Ottawa’s ‘superclusters’ strategy looks headed for failure

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There were always good reasons to be skeptical of Ottawa’s nearly billion-dollar bet on five industry “superclusters” it vowed would turn Canada into an innovation leader.

With limited funding spread so thinly among so many different regions and sectors, the $918-million Innovation Superclusters Initiative was never going to generate transformational change in a $2-trillion economy. Even with matching funds from provincial governments and the private sector, the program first announced in the 2017 federal budget was bound to disappoint.

Part of the reason is cultural. Canadian business, with its resource-based and branch-plant mentality, has a long history of failing to innovate. Successive federal governments have vowed to kickstart innovation, each claiming it would be “smarter” than the last in leveraging scarce research dollars to get the biggest bang for taxpayer bucks. Not only have they failed, overall R&D spending has continued to decline since 2015.

While Canada spent about 2 per cent of its annual gross domestic product on R&D during the first decade of this century, the figure had dropped below 1.6 per cent by 2018. The average for advanced industrial economies is 2.4 per cent. Innovation leaders South Korea and the Nordic countries spend 4.5 per cent and 3.3 per cent, respectively.

Not every recent federal research effort has been an abject failure. In the late 1990s, Jean Chrétien’s Liberal government launched an ambitious plan to make this country a leader in university research, with generous funding to attract top scientists from around the world. It worked and Canada continues to punch above its weight in basic research.

Where Canada drops the ball is in translating basic research into new products and services that improve lives and create thousands of high-paying jobs in future-oriented industries. The superclusters initiative unveiled more than three years ago by Innovation Minister Navdeep Bains was supposed to change that by funding collaborative research among businesses operating in five strategic sectors – digital technology in British Columbia, agri-food on the Prairies, advanced manufacturing in Ontario, artificial intelligence in Quebec and oceanic research in Atlantic Canada.

“I know it’s a jargony term,” Mr. Bains said in 2018 of the “superclusters” moniker, before laying on yet more jargon with this whopper: “It’s a Made-in-Canada Silicon Valley that will generate tens of thousands of jobs.”

Mr. Bains made it sound like he was on to something huge that no one before him had thought of, when ideas of the sort had been tried elsewhere for almost three decades with underwhelming results. But a government that believes in the guiding hand of the state as much as this one was not about to let evidence get in the way of its ideology.

Yet, what the Parliamentary Budget Officer found in a Tuesday report on Ottawa’s superclusters strategy borders on the scandalous. A mere $30-million of the $918-million in direct federal cash allocated for the initiative had been spent as of last March, and $18-million of that sum had gone toward administrative expenses.

Mr. Bains and the chief executive officers of the regionally based superclusters were quick to claim that the report was out of date and private businesses and provincial governments have “committed” hundreds of millions of dollars in spending since March. Whether they carry through with such commitments remains to be seen. The PBO warned that the pandemic could lead to project cancellations or delays.

The PBO found no evidence to support Ottawa’s claim that the superclusters strategy would generate 50,000 jobs and boost GDP by $50-billion over 10 years. Ottawa’s projections imply a multiplier effect of $25 in additional GDP for each $1 in research spending. But global studies consulted by the PBO showed far more modest results for similar R&D initiatives elsewhere, where the ratio was between 3-to-1 to 8-to-1.

The federal innovation department “listed several metrics that they will monitor to measure innovation, such as an increase in productivity or the development of new products and processes” the report noted. But it added: “To the PBO’s knowledge, [the department] does not have quantifiable objectives for any of these metrics.”

That is likely by design. Only in the absence of any rigorous methodology to evaluate the effectiveness of the program could Mr. Bains declare – as he did in response to the PBO report – that “we are seeing the five superclusters live up to their promise.” Some promise, when the PBO could not even determine whether any jobs that do emerge from the initiative would be temporary or permanent.

And this is the same government that now wants taxpayers to believe it can engineer a green economic recovery and turn Canada into an electric-battery powerhouse?

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