STIMULATING AND MEASURING CANADIAN INNOVATION — BADLY

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.