Supercluster strategy may be off the mark

Mischa KaplanOTTAWA – The federal government’s “Innovation Supercluster Initiative,” which will see the federal government invest nearly $1 billion to create five separate “regional innovation ecosystems,” is just the latest example of the federal government’s boundless optimism in its own ability to foster economic growth.

Writing in Maclean’s magazine, Ottawa-based economic development advocate Mischa Kaplan (pictured), critiqued the plan and the government’s approach to innovation. Kaplan writes:

The concept has been touted as having the potential to “usher in an unprecedented era of innovation and progress,” according to Innovation Minister Navdeep Bains. The idea, apparently, is to create what Bains calls a “made-in-Canada Silicon Valley.”

Perhaps someone should tell Mr. Bains that Silicon Valley somehow miraculously developed in the most unexciting of ways: a group of highly innovative and productive companies created products that consumers wanted. Private capital poured in. Markets responded. While it certainly helped to play a backroom role in the region’s rise, Washington was by no means the key development orchestrator.

Productivity and innovation are mutual enablers, and addressing Canada’s innovation crisis relies on first taking steps to ensure that our workforce is a global leader in productivity. If the federal government really wants to take a leading role in fostering a more innovative national economy, then it should abandon its Ottawa-centric attitude and turn its attention to policies that have been shown, time and again and across multiple geographies, to encourage productivity.

Such policies might include providing more incentives for companies (both large and small) to invest in R&D and capital infrastructure, encouraging post-secondary institutions to better tailor their programming to meet market demand in terms of subjects and skills, and making Canada a more attractive country for foreign or start-up companies to invest in by deregulating industries that have no business being as regulated or as protected as they are, such as telecommunications, airlines, and broadcasting.

These recommendations were in fact cited by the Organisation for Economic Co-operation and Development (OECD) in its 2016 annual Economic Survey of Canada. Naming a lack of productivity as a major impediment to future economic growth, the OECD called for Canada to pursue a platform of deregulation while also reducing interprovincial trade barriers and providing more incentives for small- and medium-sized companies to innovate and invest.

Unlike the Liberals’ Advisory Council, none of the OECD’s recommendations involve an expanded role for government. Instead, the OECD’s report suggests that the best way to achieve greater productivity is for government to foster a more market-friendly environment.

And being perhaps the world’s most comprehensive aggregator of economic data for the largest and most advanced economies on the planet – and having tracked such data for the last five decades – one might suggest that the OECD knows a thing or two about improving productivity and making an economy grow.

Given that we’re now two years into the Liberals’ mandate, it seems unlikely that we’re going to see a reversal of Ottawa’s government-centric innovation drive. Unfortunately for Canadians, by the time this approach catches up to us, we’ll have a lot more to worry about than the loss of 88,000 jobs in one month.

The recent release by Statistics Canada of their monthly January jobs report – which showed that Canada lost nearly 90,000 jobs in the first month of 2018 – will make for excellent fodder amongst critics of the federal government’s approach to economic development.

But for a far better indicator of the health of Canada’s economy, opposition politicians should consider the disturbing decline in this country’s innovative capabilities, as evidenced by Bloomberg’s recently published 2018 Innovation Index.

Far from being the “nation of innovators” so often touted by Justin Trudeau’s Liberal government, the Bloomberg report is a stark reminder of one simple fact that negatively impacts a lot more than just jobs: our country is suffering from an innovation crisis, and it’s getting worse every year.

The Bloomberg ranking is based on seven “innovation-related” criteria, including R&D intensity, patent activity, and tech density. At number 22, Canada is one of only two G7 nations – along with Italy – that fail to make what Bloomberg calls the “top-tier,” which includes the Nordic countries, the remaining G7 economies, and other economic powerhouses such as Singapore, Australia, and South Korea.

Written by Editor

1 Comment responses

  1. Avatar
    February 23, 2018

    The questions you raised are valid: Canada does not do that well on the innovation indicators of the OECD, and we also have lower productivity growth. We also have the highest investment on R&D tax return of the OECD; that contrast to all other OECD countries that invest a much larger percentage of their innovation funds into facilitating adoption of new technologies that can improve productivity. So how do you reconcile these? Facilitating adoption of technologies that can improve productivity and innovation is better done when companies work together in their supply chain. Call it a “network”, call it a “supply chain”, call it a “cluster”, the fact is that companies have to work together to figure out how to adopt technologies to both innovate and improve their productivity. The R&D tax credit does not do that.


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