Canada’s real economic challenge? Innovation.

A new report shows that Canada isn’t pulling its weight in fostering innovative, globally competitive companies, writes Chris Sorensen

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Inside the DMZ, an incubator for innovation/entrepreneurialism at Ryerson University. (Photograph by Jessica Darmanin)
Inside the DMZ, an incubator for innovation/entrepreneurialism at Ryerson University. (Photograph by Jessica Darmanin)

There’s been much talk on the campaign trail about Canada’s sluggish economy and how to get it growing again, including the relative merits of pursuing a balanced budget policy or engaging in short-term deficit spending. There has been far less discussion of what many would argue is a more serious long-term problem: Canada’s inability to foster innovative, globally competitive companies—the Apples, Googles and Teslas of the world.

At a time when natural resource industries are suffering and Canada’s competitive advantage—traditional manufacturing—has been eroded, the country’s future increasingly depends on being able to turn great ideas into great businesses.

But a report released Thursday by the Conference Board of Canada gave the country a “C” grade when it comes to its innovation chops, ranking Canada ninth out of 16 “peer” countries. While the study noted improvements in access to venture capital and “entrepreneurial ambition” in recent years, it said Canada still lags in a number of critical measures, including corporate research and development, information technology investments, patents and productivity.

The good news, in other words, is that we’ve got plenty of bright, hardworking people with great ideas, who aren’t having any trouble attracting investors—Vancouver’s Hootsuite, a social media management firm, comes to mind—but where we run into trouble is creating the necessary framework to make sure those same companies can successfully scale up their operations and become true global powerhouses. (The report also stresses that not all innovation need be of the radical variety; constant, incremental improvement is necessary to keep companies competitive and the economy growing.)

So why has Canada fallen so far behind? “Insulation from competition, high resource prices, generally good trade with the U.S., and other conditions have meant that Canadian businesses have not had to innovate as much as businesses in other countries in order to be profitable,” the study’s authors wrote. “Overall, Canada has been able to maintain a high standard of living despite relatively weak business innovation performance.”

That said, the report also noted there’s a significant disparity within Canada when it comes to various innovation measures. In general, Ontario, Quebec and B.C. rank much more favourably on their own—a “B” grade—whereas the Maritimes and Prairie provinces tend be at the back of the pack.

The Conference Board is hardly the first one to highlight Canada’s long-standing innovation problem. Earlier this year former BlackBerry co-CEO Jim Balsillie penned a lengthy op-ed in the Globe and Mail that criticized policy-makers for taking a mostly hands-off approach while other countries work closely with firms in the high-tech and knowledge sector to help them succeed internationally, where the real money is made. A particular problem, Balsillie argued, is Canada’s inability to protect its home-grown ideas from being targeted by patent lawsuits waged by predatory trolls and deep-pocketed foreign competitors. “The smart countries have a very sophisticated private-public interaction,” he said during a talk at Toronto’s Empire Club earlier this year. “But it’s just AWOL in Canada.”

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