Canada should focus on prosperity and commerce rather than enhanced R&D performance if it hopes to reverse the slide in its number of globally focused innovative companies, says a new report. The loss of large and medium-sized technology-based firms can be traced to misdirected government policies and a long term shift in the nation's post-secondary institutions towards pure research, although one of the report's co-authors says the recent policy emphasis on experiential learning is cause for cautious optimism.

"There are changes in the wind at the moment and that is positive and encouraging," says Dr Douglas Barber, a distinguished professor-in-residence at McMaster Univ and former president/CEO, Gennum Corp. "The Innovation Agenda and the education agenda have to become richer in experiential learning by emphasizing trust, understanding, ethics and respect. You can't learn these from math courses. It's about the customer-value exchange."

The report by The Impact Group - titled Changing the Innovation Conversation: From Research to Global Value Exchange - argues that the current crop of Canadian entrepreneurs and company leaders are the product of an education system that often does not consider the relevance of the knowledge imparted to students. That, combined with a tendency to sell rather than nurture globally competitive companies, has resulted in a serious lack of medium-sized firms that are necessary for knowledge spillover and the emergence of more Canadian-based multinational companies.

"Canadian tech sectors are populated by small firms led by entrepreneurs who don't know how (or don't want to) grow globally competitive businesses ... As our resource sectors decline, the negative impact of this weakness will exacerbate," states the report. "Relying on start-ups and early-stage firms to compete globally is not a winning strategy."

Barber says that this report - the sixth in a series stretching back to the early 2000s - attempts to strike a more positive tone than previous studies which he says were "more critical than constructive". The focus on prosperity is indicative of the authors' intention to see a positive way ahead. But Barber emphasizes that there's an urgency to implementing the necessary shift in focus and values as it will take a generation.

"Research is not an appropriate national focus but prosperity is. We need to be more selective in what we do," says Barber, who co-wrote the report with Impact Group president Dr Jeffrey Crelinsten. "We've lost the companies operating on the big global front. We didn't need to lose Nortel or Blackberry but we did. Our learning institutions and governments do not see a responsibility for commerce."

The report acknowledges the unique challenges facing nations with smaller populations. Lacking the critical mass of larger competitors like the US, China or Germany, Canadian firms must identify smaller niche markets that they can dominate globally while avoiding the interest of large multinationals.

"The focus on R&D has been a major distraction from the real issue, which is prosperity. The engine of a country's prosperity is the knowledge economy ... Currently we run a trade deficit in the knowledge economy. We've lost many companies that were doing well in the 90s and early 2000s. Canadian founders didn't work on succession and preferred to sell. — Barber/Crelinsten Report

Prosperity

Smaller nations dominate the Legatum Prosperity Index (www.prosperity.com/ rankings) and although Canada is well positioned due to its natural resources advantage, it's been slipping recently.

"Norway is at the top of the prosperity of nations. They have a huge sovereign wealth fund and global oil and gas companies that operate in the oil sands and Newfoundland," says Barber. "There's a lot to be learned from these small countries which are mostly under 10 million. But we've been sleeping."

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For a copy of the report go to www.impactg.com under Publications