Economic analysis

Too much innovation talk can be a bad thing

The Trudeau government says it’s focussed on an innovation agenda. But what does that even mean?
Minister of Innovation, Science and Economic Development Navdeep Bains speaks during a news conference, Tuesday, June 14, 2016 in Ottawa. (Adrian Wyld/CP)
Minister of Innovation, Science and Economic Development Navdeep Bains speaks during a news conference, Tuesday, June 14, 2016 in Ottawa. (Adrian Wyld/CP)
Minister of Innovation, Science and Economic Development Navdeep Bains speaks during a news conference, Tuesday, June 14, 2016 in Ottawa. (Adrian Wyld/CP)

It’s hard to get away from “innovation talk” these days. Almost as prevalent as “fake news”, it’s everywhere you turn. Toronto Star columnist Paul Wells recently referred to it on Twitter as a “river of baloney.” The federal government’s new chief innovation fellow, Mike Moffatt, responded that such a river would, itself, be quite innovative.

But fun aside, there is a lot of truth in Wells’s contention that much of the current innovation talk is baloney, or at least, hard even for experts to decode. When I was an associate deputy minister at Industry Canada (now renamed Innovation, Science and Economic Development), I had a hard time getting straight answers from staff about innovation. It wasn’t because they weren’t hard-working, thoughtful people. It was because the rhetoric had overtaken the reality. Here are some of the issues I encountered as I tried to decode “innovation talk”. They are important to consider because our governments currently spend hundreds of millions of dollars annually to support “innovation”.

MORE: Will Ottawa’s ‘cluster’ approach to innovation funding work?

What does innovation mean? Merriam-Webster says innovation is “a new idea, method or device.” Needless to say, this covers a pretty broad range of products and services and processes for making them. More precision might make encouraging business innovation more manageable.

Are all innovations valuable? Commercial cold fusion would a great innovation, but a new recipe for garlic and jalapeño carrot muffins might not be. Robots that help disabled people live independently could make the world a better place, but robot soldiers that terminate enemy soldiers and civilians alike might not be. Just because something is new does not mean it is good.

How is innovation measured? We generally rely on both micro and macro indicators of innovation, but neither are very revealing. Some people count the number of patents as an indicator of innovation, but lots of crazy ideas never get much farther than the patent office, while lots of good process improvements are never submitted for patent protection. Other micro measures include research grants or business R&D spending. However, these are inputs to the innovation process and say nothing about the flow of useful innovations that may actually result.

MORE: How to fix Canada’s innovation conundrum

At the macro level, we generally associate growing productivity with innovation. In its simplest form, productivity is measured as output per worker. If productivity is growing faster than sales, then the number of jobs is declining. This is great if you are a firm owner, but not so hot for workers who are laid off. It’s often forgotten that productivity growth needs to matched by sales growth for workers to benefit.

Are innovation and productivity the same idea? Productivity is a last-decade buzzword that we hear less about these days, perhaps because productivity and innovation don’t always go together. For example, productivity is declining in the oil sands, despite lots of innovation. Why? Because the (relatively) easy-to-get oil has already been exploited, leaving increasingly difficult reserves for producers to work with. Does it make sense to continue to mine the oil sands if productivity is declining? Not surprisingly, it depends on the price of oil. Even low-productivity oil may be commercial if prices are sufficiently high.

Who benefits from innovation? Consumers and firms may benefit if innovations are valuable. Who would want to go back to a 1 kg, $2,000 ‘mobile’ phone? Workers may benefit if their skills enable innovations in production, and if sales grow fast enough. Alternatively, they might lose their jobs. It’s not easy to predict what will happen.

MORE: Canada’s real economic challenge? Innovation.

Will piles of government money buy us more innovation? Piles of money may help, but we probably also want our firms to face lots of competition. Keeping a lid on anti-competition policies and practices at home and exposing domestic firms to international competition through trade may encourage the flow of product and process innovations.

Where does this leave us as we struggle to decode innovation talk flowing past in Wells’s “river of baloney”? Innovation is hard to define precisely and devilish to measure even though governments spend hundreds of millions of dollars on it. We are not sure whether workers will benefit from it.

It’s not that much of what is being done to foster innovation is bad policy and, indeed, we are continuing to support many of the same things we did in the past in the name of improving productivity. But perhaps it would be better to focus our attention and public discourse on things we care about more directly, understand better and can measure. I am thinking about things like prosperity (levels of incomes), equality (distribution of incomes) and competitiveness (costs and quality relative to other producers). Innovation policies can help us achieve these things sometimes, but not always, and not by themselves. Too much “innovation talk” may be a bad thing if it actually distracts us from our overarching goals of building the economy and society we want.

Paul Boothe is Managing Director of the Trillium Network for Advanced Manufacturing and a Fellow of the Institute for Competitiveness and Prosperity.