How to cure Canada’s innovation woes
The Globe and Mail
By Tavia Grant
Going global by expanding corporate ties in both emerging and advanced economies would boost Canada’s lagging record on innovation, a paper to be released Wednesday says.
Experts have long lamented Canada’s innovation record, offering up solutions ranging from university investments to corporate tax incentives.
Companies should boost ties – and soon – in emerging markets like Brazil and Indonesia, along with advanced regions such as the European Union, the working paper from the Institute for Competitiveness and Prosperity suggests.
Expanded trade with these nations will spur the cross-pollination of ideas, boost earnings that can be reinvested in research and development, and turn up the competitive heat on Canadian companies to come up with better products at reasonable prices, said Roger Martin, chairman of the institute and the report’s co-author.
“Complacency is Canada’s biggest danger – that we don’t continue to upgrade to serve the most sophisticated customers in the most sophisticated ways,” Mr. Martin said in an interview.
Canada scored another “D” in innovation this year from the Conference Board of Canada and lags in most international comparisons. Abysmal productivity and innovation records are a worry because, without improvements, they will hamper Canada’s ability to compete globally and raise its standard of living.
Boosting global trade – and competitive pressure – is a means by which companies can turn that record around, said Mr. Martin, who is also dean of the Rotman School of Management.
The 60-page report does not mince words about Canada’s track record. The country is a laggard in innovation scores as shown by its “low productivity, limited patent output, under-investment in technology, and under-achievement by our clustered industries,” it says.
The report quashes the notion that trade with China, and a flood of cheap imports, has hurt Canada’s manufacturing base. The appreciation of the currency, rather, is the main culprit for factory job losses, the analysis found.
It’s essential to engage now with countries like China because they are on the cusp, or at the “innovational tipping point,” of being able to compete on new ideas, design and value-added products, the report says. More trade with the EU, meantime, will help innovation for two reasons: Consumers there can put “beneficial pressure” on Canadian companies to strengthen their products and services, and competitive pressure from European imports can also stimulate innovation.
Competitive heat is a key driver of innovation. Proof of that comes with Apple Inc.’s foray into the smart phone market, which challenged Research In Motion Ltd. to put its innovative strategy into overdrive, and American auto makers, which are producing better cars thanks to pressure from Japanese competitors.
That can only happen in conjunction with a series of policy changes, such as investing in education, helping displaced workers find new jobs and better integrating immigrants.
The report comes amid predictions that China could overtake the United States as the world’s largest economy by 2025. By 2040, all four BRIC nations – Brazil, Russia, India and China – will be in the top six countries ranked by economic output, along with the U.S. and Japan, Goldman Sachs estimates.
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KEY RECOMMENDATIONS
Five key recommendations on how Canada can boost its innovation record:
Expand trade relationships
Canada should strengthen its ties with BRIC countries, along with other emerging economies such as Vietnam, Indonesia, Poland and Romania as well as bolstering relationships with existing partners such as the EU.
Invest in infrastructure
Expanded trade won’t work without easing “chokepoints.” Canada needs to improve its border crossings, airports and its coastal seaports if it is to accommodate more activity.
Integrate immigrants
Funding should go to help immigrants start businesses that are built on trade with their native countries. Canada must find ways to draw on the knowledge of recent business student grads who are immigrants.
Invest in education
Social intelligence, creativity and analytical skills will become key to the economy in the coming years, so Canada should boost its investment in postsecondary education.
Help displaced workers
Some workers will invariably bear the brunt of enhanced trade, so support should be established for displaced workers. While retraining can be ineffective, governments should study the possibility of wage insurance.
Tavia Grant
