Research Summary: “Unlocking Innovation to Drive Scale and Growth”, Government of Canada’s Advisory Council on Economic Growth (2017)
Framework for a Functioning Innovation Ecosystem
At Issue: The traditional engines of Canadian economic growth, including production of commodities, liberalized global trade, and an expanding workforce, are slowing. More than ever, innovation “at home” is crucial to maintaining and growing the nation’s economic prosperity. As the world moves briskly towards digitization and automation, Canada must keep pace in the global marketplace. By focusing on innovation, particularly within small- and medium-sized enterprises (SMEs), the Canadian government can serve to increase businesses’ productivity, drive inclusive growth, and encourage high-potential SMEs to achieve the status and scale of global champions.
Research Objective(s): The Advisory Council on Economic Growth performed this study in order to make recommendations to the public sector for enhancing innovation in Canadian small businesses.
Scope: The study examines innovation in the Canadian economy, with a particular focus on small- and medium-sized enterprises.
Approach: The authors of the study conducted secondary research by reviewing more than 51 independent sources. They utilized these sources, in addition to their own expertise, as the basis for their recommendations.
Findings: Three specific bottlenecks are contributing to Canada’s underperformance in the field of innovation:
(1) A gap between invention and revenue-generating commercialization, as evidenced by Canada’s ranking in business-university R&D collaboration declining to 19th place in 2015;
(2) Difficulty scaling up successful start-ups and SMEs, due to (a) a small and fragmented local market, (b) shortages of experienced business talent, (c) a lack of at-scale sources of growth capital, and (d) risk aversion by more established companies; and
(3) No “burning platform” to drive corporate innovation, as evidenced by (a) Canadian businesses persistently spending at half the U.S. rate on R&D, (b) Canada’s ranking in the OECD Business Expenditure on Research and Development index falling from 12th place in 2001 to 22nd in 2015, and (c) statistics indicating that only 30 percent of Canadian firms consider any form of innovation to be extremely or very
important, with just 15 percent of corporations willing to take significant financial risks in pursuit of innovation.
The following five interventions are recommended for the Canadian government to encourage innovation by the private sector, SMEs in particular:
(1) Catalyze the formation of business-led “innovation marketplaces” in sectors and technologies in which Canada has momentum and for those which require new solutions to progress forward;
(2) Create additional pools of growth capital to ensure that promising companies have both (a) sufficient capital to achieve scale and (b) access to investors who can provide advice and other value-added support;
(3) Modify government procurement policy to incorporate strategic procurement and innovation as key objectives, thereby (a) prompting a shift from a requirements-focused to a value-based procurement system and (b) enabling the government and other public-sector players to become important first customers for growing SMEs;
(4) Review and rationalize government innovation programs by (a) expanding those with proven impact and (b) reconfiguring or removing any regulatory barriers that impede development of priority sectors and innovation marketplaces; and
(5) Recruit and train top talent by (a) adopting favorable immigration policies for reducing the talent shortfall and (b) invigorating the existing talent pool via focused innovation training programs and the FutureSkills Canada program.
Notes: The full text of this study can be accessed at https://www.budget.gc.ca/aceg-ccce/pdf/innovation-2-eng.pdf.
Researcher Profile: Allie Grace Garnett is a professional researcher and freelance writer with a background in finance and entrepreneurship. A serial entrepreneur who has established numerous businesses, Ms. Garnett previously was a founding Principal of Nexos Resource Partners (NRP), an energy project finance firm in New York. Prior to co-founding NRP, Ms. Garnett provided financial advisory and fund raising services to institutional-scale energy funds with Sustainable Development Capital. Ms. Garnett served as the Vice President of Marketing and Strategic Partnerships for the start-up Rentricity, and additionally founded a nonprofit organization (YAVA) that encourages volunteerism among college students. Ms. Garnett holds a Master of Business Administration degree from Harvard Business School and a Bachelor of Science in Civil Engineering degree from Northeastern University.