Canadian Manufacturers and Exporters make business case for innovation

Canadian industry has jumped into the escalating debate over innovation with a well-timed and proscriptive report. It calls for a national innovation strategy targeting the research, education, tax, regulatory and financing regimes that comprise a national system of innovation. The report anticipates the pending release of the federal government’s innovation agenda, and almost exclusively addresses the economic aspects of innovation, proposing changes that it contends will enhance the ability of Canadian industry to compete globally.

The Business Case for Innovation was prepared by Jayson Myers, chief economist of the Canadian Manufacturers & Exporters (CME) association, and contains recommendations aimed at government and industry, as well as academic, research and financial institutions. It argues that an effective national innovation strategy requires a shared, coordinated effort by all major players, and cautions against a top down approach that many in business contend the current federal innovation agenda is leaning towards.

“The objective is to get it out to have something on the table to focus on the big issues before the government’s own white paper in innovation comes out,” says Myers. “The white paper is becoming a grab bag for all sorts of policy and spending initiatives and we need to address the economic and business part of it.”

As an association representing the manufacturing and exporting sectors, the CME directs its emphasis for change towards tax and regulatory reform. While it acknowledges the important role played by government, it cautions against the public sector taking too active a role in the marketplace.

“A national innovation strategy should not be about subsidies, picking winners, or government hand-outs. Instead it should be about removing obstacles, building a competitive environment for investment, and encouraging world-class business practice,” states the report.

And in a departure from other players in the innovation system, the CME argues that Canadian firms do not have to be unique to be world class. If Canadian industry has access to proven technologies, management techniques and systems of organization, improved productivity should follow.

“We’re not saying don’t be unique, but for 95% of Canadian business, this is about improving existing products and services by adapting proven business practices,” says Myers. “We can be unique, but becoming so by doing things that are proven. Canada has tons of patents but they’re all sitting on the shelf because there’s no economic reason to commercialize them.”

The rationale for the CME recommendations is underpinned by a parallel study that benchmarked the performance of Canadian industry against its G7 counterparts. The study contends that Canada suffers from a “significant excellence gap” in terms of innovation, R&D, training and commercialization of new products, resulting in a manufacturing sector that performs 62% as well as the best of the G7. In comparison, the US posts a score of 94%, while Japan scores 82% and Germany scores 78%.

The study examines the performance of the G7 nations between 1995 and 2000, using 10 indicators that it says are crucial to competitive success in manufacturing. Of the 10 indicators (see chart). Canada scores lowest in R&D (24%), and also ranks poorly in terms of skills training (35%) and commercialization (36%). Canada fared far better in the areas of production (96%) and exports (85%), most likely due to the weak Canadian dollar when compared against US currency.

The CME report contains analysis and advice for all sectors within the innovation system, and as such is directed at several audiences, including industry. Myers says that while government has a responsibility for enhancing the competitive environment in which businesses function, it’s also up to individual firms to determine what changes are required to develop and maintain a competitive edge.

“The paper is intended to focus business thinking on what is important. Innovation is not just about R&D, it’s about translating new ideas and technologies into what is valuable to the customer,” he says. “We have to move the emphasis from being solely on R&D and make sure the results of R&D make it into the marketplace.”

Myers concedes that while the improvement of business conditions ranks first in terms of government’s role in commercialization, there is also a place for government programs that are effective in supporting companies. He singles out the Industrial Research Assistance Program and the Canadian Technology Network as the best examples of effective government business assistance vehicles, which help reduce the risks surrounding commercialization.

Technology Partnerships Canada — the largest technology business assistance program — receives a less ringing endorsement. Myers acknowledges that it helps level the playing field for the aerospace sector, but contends that it should be examined carefully to determine how it can be made more effective.

Of greatest concern, however, is the innovation agenda itself: “I’m afraid that the federal government will drop innovation because it’s finding it so difficult to get its act together.”

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