R&D, innovation should be ‘on A list,’ Conference Board urges

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Canada's innovation record ranks near rock bottom compared with peer countries, with particularly abysmal performances in research-and-development spending and venture capital.

And the head of the Conference Board of Canada, which is releasing a study on the topic on Thursday, says lagging innovation should be "put on the A list" of urgent challenges the country must tackle.

"This is about the legacy we leave the next generation in terms of job opportunities, the legacy we leave in the ability as an economy to generate income and wealth," Daniel Muzyka, president and chief executive officer, said in an interview. "We're still hugely dependent on resource extraction, and while that may be good, it makes you subject to pricing cycles – and it doesn't create diversification in the economy to the extent it should."

Canada gets a "D" for innovation and ranks 13th of 16 industrialized countries, the Conference Board said in its annual report card, which places Switzerland, Sweden and the United States on top. In two categories – business R&D and venture capital – Canada ranks second-to-last. And in all stages of the innovation process, from creation to transformation, Canada is "weak" while the country is "rarely at the leading edge of new technology."

It's a sobering reminder that the nation still struggles to bring new ideas to market, despite years of study, reports, debate and public policy all aimed at spurring innovation. Poor innovation has long-term consequences for Canada's ability to create wealth, fuel economic growth and compete on a global stage.

Government investments have bolstered some areas, such as the ease of starting a business and public spending on R&D. "Now we need the entrepreneurs to take these businesses and run with them and exploit them fully. So some of this is about entrepreneurial ambition," he said.

The Conference Board report isn't the only assessment that shows Canada is flailing. Bloomberg's global innovation index put Canada in 17th spot this year, behind Ireland and Russia.

The worst grades come in venture capital – where Canada's rate of investment is less than half that of the top performers. The country needs a "larger and more dynamic equity and venture capital industry" willing to invest in and guide Canadian start-ups, the Conference Board says.

Limited opportunities are driving some entrepreneurs out of the country. When Vancouver native Punit Dhillon was looking to start his biotech company, he chose San Diego over his hometown. San Diego has more venture capital and better options for working with universities on research, said the founder of OncoSec Medical, which develops treatments for late-stage skin cancer.

"It really truly feels like a land of opportunity here in terms of access you have to different things," Mr. Dhillon said in an interview.

R&D is the other, long-standing weak spot. Canada has been a poor performer in business spending on research since the 1980s. The U.S. spends twice as much in this area, while Canadian businesses spend one-third of what Finnish firms do.

Canada is not a laggard in all areas related to innovation. It has great post-secondary schools. It has top-notch scientific research. It is better-than-average in a half-dozen areas, among them the density of new firms, government online services and top-cited papers. "But these signs of promise are not being turned into commercially viable products and services, and successful, globally-competitive companies are not emerging from our creative ideas," the Conference Board says.

Innovation isn't the only area hampering Canada's ability to compete globally. International trade is another weak point, another report to be published Thursday says. The study, by the Forum for International Trade Training, calls for more-detailed statistics on occupations that relate to trade, more chances for workers to gain overseas experience and closer collaboration between schools and businesses to encourage people to work in trade. Areas that will need more workers include international risk management, regulatory compliance and value-chain management, it said.

Innovation Report Card

The Conference Board uses 21 indicators to measure innovation performance for Canada and 15 peer countries: