Innovation Report Card 2021

Beyond Canada’s relative performance on a selection of high-level indicators, there is much room for improving our understanding of innovation in Canada. In response to this gap, we have developed the Capability-Centred Innovation Framework, which focuses on six categories of organizational capabilities and environmental factors related to firm-level innovation performance. These include:*

The Conference Board of Canada acknowledges the thought leadership, advice, and other important contributions from Alberta Innovates, the National Research Council of Canada Industrial Research Assistance Program, and Canada Economic Development for Quebec Regions to establish this proof-of-concept framework. In addition, these organizations were the first to apply and pilot this framework to their portfolios of clients. These efforts pave the way for a more nuanced understanding of how to strengthen Canada’s innovation performance.

Using data from a survey of Canadian organizations across Canada, we proxy firm-level innovation performance according to revenue and employee growth and have identified several capabilities important to innovation. For example, ensuring diversity within the management team, formally assessing management capabilities and expertise, and participating in daily R&D activities are all important factors that should be strengthened in organizations across Canada.

Another important consideration is the enabling role that not-for-profit organizations play. For example, they often administer grants and advisory services to help businesses iterate and validate their ideas. If Canadian governments want to spur businesses into action, they need to understand how to motivate and equip them for innovation success. Spending money on public R&D and fostering a healthy business environment is only beneficial to the extent that firms can use their capacity and resources effectively and efficiently.

*Organisation for Economic Co-operation and Development and Eurostat, Oslo Manual 2018.

Canada and many of the provinces have performed well on public research and development (R&D) in the past; however, spending as a share of GDP has slipped over the past decade. This could have consequences for scientific research and its foundational role in economic and social innovation. It could also affect the country’s ability to educate and train future researchers to contribute to innovation through roles in academia, business, and government. In addition, reduced funding for R&D could hinder Canada’s ability to address the health, social, environmental, and other challenges it faces.

Policy-makers should:

Provincial and federal government investments in artificial intelligence, digital infrastructure, superclusters, and direct funding mechanisms are promising. Still, these must be followed by increased business R&D investments and activity.

Digital technologies provide the necessary infrastructure to exchange ideas and share data within and across organizations. This exchange is crucial to the research, development, and commercialization of innovative goods and services. The adoption of technology also enables process innovations that increase productivity and allow firms to remain competitive.² These gains are important for small businesses that represent the majority of firms and employment in Canada but face unique barriers to technology adoption.

There are many barriers to digital technology adoption, including costs, integration time, training requirements, a lack of usability and compatibility, regulatory frameworks and trade barriers, a lack of knowledge and trust in digital solutions, and a limited number of employees with the appropriate skills. Governments should address these barriers to support and incent businesses to innovate. For example, government programs designed to increase exposure to emerging technologies and help businesses navigate available technologies could help address these barriers.

Innovation, Science and Economic Development Canada, “Canada’s Digital Charter in Action.”

Canadians exhibit world-leading levels of entrepreneurial ambition. However, what matters for innovation performance is whether entrepreneurs and innovators are willing and able to act on that ambition—that is, to start and grow new ventures. Canadian entrepreneurs need:

Policy-makers have levers to address some, though not all, of these factors.

Employment declines in occupations that involve routine tasks have been under way for decades. However, it is unclear how advances in technologies such as artificial intelligence and robotics will impact each province. As some occupations and industries are more vulnerable to automation than others, and regional economies have different occupational and industry mixes, each province may experience the impact of automation differently.

Placing automation in the context of other ongoing labour market trends highlights additional vulnerabilities that the provinces will likely face as companies and industries adopt new automation-enabling technologies. Knowing the type and amount of employment at risk of automation—and the economic cost associated with potential transitions to less-vulnerable occupations—could help policy-makers better prepare for technological change. It will also help the provinces equip their workforces with the skills and resources necessary for businesses to increase and sustain their innovation activity.