On May 9, The Globe and Mail published Canadians Can Innovate, But We're Not Equipped To Win by former Research In Motion co-CEO Jim Balsillie. This is part of a series responding to and expanding on that essay.
Dan Breznitz holds the Munk Chair of Innovation Studies and is a co-director of the innovation policy lab at the Munk School of Global Affairs, University of Toronto. He is the author or co-author of several books on innovation-based growth.
In 2011, right after Michael Murphree and I released a working paper on international technology standards, I got a call from the U.S. Senate. Shortly thereafter, I was called to testify on the subject in front of the U.S.-China Economic and Security Review Commission.
The result was that the commission sponsored us to perform a larger research undertaking on our work. At the same time, the U.S. National Academies asked us to join a multicountry effort to look into national strategies of technology standard-setting bodies and their economic implications. Every part of the U.S. innovation and commerce apparatus was involved in this project, as were representatives from numerous countries and international bodies. Everyone knew these proceedings would influence international and U.S. policies, with a direct impact on economic prosperity around the world.
Only one country was not invited to or even aware of the party: Canada.
This all began as we were finishing Run of the Red Queen, our book on innovation in China, and we discovered that China was investing significant amount of resources in making its voice heard amid an ever-growing array of international technology standards. Why?
It turns out that standards-setting isn't just a piece of technical work to ensure that the best technology is used to enhance human welfare. It does some of that, but along the way, it also decides who wins and loses in the innovation economy, and the rules under which those systems operate.
The game is about which countries' and companies' technologies are embedded into the standards, usually in the form of essential patents. If your company has just invested a billion dollars to develop core technologies for the next-generation mobile telephony standards and your patents get embedded into the new standard, then you and even your country have just won the lottery. From now on, a few dollars will be shipped your way on the sale of every phone produced anywhere in the world using this standard.
On the other hand, if you lose the technology standards game, all of that private and public investment – remember that for every dollar of private research and development spending, we have to add years and billions of dollars in public funding – will go down the tube. And if you're not even at the table, like Canada, you end up writing cheques rather than collecting them.
Remember DVDs? It turns out that China had no seat at that table. Even when most of the world's DVDs were produced in China, Chinese DVD manufacturers had to pay significantly more royalties then the combined profits of the whole industry. When the Chinese firms filed motions in U.S. courts arguing against abuse of monopoly power by the standard's patent holders, they got no traction. However, as soon as China started to develop its own DVD standards, mysteriously, the royalties that Chinese DVD manufacturers had to pay became the lowest in the world.
The lesson is clear: Countries that do not engage in the game of international technology standards-setting are squandering their own investment in innovation. Canadians need to ask their policy makers why we are missing in action when it comes to our own prosperity.
The Internet is a vast web of standards, and the countries that actively insert their innovations into the standard-setting process prosper in the Internet economy. All highly innovative countries take a deliberate and systemic approach to building their innovation economies – patents and standards are a critical part of this. Canadians should be keenly aware of how the innovation economy works, how money is being made globally and how societies become and stay wealthy. Having no policy or voice in international debates on these issues ensures that Canada will not enjoy the fruits of its own large investment in innovation.
To put this in perspective, imagine our national representatives not bothering to attend the meetings of the International Ice Hockey Federation, then claiming to be surprised at the introduction in the rule book of a little section that reads: "All national teams wearing red and white and having a national anthem that starts with the letter O are no longer allowed to field goaltenders." Just before the Olympics.
You might think that this example is absurd. Sadly, it is a metaphor for our current non-innovation policy. Countries such as the United States, China, Finland, Germany and Israel use systemic approaches to ensure they succeed at innovation. They do not focus only on one part of it.
Canada's national innovation policy guards need to wake up and smell the jasmine if our country is to remain prosperous.