So many ideas, but no one using them

If he ever gets done saving GM and Chrysler, Tony Clement will have some reading to catch up on. Clement is Canada’s industry minister. Don’t worry if that’s news to you. It’s not as though he’s provided much evidence of his existence. But his desk is lately piling high with reports commissioned by his predecessors.

In May 2007 Maxime Bernier asked the Council of Canadian Academies (CCA) why Canadian business isn’t as good as the private sector in other countries in coming up with new ideas and implementing them. Five months later, Bernier’s replacement, Jim Prentice, set up a Science, Technology and Innovation Council (STIC) to advise him on, well, basically the same topic.

Both reports have landed on Clement’s desk within days of each other. If they gather dust because the minister in charge appears to be stuck in witness protection, then all the university presidents, CEOs and public servants who drafted them will have wasted their time. More important, Canada will be wasting some of its potential, because the two reports say the same thing: Canada isn’t innovating; it’s hurting our productivity; so we’re not creating the prosperity that could improve all of our lives.

This matters. The best guess we have is that after the recession there’ll be less potential for total global growth than there was from 2002 to 2007. So the next decade won’t be as easy as the last one. Coasting on easy prosperity won’t be an option.

Canada’s economic growth has lagged behind growth in the United States more or less forever, which means we have less money to keep in our pockets or use for social programs. The difference is productivity: 100 Canadians working 100 hours create less wealth than 100 Americans working 100 hours. That’s because U.S. business—and business in plenty of other countries as well—is better at innovating, at creating new ideas, methods and equipment that wring more value from workers’ time.

Now it’s not as though successive governments haven’t been worried about this. New ideas? By God, we’ll get you some new ideas. That’s why the Chrétien government spent money hand over fist after 1997 on university labs and research. Paul Martin and then Stephen Harper have enriched those programs, though lately with declining enthusiasm. The newspapers have started to cover the shrieks of indignation from researchers who doubt Harper’s affection for universities’ research mission.

But here’s the thing. Our university labs aren’t what’s broken.

Both the CCA report and the STIC report show what everyone who follows these questions knows: Canada ranks second in the OECD (behind Sweden) for government spending on university research. It can’t do much better. Nor is it second-rate research: our scientists are cited frequently in papers by their colleagues worldwide, a handy measure of respect for their work.

I could go on. We make ideas just fine, thank you. We just don’t use them.

If you rank the 100 companies in the world that do the most R & D, you’ll find that fewer of those companies come from Canada than from any other G7 country. Canada ranks 14th out of 20 similar OECD countries for the number of “triadic” patents its companies filed in 2005, which is the name for patents filed in the U.S., Japan and Europe by companies that want to protect big ideas in a global market. Canada was 14th out of the same 20 countries for the level of business spending on R & D. It’s lagged on that indicator for more than a quarter-century. “Canadian businesses on the whole—but always with notable exceptions—are technology followers, not leaders,” the CCA report says.

This failure is pervasive. Innovation isn’t just an asset in self-consciously high-tech sectors like telecoms and pharmaceuticals. It helps companies get ahead in transport, storage, resource extraction, what have you. But in 2006 Canada’s business sector had half the capital stock in information and communications technology—cellphones, databases, BlackBerries and so on—as the U.S. business sector. In manufacturing it was closer to 40 per cent. In transportation and warehousing, more like one-fifth.

This is usually the place in the conversation where somebody complains that it’s too expensive to do business in Canada, so who can be surprised if our companies can’t get their act together. Sorry, wrong. Canada has the richest support for business R & D in the OECD, mostly in tax incentives. But companies don’t take Ottawa up on the offer.

Is it because we’re a branch-plant economy? Nope: Canadian branches of foreign multinationals do more R & D than do Canadian companies with no foreign holdings. Is it because we have a resource-based economy? Wrong again. There are world-beating companies building and selling equipment for the oil and forestry sectors. Just not here.

The overwhelming conclusion is that it’s too easy for business to sort-of succeed in Canada. We’ve got a big, isolated, rich country. It’s too easy to just lob exports a few miles over the border into the United States. And when a company fails—well, ask Tony Clement how eager successive governments have been to prop that company up and keep it on life support.

Governments know all about keeping Canadian business fat and lazy. They have been inept, or afraid, when it comes to making our businesses so hungry they must finally live by their wits. That’s a serious challenge for a serious government, if we have one.