Closing the Innovation Gap in Canada

Industry Canada's take on the strengths, weaknesses, and next steps for the nation.

Although Industry Canada declined our request for an interview, it did offer the following comments in response to questions submitted in writing.

THE MARK: What are the major impediments to innovation in Canada?

INDUSTRY CANADA: Innovation is a complex economic process, and is a key driver of labour-productivity growth. It is more than a linear, cause-and-effect development of ideas into products, and understanding impediments to innovation requires an understanding of what’s going on in business.

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In May 2007, as a follow-up to a commitment to the federal Science and Technology Strategy, the minister of industry requested that the Council of Canadian Academies (CCA) work with the private sector and academic experts to conduct an assessment of the factors underpinning low Canadian business investment in innovation. In June 2009, the CCA released its report entitled “Innovation and Business Strategy: Why Canada Falls Short.”

The key finding of the report is that Canadian businesses do not use innovation as a competitive strategy as frequently as firms in other countries, such as the United States. This innovation gap is then reflected in related statistics like low spending on business research and development (R&D), lower levels of skilled researchers being used by Canadian businesses, and lower levels of investment in information and telecommunications technology vital to improving productivity and competitiveness. These innovation gaps continue to exist, despite a high level of federal support for R&D.

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The report points out that there is no single cause of the innovation problem in Canada, but that public policy on innovation needs to be informed by a deep understanding of the sector-specific factors that influence business decision-makers. Recognizing this, the Government of Canada has launched a comprehensive review of federal programs that support business innovation. The expert panel undertaking this review will provide recommendations on maximizing the effect of federal programs that contribute to innovation and create economic opportunities for business. The report is due to be released in October 2011.

THE MARK: What are the issues that need to be addressed when discussing innovation?

INDUSTRY CANADA: A successful innovation system requires a mix of complementary elements, and R&D spending is only one of several indicators of innovation. Other key indicators include knowledge development, knowledge transfer, and talent base.

Some of our major challenges involve how to leverage Canada’s R&D strengths to help stimulate innovation, and how to encourage the adoption of innovation-based business strategies in sectors where they would be advantageous.

The government’s role is to establish marketplace policies and frameworks that provide the climate for private-sector competition and investment. Specific areas for policy development are suggested in the CCA report – namely, those designed to achieve the following objectives:

• Encourage business investment in machinery and equipment, and, in particular, information and communication technology.
• Encourage innovative business strategies by increasing exposure to competition and promoting an export-oriented focus.
• Improve the climate for new ventures so as to better commercialize university research.
• Support areas of Canadian strength through focused sector-based strategies.

In addition to establishing policies, another key role for government is providing appropriate support for business- and commercially oriented R&D, which is the focus of the R&D review currently underway.

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