Canada has an innovation problem, but it can’t be pinned on the performance of the booming oil sands and mining industries.
The resource sector scores higher than most other Canadian industries when it comes to innovation, concludes a report released Friday by the Ottawa-based Centre for the Study of Living Standards.
“It’s not inconsistent to have an innovation problem and also have sectors that do well,” said Andrew Sharpe, the centre’s director. “And that’s the case in Canada.”
While the resource sector is vital to the Canadian economy, it generates a relatively modest share of the country’s employment and economic output.
So the innovation problem lies elsewhere, most likely in the large service industry, which dominates the Canadian economy and generally suffers from weak productivity, Mr. Sharpe suggested.
“The overall innovation performance of the Canadian natural resources sector is strong and has improved in recent years,” according to the report. “The implication . . . is that Canada’s system of innovation for natural resource industries is doing quite well.”
Far from needing more government help, the resource sector is “grounded” in strong policy support, good technology and consistent collaboration between companies.
The strongest piece of evidence is that the top 10 of Canada’s nearly 200 sub-industries ranked by their use of science and technology are resource industries. The oil sands ranked No. 1.
Overall, the resource sector outperforms the rest of the Canadian economy in productivity, growth rates, intensity of machinery and equipment use, adoption of new technology and hiring of R&D personnel.
The report also said these industries generally stack up well compared to rivals in other parts of the world.
A lot of research on innovation focuses on company-level research. But Mr. Sharpe said that misses a lot of what’s happening in other parts of a supply chain, or in university and government labs.
“We always focus on R&D done by the firms themselves, but a lot of innovation is still going on,” Mr. Sharpe remarked.
The report concluded that “process innovation” is more important than product innovation in the resource sector. Innovation, where it takes place, usually involves the adoption of equipment produced by other industries.
Mr. Sharpe cited examples in the oil sands, such as the in-situ process of extracting bitumen from deep in the ground or the oversized dump trucks used to truck oil-laden sand. Oil companies didn’t do the innovation themselves, but they’ve exploited it to become much more productive, Mr. Sharpe pointed out.
The exception to the rule in the resource sector is forest products, which has generally lagged in innovation. Mr. Sharpe said the advent of the Internet and mobile devices has conspired to wreck Canada’s newsprint industry, while the deep U.S. housing slump has triggered a deep slump in the softwood lumber industry.
“It’s easy to be an innovator in an expanding industry,” Mr. Sharpe said. “There’s no money for R&D if you’re going bankrupt.”