Canada earns ‘precarious’ C-grade in innovation as investment slumps
Conference Board ranking better than last year but shows ‘weaknesses’ persist
Canada has slipped in its global ranking for innovation, falling back three spots compared to last year as business investment levels slumped, according to a new report.
In its annual study, the Conference Board of Canada ranked Canada 12th out of 16 jurisdictions for innovation, falling behind Australia, Belgium and Japan compared with last year and earning an overall “C” grade. The report ranks countries’ innovation capability according to public spending levels, research and development, access to capital and other metrics. Canada’s overall C grade this year is higher than its past score of D, but the Board cautioned that the improvement was “precarious” due to “persistent weaknesses and lagging investment” by private businesses. The Conference Board attributed the slide to a stronger performance by Canada’s peers, particularly the U.S. and Switzerland. It also said low patenting activity and lagging research and development levels are a drag on Canadian innovation more broadly. Overall, Canada was among the top performers in access to venture capital and in scientific articles.
The report comes after Ottawa boosted innovation spending in its most recent budget, raising funding to academic institutions for research-related activities by 25 per cent, totalling $3.2 billion over five years. It also aims to streamline many innovation-focused government grant programs in order to simplify the application process. Canada’s innovation spending as a share of GDP has increased slightly from 0.87 to 0.9 per since last year, but is lower than the 1.69 per cent average among the 16 countries studied. Former prime minister Stephen Harper trimmed public spending on innovation, the report said, that contributed to lower innovation activity overall. The report said that good business conditions over the past few years have allowed Canadian businesses to get by on lower levels of innovation spending. But new levels of uncertainty including the renegotiation of the North American Free Trade Agreement, lower oil prices and fiercer competition from rival countries is now bringing Canada’s shortcomings into sharper focus, putting pressure on companies to invest more heavily in innovation.
“After years of simply getting by, Canadian businesses will need to make better use of the inputs that governments have provided and improve their innovation game in a much more competitive environment,” the board said in a study. The report also ranked individual provinces on innovation, with Ontario scoring the highest with a B grade, due in large part to research and development and a high score in “entrepreneurial ambition.” Quebec was ranked secondhighest among provinces despite sliding from a B to a C grade. British Columbia fell the furthest in the ranking, from a B to a D on lower access to capital, lower spending on information and communication technology and more depleted research and development levels. Alberta also fell in the ranking, scoring an A+ on entrepreneurial ambition but falling on the measure of scientific articles from a B to a C.
Nova Scotia, Newfoundland and Labrador, Saskatchewan, Manitoba, P.E.I., and New Brunswick all received a D - for innovation. The report said that part of Canada’s weakness is due to company executives not possessing the necessary knowledge around innovation, and suggested business owners seek third-party advice on how to invest their capital.
“If weak management capacity explains, in part, why Canadian firms lag on innovation, then firms should take steps to enlist expertise where possible, while policymakers should explore ways to enhance management education and skills training for innovation,” the report said.
Between 1997 and 2004, only 32 per cent of Canadian managers had bachelor’s or advanced degrees, compared to 48 per cent in the U.S. By 2011, that figure in Canada had increased to 35 per cent.