Is Canadian innovation past its due date?

By Dr Richard Hawkins

Is innovation passé? An absurd question many would protest. But if innovation drives economies, then certainly it is fair to inquire why in the midst of the most dynamic period of innovation in human history, sustained growth remains so elusive and prosperity so fragile. Was the focus on innovation just a fad? Well, yes and no. It depends upon whether we are talking about innovation as a phenomenon, or as an institution.

Innovation became the preferred explanation for prosperity a scant 20 years ago. Before Schumpeter proposed the idea in the early 1900s, none of the great transformations of the previous two centuries had generated any theory of innovation-led growth.

Even Schumpeter's ideas slumbered in obscurity for over 60 years. In the 1930s, Bernal proposed that growth was related to science and technology. Most of his contemporaries thought he was vaguely nuts. Even the post-WWII growth spike was linked to innovation by only a tiny group of scholars. Most of their contemporaries thought they were vaguely nuts. Many still do.

The concept of an "innovation system" was first proposed to counter popular notions that innovations were created autonomously by individual entities. Rather, it stressed that they emerged from complex interactions and interdependencies between a diverse array of social, economic, industrial and political factors. This is why innovation is so hard, but also why its effects are so significant. No system — no major impacts. So systems are a good thing.

The difficulties started when this systems idea became mired in a very specific institutional model with narrowly defined inputs and outputs. In its early days, this model itself was an innovation; mirroring many hugely significant new ideas, mostly from the burgeoning ICT sectors, about how industries could be organized and financed, how knowledge could be exploited efficiently and how human resources could circulate.

Politically fashionable

Politicians and many financiers just loved this model, just as they love every shiny new toy that seems to spit out free money. The problem is that they continue to love it even though it has long been perfectly clear that it can not just be deployed willy-nilly, and that it was only ever one of a great many factors that drove the high-tech revolution of the 1980s and 1990s.

The unfortunate outcome for policy was that innovation came to be defined only in terms of those enterprises to which this model seemed to apply — mainly technology producers with patentable ideas. Thus, virtually every advanced, aspiring or developing economy is now replete with incubators, technology transfer centres, accelerators, venture capital funds, R&D subsidies, SME support schemes etc. etc., all lined up like tin soldiers.

Unsurprisingly, this system tends to churn out entrepreneurs who pattern their business strategies on it right from the beginning. Problematically, innovation surveys always show that most successful innovators in most sectors, including many high-tech sectors, never conform to this model. In other words, the model is irrelevant to most of the innovators who create most of the wealth. Start to see the disconnect?

Innovation ghettos

Now don't get me wrong here. It would be churlish not to praise the skill and dedication of professionals in this system, and dead wrong to claim that there have been no successes. But there have not been many of them. Especially when it comes to building whole new industries, which is where real growth and prosperity is generated.

Governments typically blame the system, which is not fair, and then either ignore it, bad enough, or meddle with it, even worse. Too often the sad result is an "innovation ghetto" — a clutch of marginal ventures, sustained artificially by the system, not the market.

Thus it is that "innovation" has become a well established routine; a kind of secular pilgrimage with ritualized steps to paradise. What? Routine you say? But isn't innovation the exact opposite of routine? You bet it is! And this is exactly why we need to take the question at the head of this piece very seriously.

If the phenomenon of innovation is going to deliver, then the institutions that encrust it must innovate too. And, in time honored Schumpeterian fashion, this could very well mean that completely different structures emerge.

I recall a most enlightening talk earlier this year — one of the excellent series of Bromley Lectures at the University of Ottawa. On this occasion, a distinguished scholar from China laid out the institutional structure of their National System of Innovation in meticulous detail. The room scribbled furiously — surely if this is the competition, we had better figure their system out and emulate it. Wrong! For in truth we already know this system inside and out. It is an exact clone of our own system and that of virtually very other advanced industrial economy.

What is the point of copying China when China is copying us? Especially as we already know that the system they are emulating is not all that productive. Surely the smart strategy would be to do something different. For in truth, it is highly unlikely that China will gain any strategic advantages from some pre-defined configuration of institutions. It will come, as it always has, from their demonstrated capacity to muster whatever resources it takes to propel Chinese enterprise forward in any market they choose to create or contest, and in any way that works. This is the opposite of routine.

Systemic capability

An innovation system is not just a machine for processing aspiring inventors. It is a systemic capability, involving a broad range of public and private stakeholders, to identify the likeliest winners. Their challenge is to figure out the specific industrial and commercial environments in which they must operate, and to engineer such measures as may be required such that innovation is the outcome and your jurisdiction is its beneficiary.

This is what our competitors are actually doing, while we fritter our time away figuring out how their innovation systems work. So, is innovation passé? As a phenomenon, decidedly not. As we try to do it currently in Canada, decidedly so.

Dr Richard Hawkins is Professor in the Science Technology and Society Program at the University of Calgary and Fellow of the Institute for Science Society and Policy at the University of Ottawa.