Canada must encourage business to break its low-innovation streak

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The Globe and Mail – Peter Nicholson 

Published: October 23rd, 2018

Difficulty rating

Rating: 4 out of 5.

Credibility rating

Rating: 3 out of 5.

Preview

This article talks about Canada’s low innovation in business and the reasons behind it. It explores Canada’s weak productivity growth, the increasing dangers of it. It dives into Canada’s need to implement an innovation strategy to ensure the ongoing profitability of Canadian businesses, and the essential role public policy plays to encourage Canadian companies to break their low-innovation habits.

Author

Peter Nicholson is the founding president of the Council of Canadian Academies, a former policy adviser to the Prime Minister’s Office and former business executive. He is the author of Facing the Facts: Reconsidering Business Innovation Policy in Canada, published by the Institute for Research on Public Policy.

Sources

• None

Analysis of Potential Bias

The author does not use any sources to back up any of his claims. The article is not backed up by economic experts or other public policy experts. The author is a public policy expert however, we only see his ideas, he does not give the readers any different ideas or opinions to consider.

Article Decryption

Despite its economic success, Canadian businesses are far behind in innovation among advanced countries e.g. Switzerland, The Netherlands etc. Canada has a close relationship with the world’s two innovation leaders: the U.K. and the U.S. Historically Canada has used its comparative advantage to trade commodities for technologies. Therefore, Canada is not as performant at creating technologies or innovative business models because Canada has never had to.

Canada’s productivity growth has been very weak since the mid-1980s, Canada has been able to keep up with per capita GDP growth due to stronger job creation relative to population. However, demographic aging suggests that employment is going to fall as a percent of the population. So, Canada’s future growth will depend more substantially on productivity growth, and productivity growth ultimately depends on innovation.

The direction of the global economy is being set by: globalization (particularly the shift of growth to Asia), technology, sustainability (reflecting an imperative to reduce environmental impact) and demographic aging(which only increases the importance of productivity growth).

Public policy plays an essential role by creating conditions that give Canadian businesses the best chance to succeed. Normally, the government’s encouragement of business innovation has operated mostly on the “supply side” – subsidies for R&D, public infrastructure etc. These measures are necessary but have not been sufficient. Policy measures that directly affect the bottom line e.g. regulatory approaches that encourage rather than inhibit innovation; trade and competition policies that create powerful incentives for Canadian companies to innovate to survive and grow etc., will be most effective.

These “demand-side” approaches represent a new take on innovation policy, but they require a shift of mindset inside the government to embrace a much broader conception of innovation and of how it can be supported.

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