Canada’s Productivity Gap, And What to Do About It

by: Jim Roche

This post is an excerpt from an article published April 19, 2010 in the Ottawa Business Journal.

Those of us in high-tech like to think of Ottawa as a Science and Technology (S&T) town. Certainly a lot of the economic growth that Ottawa enjoyed in the 1990s was due to the significant expansion of the technology sector. After the dark days of the tech meltdown and the recent scare of the recession, our sights are once again turning to the technology sector as the hope for the future.

However we need to face the fact that we have an S&T-related productivity gap in this country. Recent figures paint a disturbing picture of the state of S&T in Canada. According to the Conference Board of Canada, Canada receives a “D” grade and ranks 14th out of 17 countries on its capacity to innovate (well behind Switzerland, Ireland and the US at the top 3 positions respectively).

The international competitiveness of Canada in Science and Technology depends on smart policy decisions. I’ve had the opportunity over the years to lead or participate in a number of technology related organizations. Along the way I’ve developed some clear opinions on what’s needed to close the productivity gap in Science and Technology with the US and other western nations.

Let’s shred the SR&ED program. Let’s take $750M out of the $3.6B SR&ED program and allocate it to something like the Technology Partnerships Canada (TPC) program. TPC used to provide funding for strategic R&D, and demonstration projects that produced benefits to Canadians. It was geared to pre-competitive projects across a wide spectrum of technological development. Which areas should we focus on? The government has already identified four S&T priority areas back in 2008 (environmental, natural resources and energy, health and related life sciences, and information and communications). Then let’s look at the other clusters in our economy that are really working and support them too.

Support more than just R&D. If we want to see better results in commercialization of S&T investments, we need to support the other core aspects of successful business: marketing, sales and operations. How can we compete internationally if we don’t have world-class business skills to complement our excellent technology?

Be more tolerant of risk. We need our leaders to take risks. Obviously this means our business leaders but we also must allow our governments to take more risks.

Appoint a scientific advisor. The government of Canada needs a scientific advisor. We are one of the only countries in the world without this type of office.

Don’t dismiss branch plant R&D. It is a reality of the global economy that foreign companies will buy Canadian companies. This is not necessarily a bad thing provided that they continue to support local innovation.

I recently participated in the Research Money conference “Industrial R&D: Is Canada Really Lagging?” in Ottawa. The theme was an acknowledgement that multinational firms now globally distribute their R&D and collaborate with partners in public and private sector institutions. This “new normal” for S&T must lead to changes in public policies. There is some urgency to make these changes if we really want to start to close the productivity gap in this country.

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