Canada’s Liberal government has had five years to develop and implement new policies and programs to spur innovation and prosperity in Canada. Some progress had been made – most notably with the idea, if not the cleanest execution, of the superclusters, the Strategic Innovation Fund and an array of smaller entrepreneurship and skills programs under the umbrella of the Innovation and Skills Plan. Yet, on key indicators of innovation activity such as business spending on research and development, patents and ownership, and firm growth, Canada continues to underwhelm.
No one should expect innovation initiatives to generate results quickly. But it’s not clear these initiatives are well-designed to spur substantial gains in innovation, productivity and good jobs even given enough time. There is a danger too that, given how much attention and activity there was on the innovation file in the first few years of the Liberal government, there might be little appetite for more, especially in a post-COVID-19 context where money for new initiatives is likely to be scarce. Letting the innovation file slip, however, would be a terrible omission given how central innovation will be for growth and prosperity after the pandemic.
What else can government do? Four innovation priorities should be the focus of both federal and provincial governments.
First, policy makers should adopt a sector-level focus and work with firms to develop innovation strategies where there is potential to develop niche advantages in fragmented global supply chains. Grand challenge- and mission-oriented approaches to innovation policy are useful motivators, but the task for regions and sectors is to identify and nurture specialized contributions to addressing these challenges and missions. We need innovation and skills strategies and policies that are more granular. Take, for example, approaches that recognize the importance of clean tech to addressing the climate challenge generally, but focus narrowly on the technological niches where Canadian companies can contribute, such as in solar panels, battery storage or distribution logistics over vast territories.
Second, innovation policy should focus as much on technology adoption as it does on technology development. A major contributor to Canada’s productivity challenge is the lagging rate at which businesses adopt and use technologies that can improve production, sales, marketing and administration. Programs to support better technology assessment and procurement, and the skills needed to integrate technology into existing businesses – including skills to evaluate, use and manage technologies, as well as specialized implementation and maintenance expertise – can help.
There are precedents on which to build: The National Research Council tested a Digital Technology Adoption Pilot Program years ago and the federal and Ontario governments launched an emergency Digital Main Street program to enable e-commerce among retail business during COVID-19 lockdowns. More of these tech-taking kinds of initiatives to supplement our tech-making approach are needed.
Third, we need a more sophisticated approach to identifying and developing the skills needed to support sector-level innovation strategies and technology adoption. As the economist Dani Rodrik has pointed out, “good jobs … can be created only by productive firms.” That means skills strategies need to be clear-eyed about the kinds of skills companies require to innovate. A sector-level lens makes identifying and developing the required skills an easier – though not necessarily easy – task because it can be managed by companies, unions, education and training institutions, and workers who understand the specific needs and opportunities in their particular sectors.
While provincial governments have a larger role to play in sector-level skills strategies, the federal government can play an important role in shaping broader ecosystems to support skills development. Successful sector-led training and skills development initiatives will need to be combined with supports such as child care, income supplements and, in some cases, housing for those completing training away from their workplaces and home communities. My own research shows that opportunities to develop and improve skills in Canada tend to be offered and pursued by those who least need them, while those who most need them face substantial barriers, including opportunity costs (such as forgone wages), insufficient time, fewer opportunities offered to them by employers and lower levels of training readiness (such as lower educational attainment and literacy). By providing a suite of services and supports to help people overcome barriers and pursue training identified as valuable by sector actors, we can build an even more inclusive and innovative work force.
Finally, policy in Canada should get serious about ensuring that people are well resourced and empowered to participate in, and shape the speed and direction of, innovation. In a recent report for MIT’s Work of the Future Task Force, David Autor and colleagues note that the United States is not getting a “positive return on its inequality” – whether measured by employment, wages or growth. While Canada’s inequality does not approach U.S. levels, it is not clear that we are getting a decent economic return on even our moderate inequality investment. In that case, we should reconsider the popular assumption that growth requires inequality. While the relationship between growth and equality is complex, it is time to pay greater attention to the possibility that a more equitable distribution of resources and opportunities spurs rather than hinders innovation and growth.
We have seen much attention paid to a thin kind of inclusion – for example, to encouraging boards of directors, supercluster participants and workforces to better reflect Canada’s diversity. These are important steps. But we need a thicker kind of inclusion – one that provides substantially more resources and decision-making power to all people. Exclusion and disempowerment are both unfair and unwise if we want to raise participation in the labour force, generate new ideas and create prosperity that benefits all.
If pursued, these innovation priorities could put Canadian firms on a stronger path to productivity and growth – both of which are essential for the creation of good jobs. At the same time, introducing strategies to develop the skills that firms in high-potential sectors need, and ensuring that all people have resources to pursue education, training, employment and entrepreneurial opportunities, will contribute to widespread prosperity. Canada’s workers and businesses revealed a remarkable capacity to adapt to the social and economic conditions created by the COVID-19 pandemic. It’s time our innovation policies showed the same creativity and resilience.
Daniel Munro is a senior fellow in the Innovation Policy Lab at the Munk School of Global Affairs and Public Policy at the University of Toronto.
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