A recent article in the Economist suggests that Canada is lagging in innovation, and that Justin Trudeau, the freshly minted Prime Minister of Canada is going to turn this around. Not long after, the Toronto Star produced a weekend edition with innovation as its theme. There is an urgent need for Canada to be more competitive.
Every Canadian is familiar with the saying that Canadians are hewers of wood and drawers of water. This makes reference to Canada’s reliance on natural resources to support our economy. However, this reliance can no longer be sustainable as recent economic reports show that the economy has grown sluggish due to the crashing of oil prices, which took a toll on the loonie (Canadian dollar). To some observers, Canada suffers from the Dutch disease. In the absence of Alberta’s oil, another sector of the economy must step up.
As the Economist article makes clear, Canada does not lack top notch scientists and respectable academic institutions with strong research facilities. The problem is that Canada lacks mechanisms to convert ideas into marketable technologies. For a while, the Kitchener-Waterloo corridor was touted as a centre of innovation akin to Silicon Valley, but the Economist has criticized it as an exporter of talent not a magnet for it. We miss the glory days of Blackberry. The Economist also pointed out a report that suggests that Canada’s managers are not as well educated as their counterparts in the U.S. The business culture in Canada is unambitious, and this has led to lower stock market valuations.
A country that cannot take its technologies beyond basic research simply will not be competitive. It is what explains the stagnant growth in Canada. Maybe because it’s our proximity to the United States, whose multinational companies often have Canadian offices. There is also a lack of R&D (research & development) in Canada. A case in point is the healthcare industry, which consists of pharmaceuticals, biologics and medical devices. Aside from generic pharmaceutical companies, there is very little drug innovation. Although there are a number of companies doing their own R&D and manufacturing in Canada, they are the exception, not the rule.
It should not take a British magazine to sound the alarm bells. The new government of Canada has a lot on its plate. What’s critical here is that we need to transform a country that has long depended on natural resources and U.S. imports into an R&D culture that also manufactures its own products. Government has an important role here to inject funding to promising industries, not failing ones. Not only that, it must also create more private-public partnerships. While the Economist discussed only one particular sector, namely the technology industry, another industry that could also be greatly transformed is the healthcare industry. Healthcare companies with their own R&D and manufacturing would also create a number of jobs for graduates of life sciences, biomedical engineering and other related fields. The healthcare industry, being heavily regulated, would also have more regulatory submissions. Similarly, R&D driven companies also hold more patents, which can create more business opportunities.
It’s not true that Canada lacks innovation. It is a very innovative country; innovation comes from labs and classrooms. The trouble begins when Canada faces numerous barriers in turning those ideas into reality. The barriers come from both politics and culture. It is politics because for too long, politicians have turned a blind eye to opportunities in different industries, and instead, the attention was focused on the next barrel of oil to be extracted. Canada has missed many opportunities to connect the private sector with academic labs that specialize for example in health technologies. Thus, when the new government renamed Industry Canada to Ministry of Innovation, Science and Economic Development, it is a positive sign that Justin Trudeau is serious about diversifying the economy. But to diversify our economy depends on another factor as well. The cultural barrier comes from a general attitude about what our roles should be as knowledge workers. The culture is one of general complacency. In order to diversify the economy, we also need to foster a new attitude towards R&D and manufacturing on our side of the border.