flagIt is a strange irony that the people who study innovation seem to be rather unimaginative at finding ways to stimulate it and measure it. Two new Canadian studies retread tired old ground in this regard.

First, a Canadian federal government National Summit on innovation came up with these 18 lame ‘priority recommendations’ (I’m paraphrasing):

  1. Strengthen business-university relationships
  2. More university research
  3. More government funding of commercialization
  4. Eliminate capital taxes
  5. Enhance research tax credits
  6. Enhance investment tax credits
  7. Accelerate deregulation
  8. Fund more literacy improvement programs
  9. Teach problem-solving in schools
  10. More student loans
  11. More university student capacity
  12. More training programs for minorities
  13. Facilitate more workplace training
  14. Ease immigration for students and professionals
  15. More encouragement of municipal innovation programs
  16. Improve networks between research organizations
  17. Expand broadband access
  18. More learning investment in rural areas

Most of these brilliant ideas entail throwing taxpayer money at corporations, both directly and through subsidized public sector research that directly benefits private companies. The truth is that a substantial majority of Canada’s largest companies are owned by foreign (mostly US) parents who mostly treat their Canadian operations as low-labour-cost branch plants that distribute products and services designed at head office and built in the third world. Although the research capacity in Canada is comparable to the world’s best, and is cheaper than in the US or Western Europe, there’s no way Head Office is going to move its precious research function to the Canadian boonies. Many, many Canadian subs are housed in shabby, poorly-maintained, cheap premises using machinery and software cast off from Head Office when they upgraded, and run by managers sent to Canada because they weren’t assessed as good enough to run Head Office divisions. If you think that’s harsh, talk to any of the millions of Canadians working for fawning, ineffectual foreign bosses. And despite these disadvantages, many Canadian ‘branches’ significantly outperform their Head Office divisions, largely because their Canadian workforces are smarter, more resourceful, and — yes — more innovative than the Head Office drones.

So the real answer to Canada’s poor innovation performance (according to the following measurements, about which I will talk in a moment) is to take back Canada’s economy — phase in 51% Canadian ownership and Canadian management requirements for all businesses over a certain size. Require profits made in Canada to remain in Canada, by imposing a 100% tax on cross-border distributions. Scrap NAFTA. And if you want to stimulate innovation, invest in the people that live and die by innovation — entrepreneurs. Their profits stay in the community, get reinvested, and create jobs. By all means subsidize those entrepreneurs to do their research at Canadian universities — you better believe that research will be focused on commercial opportunity.

OK, now let’s look at how the Science Council of British Columbia proposes to measure innovation, to determine whether we need more wringing of hands in another Innovation Summit next year over our ‘poor’ performance. You thought the Feds’ list was bad — check this one out:

  1. Percent of population completing university
  2. Science and engineering degrees per 100,000 people
  3. Grade 8 average math and science standardized test scores
  4. Research workforce per 100,000 people
  5. Science workforce per 100,000 people
  6. Percentage of immigrants with university education
  7. Total R&D expenditures as a percentage of GDP
  8. Sectoral R&D expenditure as a percentage of GDP
  9. Business funding as a percentage of university R&D
  10. Scientific publications per 100,000 people
  11. Patents issued per 100,000 people
  12. University technology licensing revenue
  13. Venture capital investment per 100,000 people
  14. Percentage of manufacturers deemed ‘innovative’ by Statistics Canada
  15. New business starts per 100,000 people
  16. Tax rate of people with $80,000 of earned income
  17. Corporate tax rate
  18. Percentage of R&D expenditures tax-subsidized
  19. Total business investment as a percentage of GDP
  20. Percentage of households using the Internet
  21. Percentage of households using home computers
  22. Percentage of establishments in ‘high tech’
  23. Real GDP per labour hour in the private sector
  24. Real GDP per capita
  25. Employment rate
  26. Real average hourly earnings
  27. Total exports per capita

If this is how government measures performance, it’s no wonder people are jaded about government efficiency (though I confess I’ve seen corporate balanced scorecards that are just as bad). This list makes no mention whatsoever of entrepreneurship, which even big corporation defenders like Peter Drucker admit is the main driver of innovation. Even #15 is unrefined — most new business ‘starts’ are numbered companies, very often affiliates of existing corporations set up for accounting or tax purposes, or passive investment holding companies. This is no measure of entrepreneurship. And a lot of business investment (#19) is in things like replacement equipment and building premises (in Canada, most often warehouses), so this index will tell you more about the price of real estate than the state of innovation. A more intelligent set of measures, as in the previous list, would include measures of true entrepreneurship — the percentage of GDP generated by independent business (excluding franchises), and the number of graduating students starting new ventures, for example.

Canadians are quite probably the most innovative people (relative to our size) on Earth. Many of the most successful software companies in the world were started by Canadians. We nearly dominate the ranks of the world’s best comedians, female singer-songwriters, and women novelists. We have a disproportionate number of Nobelists. A recent survey found that on average each dollar invested by non-Canadians in a Canadian-invented patent generates $40,000 in revenue for the patent-buyer. We’re world leaders in renewable energy research. I could go on, but that would be bragging, and that wouldn’t be Canadian.

So why do we beat ourselves up over meaningless measures of our innovation ‘uncompetitiveness’? Perhaps because we’re ashamed to admit that we sell ourselves short. We work hard for unappreciative and often rapacious foreign bosses who take the money we earn for them with our ingenuity and run. We have lost control of our own economic destiny, which may lead inexorably to a loss of our political and social autonomy as well. If we spent half the time and energy (and money) trying to stimulate and measure our economic autonomy that we spend trying (not very competently) to stimulate and measure ‘innovation’ we’d be much further ahead — by any measure.

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  1. feith says:

    Way to sum up. This was fascinating! As a rather unpatriotic Canadian,I don’t often wonder about our autonomy, but this blog made me think. Thanks. :)

  2. David Jones says:

    Yawn (as to the list). How about:+ prod educational and employment institutions to stop stifling initiative + urge organizations of all sorts to lighten up on bureaucratic rules. Open up Free Thinking Retreats on the premises+ start compensating / rewarding the adventurous – the rock climbers, the poets and writers and the volunteers+ showcase employees – and students – who excell in partner organizations; who make breakthroughs in unaligned disciplines; who achieve inter-disciplinary horizontality in either their personal or professional lives.just a few thoughts on a Sunday evening…….

  3. WOW!!!!I have been changing ideas with you Dave, but now i am really afraid abput your words, this post seems like a Neo-nazi post, you are using the same words than Adolf Hitler before his slaghter: “foreign bosses who take the money we earn for them with our ingenuity and run” “We have lost control of our own economic destiny, which may lead inexorably to a loss of our political and social autonomy as well” he use very similar words to convince to the Germans to destroy the Jew population, your post is very offensive for the foreigners…. i am very sure that the nationality doesnt have anything to see with greed or taking money and runaway.. as i told you i have worked with a very gentle Candian as well as American, French, etc… as well as a very discusting people, but it doesnt have anything to do with their nation.Besides if the “Canadians” you are talking about are so smart and creative Why are they working with stupid bosses? Who is the real stupid? i am pretty sure that they could do it better here in Mexico if they are as great as you said, or even better in Canada….im agree with you than inovation its our biggest weapon to destroy those monopolies and create wealth to everybody, may be their mesures arent well enought but i didnt see them as bad as you said anyway you should thing about your comments about foreigners, they seem very racists and

  4. elliot noss says:

    omigod. we are the most innovative people on earth, but we need government intervention (“phase in 51% Canadian ownership and Canadian management requirements for all businesses over a certain size. Require profits made in Canada to remain in Canada, by imposing a 100% tax on cross-border distributions. Scrap NAFTA”) on a scale of an african or latin american economy?it is impossible for governments to “stimulate” innovation. what they need do is stay out of its way. tax policy, such as that allowing income trusts, skews capital away from technology and other high growth areas full of innovation and towards low-growth, resource intensive segments.this is the real drain on innovation in canada. your policy recommendations would virtually eliminate foreign investment and hurt canada’s, and canadian companies’, ability to integrate globally.

  5. Dave Pollard says:

    Feith: Thank you. Really enjoyed discovering your blog, especially the very articulate and inspiring article on ‘sensualizing’.David: Good ideas, but so counter-culture (even in Canada) how would we go about doing this?Elliot: A good investment is a good investment, even if it’s only 49%, and foreign investors are shrewd enough to know that. We give away far more than we have to to attract investment, and this impoverishes us all. As for hurting global integration, I don’t see this as a bad thing (or a good thing). There is more than one way to run an economy for the well-being of one’s people, and global integration is not essential to doing so. I’m amazed at our modern aversion to government regulation, as if it’s automatically and necessarily bad. It’s just one ingredient in achieving a balanced, healthy economy.

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