Analysis

By David Crane

Societies that are best at innovation have the best chance of achieving jobs, economic growth and the wealth to sustain a high quality of life, the Organization of Economic Cooperation and Development (OECD) promises in its just-released major report on innovation strategy. Indeed, in a world of reduced potential economic output, high unemployment and the spending constraints of higher public debt, "new sources of growth are urgently needed," the OECD says in its report, The OECD Innovation Strategy: Getting a Head Start on Tomorrow.

And that growth, it says, will have to come from innovation. Much of what the report — three years in the making — says will be familiar to anyone who has followed innovation policy debates over the years. But what the 223-page report does well (and this is perhaps its greatest value) is to bring together in a single volume some of the best thinking, research and experience from the past couple of decades, along with an emphasis on the need for an overarching innovation strategy.

There has to be a coherent framework since successful innovation requires the meshing of actions by many different players, including federal, provincial and big-city governments, business, universities, research institutes, financial markets, entrepreneurs and customers. Given Canada's decentralized federal system and regional interests, innovation strategy design and governance are major challenges.

The report also points to the need for innovation in the public sector as well as the private sector. Getting it right is more urgent than ever, not only because of the need for new sources of growth and employment but also because of the growing intensity of global competition.

"A strategic approach to fostering innovation is necessary to achieve the core objectives of public policy," the OECD report stresses, putting much emphasis on the need for a better understanding of how innovation takes place. "Innovation encompasses a wide range of activities," as the report points out. "It involves R&D, organizational changes, firm-level training, testing, marketing and design."

The federal government's main strategy document, Mobilizing Science and Technology to Canada's Advantage, was published in 2007, stressing then that "the most important role of the Government of Canada is to ensure a competitive marketplace and foster an investment climate that encourages the private sector to innovate." That strategy emphasized tax cuts and deregulation along with continued spending on university-based research and a focus on four sectors of the economy — environmental science and technologies, natural resources and energy, health and related life science and technologies, and information and communications technologies.

As the OECD reports, Canada has a number of weaknesses, including poor productivity, which is based on a lack of innovation, weak R&D spending by business, a lack of direct public funding support for high-risk business technology development, a low proportion of students pursuing post-graduate studies in science and engineering, and failure to invest in early childhood development.

But the biggest challenge is to develop what the OECD calls "a mobilizing vision and the ambition to achieve it through policy coherence and effective coordination." There is, it says, a "need for reaching across the borders on institutions, sectors, fields of training, academic institutions and countries." What Canada is missing is not only the mobilizing vision (the 2007 document is already out of date) but also a system of innovation governance that brings all the national, provincial and regional stakeholders together in common purpose. A series of individual programs by themselves, no matter how valuable, does not constitute a vision or a strategy.

In its report, the OECD focuses on what it calls five principles for innovation:

First, empowering people to innovate through high-quality education, starting with the early years, enabling ongoing skills upgrading and lifelong learning, fostering innovative workplaces, and promoting an entrepreneurial culture.

Second, unleashing innovation through sound policies on competition, mobilizing private finance for innovation, paying more attention to intangible investments (engineering, design, branding and marketing, workplace innovation, training and innovative business models), and encouraging small and midsize businesses.

Third, creating and applying knowledge, including sufficient public investment in R&D, using demand-side policies such as smart regulation, standards and public procurement to create markets for new technologies and systems, ensuring high-quality infrastructure, encouraging public-private partnerships, facilitating the diffusion of new knowledge, and promoting public sector innovation.

Fourth, using innovation to solve global grand challenges such as climate change, global health and future food supplies, by working for international science collaboration, creating incentives to encourage innovation and new technology development, and transferring knowledge and promoting entrepreneurship in the developing world.

Fifth, making innovation a central component of government policy with strong leadership, encouraging provinces and regions to foster innovation while coordinating activities nationally, and improving methods of innovation policy priority-setting, governance and policy evaluation.

The OECD experts see a number of areas where stronger effort is needed, including much better statistical measures of the innovation process and outcomes to better guide policy, more attention to the creation and growth of new firms, improved mechanisms to foster the diffusion and application of knowledge, broadening policies to foster innovation beyond science and technology, and education and training policies better adapted to the needs of 21st century society.

In many respects, our future well-being depends on becoming a much more innovative society. As Bank of Canada governor Mark Carney and his predecessor, David Dodge, have both warned, unless we can improve our productivity performance, and innovation is the way to do it, then we will lack the wealth to sustain the things we value right now, such as education and our healthcare system, or to carry out the things we would like to do, such as improving the environment, caring for an aging society, reducing poverty or improving the infrastructure and quality of life in our cities. The OECD report shows us the way to do better.

David Crane is a writer and adviser on innovation strategy. He can be reached at crane@interlog.com.