Supply and demand in the innovation economy

By Dr Robert Luke

Canada leads the world in tertiary education, yet we have persistent problems increasing our capacity for innovation and productivity. Canada has excellent basic research capacity, but we are weak in our ability to innovate and commercialize research. This failure is compounded: we do not commercialize inventions effectively, nor does our industry invest in R&D and innovation, thereby offering a poor receptor to the outputs of academic excellence.

Similarly, there is much discussion about the skills gap/mismatch and the ability of the postsecondary systems to supply industry demand for skills. At the same time, industry does not invest in skills and work force development at the rate of our international counterparts.

In 2012, George Brown College conducted a study to examine employer perceptions on employability skills acquired through postsecondary education and willingness to invest in R&D and skills training. Results from Toronto Next: Return on Innovation emphasized the role that essential employability skills play in the hiring of new postsecondary graduates. It also found that, while employers value productivity, they do not value the skills and knowledge needed to enhance firm level innovation.

In short, firms did not see a clear correlation between the skills needed to foster innovation and productivity, nor were they willing to make a long-term investment in innovation due to short-term business pressures. More troubling is that half of the firms surveyed said it is the government's responsibility to drive innovation.

Governments are seeking ways to better link educational outcomes with innovation and productivity, as well as to encourage firms to conduct research and development. One way this is being done is by enabling firms to partner with postsecondary institutions like colleges and polytechnics. Engaging students in applied research projects conducted with firms bridges the gap between skills, R&D and innovation and productivity.

This has a dual effect of encouraging firms to innovate while equipping students with innovation literacy: skills relevant to business productivity, including product development, an exemplary work ethic, problem solving skills and a capacity to learn quickly. Applied research conducted with firms has two primary outputs: increased ability of firms to get products and services to market, and increased innovation skills in graduates, who represent a stronger capacity for downstream innovation.

The recent publication of Canada's leading research colleges affords an opportunity to reflect on how best to measure college and polytechnic applied research productivity (see page 5). While ranking colleges by funding raised is a useful way to measure inputs, it may not be the most effective way to gain insight into the system's effectiveness. Better would be to measure outputs, and ultimately outcomes, of the effects of the work that colleges and polytechnics support with industry applied research.

One of the challenges with measuring outcomes is attribution: when firms can access R&D support from a multitude of sources (colleges, universities, government and private sector labs), who is to say that any one is solely responsible for enabling an innovation to reach the market? Rankings showcase the excellence of singular institutions, a good measure of an institution's capacity to raise research funding.

However, firms and innovation intermediaries — those organizations who take on the task of enabling the innovation economy — function within ecosystems. Thus, a better metric would be to measure the ways in which these innovation intermediaries work together to support firms and basic science institutions in getting products and processes to market. This is a measurement challenge that is at odds with ranking exercises.

A solution to this is to use students as a proxy for our measurement of applied research effectiveness. The main output of college and polytechnic applied research is how this activity affects our students and graduates. While graduates can be considered an input to improved business innovation, they are outputs of the college and polytechnic system.

Students gain innovation skills through applied research work with firms, often conducted as part of their programs of study, and related to the skills they are learning in these programs. This creates increased capacity and skills to understand product development, project management, communication and entrepreneurial thinking. Students gain skills as a direct result of specific activities they do in support of firm innovation. The practice of these skills represents the capacity for innovation.

Students with innovation literacy have positive effects in the firms we support directly, as well as in the firms that hire graduates with applied research experience. The importance of innovation literacy in our graduates is thus highly related to the role of employers in investing in skills development coupled with R&D. Understanding how skills are gained through research activity will enable postsecondary institutions to better equip graduates with innovation and entrepreneurial skills and knowledge.

Important here is ensuring that students acquire the language of innovation: the ability to articulate the specific skills gained and how they contribute to firm innovation. By promoting the application of skills into product development, students are encouraged to see the link between applied research activities with firms and skills acquisition as being directly related to supporting firm-level innovation. More information on measuring outcomes and student innovation literacy can be found at http://timreview.ca/article/735.

Canada has a vast talent pool on which to base our future innovation capacity. Linking innovation skills to teaching, learning and research is vital to the growth of Canada's innovation economy. By connecting the dots on innovation skills and R&D, we are able to better link supply and demand for improved innovation and productivity in the economy.

This is predicated on industry's adoption of innovation as a business strategy: a recognition that productivity gains are linked directly to increased innovation skills. When innovation skills are applied to the needs of firms we can build resilient, innovation-ready businesses. Linking Canada's world-leading postsecondary education system to industry R&D creates a rich opportunity for mobilizing the latent innovation capacity across the country.

Robert Luke is Vice President, Research and Innovation at George Brown College and Chair of the Polytechnics Canada Research Group. rluke@georgebrown.ca