Canada's competitiveness stalled by weak innovation capacity, business sophistication

An annual ranking of national competitiveness finds that Canada has stalled at 14th and is displaying declining performance in key areas that support innovation. The World Economic Forum (WEF) found Canada is showing serious decline in the areas of innovation and business sophistication — one of 12 pillars contained in its Global Competitiveness Index (GCI) of 148 nations.

In contrast, nations such as the US, Germany, Hong Kong and Norway have improved their year-over-year ranking (see chart), fuelled by strong showings in areas such as availability of financing and a university system that encourages entrepreneurship and discovery (US), a high degree of innovation and a sophisticated business sector (Germany), infrastructure and financial markets (Hong Kong), and well-functioning public institutions and technological readiness (Norway)

The WEF compiles its annual ranking with the assistance of partner institutes in each listed nation. In Canada, the institutional partner is the Conference Board of Canada (CBoC), which produced an analysis of Canada's performance in 2013.

"In recent years, Canada's competitive score has been bolstered by its relatively stable macroeconomic environment (but it) must improve its ranking on other indicators to maintain and improve its competitiveness position," states the CBoC analysis. "Most troubling is Canada's disappointing innovation and business sophistication pillar ranking. The country continues to drop — from 15th in 2011 to 21st in 2012 to 25th place this year."

CBoC found that Canada's basic requirements for competitiveness are sound with a healthy population, a strong primary education system, low inflation and credit rating.

Infrastructure is less developed than is required for a nation that needs to move vast amounts of natural resources and finished products over large distances. To maintain its 12th place ranking, investments in port, rail, air, road, electrical and telecommunications infrastructure are recommended.

Further weakness is found in Canada's institutional indicators with declines in eight of 11 indicators, including transparency of government decision-making (16th) and perceived wastefulness of government spending (24th).

Higher education and training also scored a surprisingly mediocre 16th, with strong management schools (7th) offset by quality of math and science education (17th) and availability of research and training services (18th).

In the all-important area of innovation, Canada scores 21st (up from 22nd in 2012). The relatively weak showing is driven by low scores for innovation capacity (27th), company spending on R&D (29th) and government procurement of advanced technology products (55th). Canada scored better in the areas of the availability of engineers (9th), quality of scientific research institutions (16th) and university-industry R&D collaboration (18th).

And, for a nation with a small population base, its exports as a percentage of GDP scored an abysmal 100th.

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