In Part 1, I discussed Canada’s inability so far to transform itself into a truly creative, high-value-added economy—one that doesn’t rely on the luck of the commodity market or low wages (through a low Canadian dollar). Such transformation is challenging for Canadian governments to achieve given the entrenched interest groups that benefit from continued support to the old economy.
There have been many studies and suggestions on how to deal with this situation. Some ideas include true free trade across the provinces, legislation that will encourage a more flexible and mobile workforce and elimination of barriers to competition (e.g. supply management in agriculture). But historically, governments in Canada have often experienced political difficulties in implementing such measures.
While there’s no one silver bullet that will resolve this situation, one of the actions we must focus on is turning our solid academic infrastructure into the base of a strong knowledge-based economy. In my long career as an adviser to businesses and public-sector entities, I’ve seen first-hand the inability to commercialize, in significant numbers, Canadian intellectual property and in particular that created by post-secondary institutions. In my opinion, this is one of the key obstacles for transforming Canada into a true creative economy. A testimony to this failure is the fact that Canadian post-secondary institutions lag far behind their counterparts in the United States when it comes to commercializing intellectual property developed within their walls. This is reflected in the relatively low royalties produced by top Canadian universities, whereas top American universities are producing royalties in the tens or hundreds of millions each year.
One of the ways Canadian governments can help in this regard is to encourage the creation of many innovation centres in various industries and regions that will help promote cooperation between post-secondary institutions and Canadian companies. Those centres can be effective in instilling a culture of commercialization. What’s more, such centres can help increase the relatively slow pace of technology adoption by small and medium-sized companies in Canada. From talking to our clients that have come to us for economic advice and analysis, it appears there’s an appetite in business and post-secondary institutions for these types of initiatives.
Governments can play a positive role in this—but in our experience, innovation centres are more likely to succeed when the initiative comes from the private sector and post-secondary institutions. In the past, Canadian governments provided support to industries they believed were important to the Canadian economy. While providing such support is justified in some cases, global evidence suggests that, in many such cases, governments are effectively entering a costly joint venture with a private-sector entity/sector that has relatively low prospects for long-term, sustainable success.
It would likely be economically prudent for governments to shift some of the budgets dedicated to direct corporate support and instead respond to proposals by the private sector and post-secondary institutions that are backed by strong business and economic facts and analysis. Going this route is a substantially lower cost option for governments (compared to direct corporate or sector support programs) and would allow governments to spread their funds over more initiatives, reducing risk and increasing the potential for success. What’s more, going this route has a higher chance of promoting new economy business activity and the spirit of risk taking.
In that regard, governments can help by first reducing the current bureaucratic obstacles faced by post-secondary institutions in joint venturing with the private sector. Governments also need to develop and recruit the skills they need to make prudent funding decisions that focus on supporting long-term, sustainable initiatives introduced by the private sector and post-secondary institutions. This will lead to innovation centres that create technology and know-how that serve a real market need.