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The Sustainable Approach to Prosperity for B.C. Is Innovation

Apr 07, 2016
Daniel Munro
Principal Research Associate
Public Policy
Brent DowDall
Senior Manager, Research and Business Development
Forecasting and Analysis

British Columbia’s economy is on a roll. Building on solid performance over the past two years, the B.C. economy is expected to outperform all other provinces in 2016 and 2017. Real GDP is projected to grow 2.7 per cent in 2016 and 3.4 per cent in 2017.

The province has a robust domestic economy, including solid demand for new homes. The resale market shows no sign of slowing down, which will fuel the finance, insurance, and real estate industry. Job creation will continue to be strong, driving household consumption. The Conference Board forecast includes Petronas’ $36 billion Pacific NorthWest liquefied natural gas (LNG) terminal, despite some uncertainly around the decision and timing of this major investment.
Employment is progressing well and is forecast to grow by 2.2 per cent in 2016 and 2.4 per cent in 2017. Accordingly, the unemployment rate will dip below 6 per cent in 2017.

Beyond this short-term strength, however, B.C. faces some longer term challenges. The province’s labour productivity is weak—weaker, in fact, than Canada’s productivity overall, which lags international peers by a significant margin. As the population and workforce ages, B.C.’s weak productivity will become an even greater risk to long-term prosperity.

To improve productivity, B.C. needs to strengthen its innovation game. This includes increasing the rate at which the province’s businesses develop and commercialize new or improved products and services, and the rate at which organizations adopt new processes and technologies to improve efficiency and quality.

Organizations that innovate successfully can enhance their competitiveness and position themselves for growth. Countries, provinces, and regions with robust innovation activity see better productivity, economic growth, and job creation, and have more government revenues available to support spending in core public priorities such as health, education, and infrastructure. Spurring business innovation is no easy task, but it is one that B.C. cannot afford to neglect.

Good innovation chemistry requires a number of key elements. Publicly funded R&D, researchers, scientific articles, and digital infrastructure provide the raw ideas, talent, and knowledge-exchange that supports innovation. These elements must combine with entrepreneurial ambition and sufficient venture capital, as well as business investment in R&D and information and communications technologies (ICT). When these elements are present and well-matched, innovative economies see more patents, business start-ups, and higher labour productivity—which, in turn, contribute to better standards of living.

While B.C.’s innovation ecosystem has some strengths, there are many areas where improvements are needed to spark more and better innovation. On the Conference Board’s How Canada Performs innovation report card, B.C. received a “B” grade overall and ranked 10th among 26 comparator jurisdictions—including 10 provinces and 16 international peers. Although the province outperformed Canada overall by a small margin, it lagged leading innovation provinces Ontario and Quebec, and sat well behind top global performers Sweden, Denmark, and Finland.

B.C. does particularly well on indicators related to entrepreneurialism. It ranked among the best on entrepreneurial ambition (“A+”) and venture capital investment (“A”), and was relatively strong on a few other indicators, such as scientific articles (“B”) and connectivity (“B”). But the province performed worse than the poorest-performing country on business enterprise research and development (BERD), earning a “D–.” Combined with relatively low grades on ICT investment (“C”), public R&D (“C”), patents (“D”), researchers (“D”), and labour productivity (“D”), B.C.’s innovation ecosystem is weaker than the province needs it to be to sustain and improve economic and social well-being.

For British Columbia to boost its innovation results, business, government, and civil society should take action on four fronts:

  • Increase innovation-related spending—including public and business R&D, ICT investment, and venture capital.
  • Encourage businesses—especially small and medium-sized enterprises—to take advantage of federal programs to assist with ICT adoption and use, given the potential for substantial productivity gains in this area.
  • Create a healthy business climate by improving access to capital and expertise, and by adjusting business tax rates to incentivize firms to grow and create more jobs, rather than stay small.
  • Enhance skills and expertise for innovation by encouraging firms to enlist experts and provide training where necessary, and by improving management education and skills for innovation.

With signs of emerging weakness in public R&D and persistent weakness on many other indicators, innovation in Canada and B.C. rests on a precarious foundation. B.C. has benefited greatly from its resource wealth in the past couple of decades, but as recent events illustrate, global markets can turn quickly. For B.C. to prosper—economically and socially—innovation is the best path.

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