Despite considerable federal government spending on private sector research and development -- $5 billion in fiscal 2010-2011 -- Canada is losing the global innovation sweepstakes. According to the Organization for Economic Co-operation and Development (OECD), our R&D spending is middle of the pack and trending downward. After adjusting for inflation, Canadian businesses spent less on R&D in 2010 than they did in 2001.
This matters because our lack of innovation is having an impact on our ability to compete. With the Canadian dollar at parity with the U.S. greenback, our cost advantage has largely evaporated and, if we're no longer cheaper, we better become something else. The usual suspects are being more productive or having products and services others do not, both of which are pretty deeply rooted in innovation.
One element of the federal government's program to help restore Canada's innovation capability is the much-awaited Jenkins report, which came out last month.
Officially titled "Innovation Canada: A Call to Action", the report is an expert panel's review of federal support for R&D. The panel was led by Tom Jenkins, whose day job includes being the chairman of Open Text Corporation, and was mandated to: assess what federal initiatives did the best job of increasing business R&D and relevant partnerships; gauge the appropriateness of current incentives and support; and identify the gaps and what to do about them. All of this was to be accomplished without calling for incremental spending by government.
The report is interesting reading for a lot of reasons, not the least being when it comes to R&D, New Brunswick is to Canada as Canada is to the OECD -- in other words, our innovation engine also needs a major overhaul.
The recommendations call for government to consolidate its innovation programs -- such as the Industrial Research Assistance Program, and Scientific Research and Experimental Development Program -- under the auspices of an arms-length organization called the Industrial Research and Innovation Council, which looks remarkably like Tekes, the principal innovation agency in Finland.
In general terms, fewer, more flexible and more accessible programs are called for, with an increased emphasis on support to small- and medium-sized enterprises. Additional funding is provided to the research assistance program by re-allocating some of the monies currently available to the scientific research program, which in turn is to be simplified and focused more towards direct incentives. In addition to becoming a "one-stop-shop" for business, the innovation council is also charged with developing and implementing a national talent strategy.
In parallel with the creation of the innovation council, the panel asks government to demonstrate leadership by establishing a Ministry of Innovation; make business innovation one of the core objectives of its procurement programs; base procurement requests on needs to be met or problems to be solved rather than detailed technical specifications; and become more of a first-time user of "Made-in-Canada" products and technologies.
Other recommendations in the 148-page report include increasing the amount of risk capital available for commercialization, and morphing the National Research Council into sector-specific research institutions increasingly fuelled through private sector collaborations.
What was striking to some experts was how the recommendations mirror the dialogue we're having here. Enlarging the pool of talent and ideas; more accessible programs; procurement as an engine for innovation; and enhanced commercialization support -- all in a context of no spending increases -- should have a very familiar ring to it.
It's acknowledged that our focus on deficit reduction makes it challenging to consider the revenue side of the equation, but there is considerable alignment in thinking here. Maybe it's time to explore more fully our options around growing the economy.
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