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Economic Development Minister Navdeep Bains fields questions in Davos, Switzerland, on Thursday, Jan. 21, 2016. (Andrew Vaughan/THE CANADIAN PRESS)
Economic Development Minister Navdeep Bains fields questions in Davos, Switzerland, on Thursday, Jan. 21, 2016. (Andrew Vaughan/THE CANADIAN PRESS)

Ottawa wants to gamble on innovation, but is it ready to roll the dice? Add to ...

After a year of bandying about the buzzword “innovation” as the key to its economic-growth policy, Justin Trudeau’s Liberals are getting ready to roll out the policies that fit the bill in 2017.

It will start with a kind of bidding process aimed at creating technology clusters. In the next few months, according to Navdeep Bains, the Minister of Innovation, Science and Economic Development, the government will encourage the creation of consortiums of companies, academic institutions and other organizations to put forward proposals for clusters.

Companies specializing in artificial intelligence in Montreal, for example, might team up with McGill and the Université de Montréal, for example, and ask for the government to fund research, or a network for sharing developments – or something. The dream is a new cluster – the most famous example is Silicon Valley – that spawns rapid growth and good jobs.

“What we heard from everyone is, we need to take some risk, we need to demonstrate leadership in this area and industry alone can’t do it; government needs to play a role,” Mr. Bains said in an interview.

It is a different philosophy from the last government’s. Even though Stephen Harper’s Conservatives never stopped pumping out industrial subsidies, they often argued government’s best role was to get out of the way, by lowering taxes or cutting regulation, and they had a philosophical aversion to picking winners and losers.

But a big challenge for Mr. Bains’s cluster plan probably revolves around whether the government has it in its DNA to even try to pick winners. Is government really willing to gamble $800-million on making three or four tech clusters, if they might fail?

The innovation policy is part of the more interventionist economic policy that Mr. Trudeau campaigned on. The high-profile promise was infrastructure spending. But many think fiscal stimulus won’t dramatically change the low-growth track of the economy. In theory, innovation and technology can stimulate faster growth.

The problem is you can’t legislate innovation. Past government efforts, such as tax credits for research and development, haven’t been particularly successful. It’s Mr. Bains’s job to try new things in 2017.

Small business and startups are no longer the mantra; it’s more about high growth and scaling up to a larger size. The government wants to rejig its venture-capital incentives to encourage longer-term financing. It will set aside part of its procurement for small- and medium-sized firms. And the 2017 budget is expected to outline a series of skills-training initiatives.

But the first big piece is clusters. In the last budget, $800-million was set aside, and in the next few months Ottawa will ask for proposals – industry and academia can propose ways to foster a new tech cluster and the federal government will provide some of the money. The idea is that they will create critical mass of business activity, ideas, and talent, and a winner – a big, fast-growing company – might emerge.

“We’re really good at creating a farm system, but how do we create successful Canadian companies that have a global brand, that are successful globally?” Mr. Bains said. Big “anchor” companies want an “ecosystem” around them, and tech clusters can create a buzz that will help retain and attract top talent, Mr. Bains argued.

The intention is that the clusters won’t be in industry sectors, such as telecoms or autos. Instead, the focus will be on a technological “horizontal platform,” such as artificial intelligence or quantum computing, that can be employed in several sectors, Mr. Bains said.

In theory, it’s a worthwhile risk. An investment of $800-million is relatively small money if it really shows a path to innovation and faster growth.

But will government really take the risk? Governments usually try to please various constituencies, rather than gambling on a potentially revolutionary idea. It’s far from clear that governments even have the kind of people who can judge the ideas, or the risk.

Mr. Bains said he wants an open process that allows government to hear what ideas industry and academia can offer, but also that there will be clear criteria to judge them on merit. All good ideas, but in practice, they might conflict. The thing about innovation is that it requires taking a gamble on an educated guess. Mr. Bains’s first challenge in 2017 will be getting government to learn how to do that.

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