Wednesday, April 27, 2011

Innovation Faltering Under Stephen Harper

Gross Expenditure on R&D as a % of GDP, Canada & OECD Average,
2000—2008
One of the indicators of economic growth is R&D as a percentage of GDP, a figure that has been falling ever since the Conservatives took over in 2006. The latest statistic is 1.92% in 2009. Historically, Canada has been a laggard in general R&D {GERD}::


The Conservatives, in the past five years haven't done much to change this. While Canada has several things working in its favour, the level of innovation has been disappointing. Canada has a reputation for research, but not for development. Canada has had a history of tax incentives for R&D, but of late these tax breaks haven't yielded great results. The bright spots being greater human resources in science and technology than the OECD average {spider graph below}, scientific articles, and the percentage of firms with new-to-market product innovations. Canada's science and innovation profile is a mixed bag, when compared to the OECD average::

Canadian innovation indicators, as compared to the OECD average [pdf]

The problem with the Conservative strategies is that they fail to consider the context of innovation within a larger system of business, science and technology, labour, and government. Specifically, the Conservative policies assume that piecemeal projects and tax incentives alone will solve the innovation lag, not to mention productivity that is behind the US. The issue of productivity, in my opinion, is the critical issue, not tax policy.

I've said this before, I believe Stephen Harper's neoliberal economics is stuck somewhere in the 80s and he's perfectly willing to throw that out the window when it suits him politically {See:: 2009 GM bailout and propping up the asbestos/chrysotile industry in Québec}. An American political scientist, Colin Bradford, says of Harper::
"[He] grasps that the world has changed profoundly since the shocks of 2008, that the West is in relative decline and Asia is on the rise, and that Canada must accommodate its foreign policy to this reality. Yet at the same time, Mr. Bradford notes, Canada is a country conditioned by the certainties of the Bretton Woods agreement that established the post-Second-World War order – a world dominated by the United States, and buttressed by Europe, Japan and the other nations of the West.
While I'm loathe to quote him, John Ibbitson may have a point here::
"The challenge for Mr. Harper will lie in navigating this transition, and exploiting his hard-won geopolitical capital to accelerate Canada’s shift from its Atlantic past to its Pacific future."
I don't think Harper is up to the challenge, because he still thinks in terms of the 1980s. Case in point, the Conservative innovation policy's centrepiece is its 2007 Mobilizing Science and Technology [Fr] to Canada's Advantage, which IP and innovation expert Michael Geist noted::
"...was billed as a new and focused approach, yet most of the plan involved little more than repackaging Liberal programs or promising corporate tax incentives to encourage greater private sector research and development."
Geist is advocating for means that would increase the use of research towards innovation that involves setting free basic research and instituting mandates for open access to information for publicly-funded research. Moreover, a big piece of the puzzle is an underdeveloped venture capital market [pdf].

The Liberals are addressing innovation through focusing on three sectors clean resources, health and biosciences, and digital technology in their platform {see Canadian champion sectors} [pdf], while the NDP is offering hiring and equipment incentives for small businesses and the encouragement of green energy [pdf]. Recently, the NDP has advocated its support for open innovation and the Nova Scotia NDP is exploring the development of a regional venture capital fund.  The disappointing Conservative platform [pdf] offers up tax incentives, piecemeal projects, and small-scale actions with a digital economy strategy. 

Open Innovation
A true "game changer" that would spur growth through innovation for Canada is a paradigm of openness that is enabled and supported by the government. How? Setting basic research findings free and streamlining access to public scientific and technological knowledge and information can allow for faster development of ideas into the commercialization stage. Simply throwing money at piecemeal projects doesn't address the problems at hand. Namely, the problems of lower investment in R&D and the lacking of a well-developed venture capital market in Canada. Over time, open innovation can attract domestic and global capital, the latter subject to restrictions by the Canada Investment Act, by creating communities of production in regional innovation clusters.

Open innovation is new, but embraces the Schumpetrian concept of "creative destruction." Stephen Harper is still embracing a closed innovation model, where intellectual property can languish within institutional or organizational silos. It's not surprising, since I don't think "openness" is a concept Stephen Harper is comfortable with in any context.

Canada could take advantage of the current global economic context to make a play to be an innovator, but this would require much better strategies than the meek ones coming out of Ottawa lately. Even if Harper gets another minority government, it's probably time to think about multi-partisan innovation policies {read: NDP & Liberal} that move away from tired economics that haven't served the country well.

Twitterversion:: [blog] How has Canada's innovation policy fared under Stephen Harper & the #CPC? R&D is behind OECD & strategy is tired. @Prof_K



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