Anne Golden
Globe and Mail
August 10, 2010

Anne Golden speech at the 79th Annual Couchiching Conference on CPAC

If Canadians were as good at innovating as we are at explaining why we’re bad at it, Canada wouldn’t rank 14th among industrialized nations in the Conference Board of Canada’s report card on innovation. And because innovation is the key to improving productivity, we wouldn’t be earning $7,000 less a person each year than Americans.

Canada’s poor performance on innovation is not a new problem; we’ve been a consistent D performer for four decades. But when it comes to creating and sharing knowledge, we do pretty well. Where we continue to fall down is in commercializing our inventiveness.

This failure to cash in on our creativity has been analyzed by various think tanks, institutes and forums, which have all delineated and prioritized what needs to be done. We have improved the macroeconomic environment, notably through tax reform (including cuts in corporate income tax, ending the capital tax federally and in several provinces, accelerating capital cost allowances, and harmonizing sales tax in some provinces). By helping businesses invest in new equipment, these tax changes should support innovation within firms and create new markets for technology providers.

But tax reform is just one piece of the puzzle, and government can do much more to improve the business operating environment.

The top priorities are:

• Investing strategically in the infrastructure of major city-regions where most innovation occurs; 
• Supporting a small number of niche areas – such as clean energy, regenerative medicine, water management technologies – where Canada can grow competitive high-tech industries; 
• Reducing the time and business costs to get regulatory approvals for new technologies and products without undermining the regulations’ intended safeguards; 
• Eliminating regulatory barriers to labour mobility, trade and investment among provinces.

But what about research and development, the primary driver for developing new technologies, products and services? Here, Canada’s governments have stepped up to the plate. The most glaring gap is with private-sector investment in R&D and new equipment. It may be that, until now, business leaders didn’t innovate on a major scale because they didn’t have to. In the 1990s, they could rely on a low Canadian dollar to compete and, until the recent global recession, they were helped by world commodity markets and the now-expired North American spending binge.

But will the unsteady economic recovery, combined with the strong loonie and looming labour shortages, be enough to spark a new era of innovation in Canada? The answer will lie in the thousands of decisions made daily within individual companies. This takes us back to a company’s business strategy and the extent to which it centres on innovation.

Perhaps the problem is something in Canadian DNA or culture, as in that old joke: “Why do Canadians cross the road? To get to the middle.”

The recent book Start-Up Nation: The Story of Israel’s Economic Miracle offers startling comparisons to our own situation. With the highest number of start-ups per capita and massive venture capital investment (Israel’s per capita venture capital in 2008 was more than 2.5 times that of the U.S. and more than 30 times that of Europe), Israel is one of the world’s entrepreneurship hubs. Almost half of the world’s top technology companies have bought start-ups or opened R&D centres in Israel; Israel leads the world in the percentage of GDP that goes to R&D.

What makes Israel so innovative and entrepreneurial? Start-Up Nation lists the tight proximity of businesses, universities and start-ups, as well as a support system of suppliers, skilled human capital and venture capital. Another reason is the role of the military in pumping R&D funds into cutting-edge technologies and the spillover into civilian society.

But Start-Up Nation argues that this alone would not be enough – rather, it’s Israel’s cultural core “built on a rich stew of aggressiveness and team orientation, on isolation and connectedness, and on being small and aiming big.”

Can Canada acquire this kind of entrepreneurial spirit? I believe we can develop some of our own rich stew – a cultural brew that breeds innovation. Ideally, that stew would combine our traditional sense of caution with a stronger dash of entrepreneurialism.

Canadians have what it takes to succeed. We are richly endowed, with resources and people. Our fiscal management has won us international respect. We are open to newcomers, and we are attracting terrific talent from abroad, which can only help to beef up our “ambition DNA.”

We are the country that invented both insulin and the BlackBerry – we can do this!

Anne Golden is president and CEO of the Conference Board of Canada. She spoke about innovation on Friday at the Couchiching Conference on public affairs.