Canada Lags as Other Countries Pick up Pace on Innovation

Canada has witnessed surges in AI, cleantech and blockchain over the past few years, but the country is being “just as innovative as they need to be” and that could lead to an overall decline in how cutting-edge companies can truly be.

The Conference Board of Canada has released their How Canada Performs: Innovation report card, and on the overall list of innovative countries, Canada places fourteenth with a C ranking, dropping three places from their previous rank. Sweden, Switzerland, Denmark and the U.S. each took home an A and the top four rankings respectively. However, if each province were to be counted as a country, Ontario would place seventh while Quebec would rank ninth.

The exhaustive report dives into how each province performs from an innovation standpoint. The Conference Board defines innovation in their terms as a “process through which economic or social value is extracted from knowledge—by creating, diffusing, and transforming ideas—to produce new or improved products, services, and processes.”

The report looks at both radical innovation (breakthrough technologies and new products or services) as well as incremental innovation (productivity gains through the adoption of new information and communication technologies or knowledge management). There are nine report card indicators: public research and development (R&D), researchers engaged in R&D, scientific articles, entrepreneurial ambition, venture capital investment, business enterprise R&D (business R&D), ICT investment, patents, and labour productivity. For a more in-depth look at how innovation is broken down, check out the full report.

Below is the report card for Canada and each province, broken down into each innovation indicator. Data for the most recent year available was used to create these ranks.

How Canada Innovates

Canada’s overall drop is less of an indication of how the country is failing to innovate and more of a showing on how other countries are drastically becoming more innovative at a quicker pace than Canada. The biggest decline comes from the venture capital investment indicator. Despite having a record Q1 in 2018 in terms of VC investments in technology, Canada lost ground relative to the U.S. as the leader of the pack. Other areas Canada dropped in rankings involved R&D, relating to both public spending and researchers engaged.

Provincial Breakdowns

Ontario placed highest out of the provinces in terms of overall innovation with a grade of B, while Quebec received a C and B.C. and Alberta each received Ds.

“With public R&D of 0.96 per cent of GDP, Ontario is among the top-ranked jurisdictions in the world and earns an A,” the report reads. “Ontario gets an A+ for entrepreneurial ambition—an indicator on which all provinces score especially well relative to international peers.”

The report breaks down innovation at a deep level and looks at how each province gained ground in some areas (such as Alberta growing in scientific articles and labour productivity) while also losing ground in other fields (such as Nova Scotia dropping in researchers and business R&D spending).

One of the main areas the report indicates Canada to be trailing behind other countries in involves how much spending goes into company innovation.

“Canada continues to lag international peers on business R&D by a substantial margin,” the report states. “Although spending as a share of GDP increases slightly from 0.87 to 0.9 per cent, most international peers have achieved even larger increases, leaving Canada well behind the international peer average of 1.69 per cent of GDP.”

An ominous warning for Canadian innovation rounds out the report.

“A low-innovation, high standard of living equilibrium is increasingly unsustainable. We are seeing more volatile resource prices, shifting global trade patterns, and a growing wave of retirements in the workforce. All of these changes are exposing Canada’s business innovation weaknesses and generating further pressure to become more innovative in coming years.”

“After years of simply getting by, Canadian businesses will need to make better use of the inputs that governments have provided and improve their innovation game in a much more competitive environment.”

There are some suggested remedies though: increase spending on innovation; implement and use technology effectively; create a healthy business climate; enhance management skills and expertise; and move towards an inclusive innovation agenda. These are all areas Canada has actively been supporting, but the underlying problem again points to the country not doing enough to keep up with international peers.

It’s been a good few years for the Canadian tech and innovation scene, but it looks like leaders in the industry are going to have to keep on delivering if they want to keep up with other countries.