Are small businesses hurting innovation in Canada?

Dianne Buckner, host of CBC’s Dragon’s Den, has a problem with people saying that Canada lacks innovators.

In an editorial on the, she takes to task two organizations who say that Canada’s large base of small businesses hurt our ability to innovate: TD Economics, and the Coalition for Action on Innovation in Canada, a think tank co-chaired by Paul Lucas and former Liberal Deputy Prime Minister John Manley. Both organizations commend small businesses for having good ideas, but say that they are far too cash-strapped to invest in innovative solutions.

TD Economics says, “It is often said that Canada’s poor productivity performance, especially relative to the U.S., is partly a reflection of the fact that a greater share of the Canadian economy is comprised of small businesses,” and “small businesses lack the scale to undertake the level of capital investment and R&D of large firms.”

In their report, An Action Plan For Prosperity, the Coalition says:

Canadian companies cannot hope to succeed in the 21st century global economy by relying on 20th century technology. Yet Canada ranks only middle of the pack by OECD standards in business investment in new machinery and equipment as a share of GDP. Larger companies that compete internationally tend to be the leaders in adopting new productivity-enhancing technologies. Smaller firms and those facing less intense competition are often slower to invest in new equipment and processes, including advanced information and communications technologies (ICTs) that would allow them to seize new business opportunities.

Basically, what both these groups argue is that without the capital for investment and research that is found in larger companies, small businesses can’t hope to compete. And since Canada relies heavily on small businesses, our nation can’t compete. And since our nation can’t compete… we’re screwed.

Buckner doesn’t think so. In her column, she mentions some hugely innovative companies from Canada, like tigits, which has the potential to reach 50 million subscribers across North America, and Xagenic Inc., which is helping create some amazing medical technology through the MaRS Centre in Toronto.

She does note that more can be done to help small businesses punch above their weight. Government programs encouraging innovation in small business (MaRS being one of them) can provide the essential funding to create high-tech scientific developments. Tax incentives and stronger intellectual property laws can create an environment more conducive to innovation.

In my opinion, it’s a crock to say small businesses are hurting innovation in this country, or to say that only big business can make this country strong (my favourite line from her article: “…so often large companies ‘innovate’ by simply acquiring or investing in small firms with innovative products or services”).

But what do you think, Techvibes readers? Are we facing an innovation crisis? Are small businesses to weak to produce real innovation? Are big firms going to save us?

Let us know what you think in our comments section.