canada.

So we continue to have the key challenge identified by the Council of Canadian Academies nearly 15 years ago. It’s time for another review. The best way to do this —and to ensure ongoing research and analysis of other urgent Canadian challenges as well — is through the creation of an independent, arm’s-length research body, similar to the former Economic Council of Canada or Science Council of Canada.

This new organization would have the capacity to conduct the independent analysis we need, and to make policy recommendations, operating in public rather than the secretive world of the Ottawa bubble. It would widen public understanding and debate, both of which are critical to better policy. We need good analysis, not pie-in-the-sky aspirations, to help us become the innovation nation that we must be. There’s much to be done for a better future.

David Crane can be reached at crane@interlog.com.

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