Is Canadian Innovation in Decline?

November 21, 2018 SRED

Is Canadian Innovation in Decline?

According to the 2017 Global Innovation Index (GII), which measures how innovative over 130 countries are, Canada has fallen from 15^th place in 2016, to 18^th place in 2017.¹

What has Caused the Decline in Canadian Innovation?

The Global Innovation Index acknowledges that “Canada excels in ease of starting a business and quality of scientific publications, while its political, regulatory and business environment draw top marks.” ² However, compared to the United States, which ranked fourth in 2017, the GII suggests Canada may suffer from a lack of strengths such as “the [high] presence of high-quality universities and firms conducting global R&D, [a high] quality of scientific publications, [high] software spending, and the [strong] state of its innovation clusters,” ³ which the US boasts.

It appears that Canada is innovative, however, it may be missing aspects of what other, higher-ranking countries are actively encouraging and promoting. This article will discuss some of the factors that may have led to Canada’s comparatively low ranking in the GII.

Canadian Innovation in Education

One of the factors that affected Canada’s performance in the GII in 2017 was education. In education, Canada ranks 74^th,⁴ and in university and industry research collaboration, Canada ranks 22^nd.⁵

Canada’s perceived weakness in its educational and industrial research and development (R&D) efforts were highlighted in April 2017, in Investing in Canada’s Future: Strengthening the Foundations of Canadian Research (The Naylor Report), which noted that the federal government had been reducing spending in academic research.⁶

The funding reduction highlighted in the Naylor Report may have contributed to Canada’s low educational and industrial R&D ranking; however, the World Intellectual Property Organization (one of the groups that oversees the GII) noted that “Canada has logged improvement in its education system.” ⁷ The GII report also notes that Denmark and Finland replaced Canada and France in the top ten “high-income economies” and states that “while [Canada and France] show high scores in both university rankings and citable papers, improved scores for patents filed from both Denmark and Finland is the main reason for this change.” ⁸ This observation is also supported in The Naylor Report, which notes that “Canada’s patent filings are growing faster than the population, but we lag [behind] many peer countries.” ⁹

Is Canadian Innovation Too Small?

In the GII, Canada is ranked second when it comes to “ease of starting a business;” ¹⁰ however, in a Globe and Mail opinion column from June 2017, David Ross noted that “[Canada has] an enormous number of tiny startups, a declining number of mid-sized Canadian tech companies and very few Canadian tech giants.” ¹¹

Canada’s lack of mid-sized and “giant” technology firms may have contributed to its low ranking (24) for “business sophistication,” ¹⁰ as this factor considers aspects such as the number of knowledgeable workers, “innovation linkages” (i.e. university and industry collaboration, cluster development, etc.), and intellectual property payments, among others.¹³

The findings from these reports may have also prompted industrial groups to propose the federal government makes changes to the SR&ED program so more companies are able to scale from start-ups to mid-sized or larger firms. In August 2017 the Information Technology Association of Canada (ITAC) published its 2018 Pre-Budget Submission, which stated that “SR&ED is highly successful at supporting start-ups, but less effective at helping [Canada’s] small companies scale to middle- and large-sized businesses.” ¹⁴

Canadian Innovation: A Summary

In the GII Canada’s lowest ranking factors, overall, are in “Creative Outputs” (27) and “Business Sophistication” (27).¹⁵ These factors consider aspects such as creative goods, industrial designs, intellectual property, patents and trademarks. The low rankings suggest Canada is lacking in traits that synonymous with being considered innovative, as the definition of innovation suggests: ¹⁶

Innovation involves deliberate application of information, imagination and initiative in deriving greater or different values from resources, and includes all processes by which new ideas are generated and converted into useful products.

Canada’s low ranking for education may have had a domino effect on Canadian innovation. As, although the universities scored well, it is their lack of innovative output, such as patented innovations, that has had an effect on the other rankings. This may also explain the criticisms that innovative Canadian companies are unable to scale, as if they do have patents “the problem is in [Canadian companies’] inability to commercialize the results of the R&D done;” ¹⁷ a criticism which was echoed by ITAC in its Pre-Budget Submission.