Canada is a country that loves to study things. Commissions, task forces, inquests and panels are a national obsession.
Look at innovation. Last week, the federally appointed Science Technology and Innovation Council issued its second major report, Imagination to Innovation: State of the Nation 2010.
If innovation was measured in the output of reports about innovation, Canada would be a world leader.
We’re not. We are a laggard. The report tracked Canada’s progress over the past two years based on 24 different indicators, such as the percentage of GDP spent on research and development, R&D spending by businesses, investment in machinery and equipment, PhDs and high school test scores. Since the council’s initial report in 2008, Canada’s performance is down in 15 categories, stagnant in three and improved in just six.
However, we probably didn’t need another report to tell us what we’ve known for some time.
Here’s a passage from L.R. (Red) Wilson’s seminal 2008 federal report, Compete to Win: “We rank poorly across almost all aspects of innovation: the creation of knowledge, the diffusion of knowledge, the transformation of knowledge and the use of knowledge through commercialization.”
Three years on, what’s lacking isn’t more analysis. It’s action.
Mr. Wilson made 65 recommendations for putting the country on the right track. If even half of them were in place now, Ottawa might not still be talking about its innovation deficiencies.
Many of the most significant recommendations remain on the shelf. Others have only been partially or half-heartedly fulfilled.
Mr. Wilson started with the premise that “greater competition is the key to increasing productivity and prosperity.”
The to-do list on the path achieving that objective is long. There’s overhauling the Investment Canada and Competition acts, opening up the telecom and broadcast industries to more foreign competition, creating a national securities regulator, reforming copyright laws, eliminating remaining internal trade barriers and lowering personal income tax rates.
In areas most closely linked to innovation, the progress is equally slow. Mr. Wilson, for example, urged Ottawa to look at creating tax incentives to encourage venture capital and speeding up the commercialization of intellectual property developed in universities.
Mr. Wilson also pushed for better oversight of Canada’s single largest industrial R&D commitment – the Scientific Research and Experimental Development tax credit. Mr. Wilson said Ottawa needs to monitor the program annually to ensure that innovation is “effectively encouraged.”
If Ottawa is doing regular monitoring of the program, which costs Ottawa and the provinces nearly $5-billion a year, its findings are a closely guarded secret.
Meanwhile, another panel of experts, headed by Open Text Corp. chairman Thomas Jenkins, is preparing a report on the government’s R&D efforts, with a focus on the SR&ED program. He’s not due to report until October – 3½ years after Mr. Wilson recommended stricter monitoring.
That’s too bad. Billions more dollars have gone out the door in the years since, much of it wasted, according to a recent Globe and Mail investigation. That’s because the generous SR&ED program has spawned an oversized industry of aggressive consultants, many of whom pocket up to a third of the credits in contingency fees, while cleverly disguising often routine work as vital R&D.
There’s a lesson there. The country is too small to do everything with its limited resources. SR&ED spreads money too thinly, without directing enough to the most deserving companies and industries. At the very least, Ottawa must put a much tighter lid on the program and redirect the money to genuine R&D.
There’s no real mystery to what Canada should do. It has to start picking winners and, sometimes, losers. Not every region, industry and institution will get the big money.
Ottawa’s decision to sell Atomic Energy of Canada Ltd. may be a tacit acknowledgement that nuclear power is no longer a sector where Canada can be an innovation leader.
The R&D focus should be on industry clusters that can leverage the country’s natural resource wealth and traditional strengths. Think energy, water, agriculture, forestry, mining and manufacturing that serves vital Canadian needs.
It may mean that government plays a larger role in some industries while leaving others to their own devices. That, at least, is how other similarly sized economies successfully leverage limited government funds.
More study has become an excuse to put off these much tougher, but inevitable, choices.