Innovation paradox

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Canada has the potential to be a global leader in innovation, but it faces challenges in translating its strengths into economic performance, according to the Conference Board of Canada (CBoC), which scores the country poorly, ranking it 15 among 20 nations, in its 2024 Innovation Report Card.

“The Organisation for Economic Co-operation and Development (OECD) predicts Canada will be the worst performing (advanced) member country over the next four decades as measured by real GDP per capita,” the report states, warning that this could detrimentally impact infrastructure, the health-care system and the country’s economic and social health, putting at risk “what we hold dear as Canadians.”

But while the science-based, data-driven assessment “reports the good, the bad and the ugly, and is a call to action,” says Alain Francq, director, Innovation and Technology at CBoC, it also tells “a good news story.”

Canada shines in terms of “building innovation capacity, educating our population, producing talented and highly qualified STEM graduates and coming up with some of the world’s best ideas and inventions,” Mr. Francq says. “That’s where we punch above our weight.”

But the innovation paradox, he explains, is that “we fail to capitalize on these strengths and struggle to move this ingenuity and talent into the economy.”

The 2024 Innovation Report Card, says Mr. Francq, aims to address this paradox, identifying “seven pivotal areas of opportunity to improve the innovation performance of Canada’s economy.”

Number one is improving productivity, he says. “Innovation drives prosperity and productivity, so it’s very much about adopting new technologies and investing in research and development [R&D] to create and integrate those technologies into new products and processes.”

Canada can enhance innovation-driven growth by adopting new technologies, “whether that be robotics or more leading-edge, world-dominating or potentially world-changing technologies such as artificial intelligence or quantum computing, in both of which Canada has had an early lead.”

It’s also important to promote intellectual property (IP) and R&D as key drivers of commercial success by augmenting funding and programs, says Mr. Francq. “You can’t commercialize what you don’t own. In the vernacular of IP, if you cannot charge rents for your ideas, then the economic value will not come to you.”

Canada will also need to bolster the venture capital landscape, to provide the backbone for startups and innovative projects, he notes. “The question is always: ‘How do we scale good ideas in our firms? How do we create global champions?’ Access to capital will make the difference.”

Another area that has long needed attention, says Mr. Francq, is advanced manufacturing. The CBoC report highlights the need to reinvigorate the sector by leveraging high-tech exports.

Supporting the country’s vibrant spirit of entrepreneurialism is another focus, he says. “Canada is a nation of entrepreneurs. Our total entrepreneurial activity ranks high against competitor nations.

“We have a strong belief in our capabilities to identify and address opportunities in the marketplace and start a new business,” points out Mr. Francq. But Canada is also characterized by a highly risk-averse innovation culture, second only to China, the report details.

“The underlying problem is that the economic consequences of failure are high. Issues like affordability, the environment, regulation and interprovincial trade barriers make it difficult to do business,” he emphasizes. “We need to de-risk the opportunity for people who are considering starting a business.”

And ultimately, we need to “lean into our strengths” to reverse Canada’s lagging innovation performance, Mr. Francq suggests. “That’s what we’re doing with the innovation report cards. We look at where we perform best and where we have a competitive advantage. We identify where, if we invest smartly and bring everybody together, we can prosper.

“Innovation ends up being important for the community, the region and ultimately for the country,” he adds. “Areas that are strong in innovation activity will see improvements in productivity, economic growth and job creation, resulting in more resources to spend on things that we all care about, like education, health or infrastructure – and creating a better life for the next generation or two.”

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