Canada needs to think local to break out of its low-innovation equilibrium

In this series of columns, researchers from the Innovation Policy Lab at the Munk School of Global Affairs and Public Policy explore Canada's key innovation challenges, from the role of cities to the plight of scale-ups.

Canada is an innovation laggard. We have known this for decades. Successive federal governments have launched consultations, councils, strategies, superclusters and other initiatives to find a way out of our low-innovation equilibrium. But these efforts have borne little fruit. Pinning our hopes for an innovation awakening on Ottawa has been a mistake. We need to change the conversation.

Ottawa has misconceived its role in innovation and many of us have allowed — even encouraged — that to persist. While federal governments have a long track record of articulating grand national visions for innovation, success in the global innovation economy requires more locally-driven approaches that empower a wider range of actors to experiment and develop. Canada needs to stop looking to Ottawa to play first-line centre on a Team Canada approach to innovation. We need a federal government that is ready to take on the less flashy but still critical role of equipment manager, while regional and local actors in business, civil society and government need to step up their game.

In the past, Canada could rely on its natural resources and playing second fiddle to the United States as a branch-plant economy to secure prosperity. We now live in an era when U.S. companies create few jobs in North America, but millions of jobs elsewhere in the world. Old truths about where innovation occurs, how it translates to economic growth and who benefits have been replaced by new global economic realities.

At the centre of these new realities is the global fragmentation of production. Models of vertically-integrated production — systems in which a product was manufactured from basic materials to a final product in one location — have been replaced by models in which goods and services are produced in discrete stages around the world. Countries and regions that excel in innovating in any one of those many stages — such as Japan, Germany, Taiwan, Israel, Finland, South Korea and China to name a few — have secured their prosperity.

What's more, Canadian national-led innovation policy has failed to move the needle on innovation. Despite generous R&D tax credits, business expenditures on R&D as a share of GDP continue to decline in Canada while our OECD peers experience consistent growth. Supporting business growth to create good jobs has been a priority for both Liberal and Conservative governments, but Canada's scale-up performance is persistently underwhelming. And while there have been many federal programs to support tech talent recruitment and development, as well as technology adoption by firms, Canada continues to face technology and skills challenges in the digital economy.

The point is not simply that Ottawa has tried and failed to spark change, but that other actors in the Canadian

innovation ecosystem have not taken sufficient steps to improve their own performance. Our low-innovation equilibrium has been accompanied by a disposition to attribute blame rather than take responsibility. Instead of looking to Ottawa for leadership, innovation must come from a wider variety of actors, including established corporations in traditional industries as well as Canada's emerging technology firms; provincial governments; public sector service agencies; urban centres and rural communities; civil society organizations; schools and workplaces.

How can we incentivize riskier, bolder, more locally-informed action when innovation policy has been seen as a federal bag to hold for so for so long?

First, instead of worrying about the disruptive effects of innovation or the risk of failure, we need to recognize that innovation will occur whether we act or not — and inaction ensures disruption. The slower pace of technological adoption does not protect Canadian businesses or jobs. It jeopardizes them. Instead of criticizing individuals and organizations which experiment and fail, we should focus our ire on complacency, demanding that comfortable public and private oligopolies take bolder action or get out of the way.

Second, we need to do a better job of emphasizing the broader issues at stake. The implications for national prosperity and employment are well-documented. Innovation, however, also safeguards national security by reducing dependence on fragile supply chains, can help to build more sustainable communities, and serve as a powerful mechanism to improve accessibility, increase opportunity and foster equality. Acknowledging these higher stakes is another way to move discussion outside of high-technology corporate boardrooms and specialized academies to engage a wider range of actors across Canada.

A more crowded and diverse field of innovators would create the kind of broad-based, decentralized experimentation which is most effective in navigating highly uncertain technological, economic and social challenges.

Viewed in this light, our messy, multi-level, multicultural and geographically diverse polity which frustrates efforts to construct a single, compact and coherent innovation strategy should be viewed as a formidable asset. It only becomes so, however, when we recognize that the risk of inaction is greater than the risk of failure, and collectively embrace Canada's innovation imperative.

WE SHOULD FOCUS OUR IRE ON COMPLACENCY.