Delivering the budget speech in April, Deputy Prime Minister Chrystia Freeland asserted the Liberal government’s three pillars in its plan to reinvigorate the economy.
“These three pillars, Mr. Speaker—investing in people, investing in the green transition, and investing in innovation and productivity—will create jobs and prosperity today, and build a stronger economic future for our children,” Freeland declared.
Central to that third pillar is the creation of a new innovation and investment agency, which was also announced during Budget 2022. But August has come and gone and details about the agency are few and far between.
Since the budget announcement, the federal government has little to offer about what the agency will look like, its role, how it will work and, most importantly, whether it will work at all. Queries to the federal government only elicit vague statements about why the new agency is needed, but yield nothing concrete about its potential workings.
In fact, only one individual seems to be empowered to address the future of the agency, and that’s a government outsider currently on contract with the federal government: Dan Breznitz.
Who is Dan Breznitz?
Breznitz is well equipped to discuss these issues. He is currently the Clifford Clark Visiting Economist of the Canadian Department of Finance, where, for the last year-and-a-half he has helped shape the Canadian government’s approach to innovation. Breznitz’s background includes roles as the Munk Chair of Innovation Studies in the Munk School of Global Affairs & Public Policy at the University of Toronto, where he is also the co-director of the Innovation Policy Lab.
A Department of Finance media relations spokesperson told BetaKit that the visiting Clifford Clark economists work closely with the department to share their views and help shape their thinking for the future. The department created the Clifford Clark Visiting Economist role in 1983 to bring in fresh outside policy perspectives. “Dr. Breznitz is working on economic growth and innovation policy,” the official added.
“In regard to the new agency Dan is the designated responder.”
In large part, it’s because of Breznitz that the federal government announced the creation of a Canadian Innovation and Investment Agency in Budget 2022, with the Liberals pledging $1 billion over five years to the agency.
Breznitz’s role with the government in the last year has been prominent to the point that when asked to comment on the proposed agency, the deputy minister for the Finance office sent an email deferring: “In regard to the new agency Dan is the designated responder.”
“The first step is admitting you have a problem.”
Talking to BetaKit about innovation in the most recent federal budget, Breznitz did not mince words. “It’s like alcoholism or drug addiction,” he said. “The first step is admitting you have a problem, and admitting the right problem, and I think that happened in the budget.”
Analogies to substance abuse aside, the need for action on innovation is necessary isn’t a contention. From Freeland on down, the consensus is that Canada lags behind the G7 countries, and many others, when it comes to innovation. In her budget address, Freeland (who is also the finance minister) called for a plan to tackle the “achilles heel of the Canadian economy: productivity and innovation.”
Noting that Canada is falling behind in economic productivity, Freeland added the issue was a “well-known Canadian problem — and an insidious one.”
From Freeland on down, the consensus is that Canada lags behind the G7 countries, and many others, when it comes to innovation.
A spokesperson for the minister of innovation, science and industry backed that view. Laurie Bouchard, senior manager of communications for the Office of the Minister of Innovation, Science and Industry, told BetaKit that despite Canada’s existing suite of programs and services to support Canada’s innovation ecosystem, the government identified some challenges that are remaining.
“Notably, Canada’s low rate of private business investment in research, development, and the uptake of new technologies, which are keys to growing our economy,” Bouchard said.
Those challenges are why the federal government announced in Budget 2022 its intent to create a Canadian Innovation and Investment Agency, Bouchard noted. Bouchard described the agency as a made-for-Canada organization structured to target Canada’s core innovation challenge of low business investment in innovation.
CARPA diem?
Despite the apparant alignment on the need to solve Canada’s well-known problem, the agency announced in Budget 2022 is quite different than what was originally promised by the Liberals.
At least one think tank, Ottawa’s Smart Prosperity, credits Breznitz with having swayed the government to abandon a 2021 campaign promise to create a $2 billion Canadian equivalent to the Defense Advanced Research Projects Agency (DARPA) in the United States in favour of the agency. Smart Prosperity wrote in a response to the federal government’s budget that Breznitz proposed the agency “as preferable to the idea of CARPA.”
Speaking with BetaKit, Breznitz rejected a model based on DARPA as too cumbersome. He noted that within DARPA it takes six to 10 years and millions of dollars before even companies as massive as Alphabet can figure out how to generate a product from it, adding that it would do “absolutely zero” to solve Canada’s current innovation problems. According to Breznitz, by rejecting a Canadian DARPA, the government also shaves a billion dollars off of its original innovation agency promise.
Before he went to work with the federal government on contract Breznitz and economist Dan Trefler wrote a Globe and Mail op-ed dismissing the DARPA model for Canada. Breznitz opined that the piece appeared to have been widely read.
By rejecting a Canadian DARPA, the government also shaves a billion dollars off of its original innovation agency promise.
“Whether I changed people minds?,” he wrote in an email to BetaKit. “I have no clue, I suspect that people knew exactly what I think when they asked me to join government, and hence, I would humbly assume that they already wanted to drop the idea even before I stepped a foot in Ottawa. A very wise choice in my own opinion.”
Breznitz also noted that consultations over the agency have taken place both in Canada and internationally, and are still ongoing. The latter included a workshop with the Israelis to “deeply learn” from the Israeli experience and how it changed over the years.
Whether or not he swayed the feds, it’s clear Breznitz is invested in the change. In fact, the proposed innovation and investment agency is being modelled in no small part on Israel and Finland’s innovation agencies, something Breznitz himself has been writing about since at least 2013, when he co-published a paper titled The Revolutionary Power of Peripheral Agencies: Explaining Radical Policy Innovation in Finland and Israel.
Breznitz described agile, responsive agencies when he discussed the Israeli as well as Finnish models. “We’re analyzing their tools and why they worked when they worked,” he said. “The first thing that becomes clear is you need a direct engagement with the business sector on the business sector’s terms.”
In both cases, the Israeli and Finnish agencies are arms-length, and recruit people from the business sector. Both place emphasis on minimizing risk through efficiency; instead of using a “cumbersome and unreliable” tax credit system like Canada, Israel provides answers on R&D proposals to companies within nine weeks. Breznitz said because the Finnish and Israeli agencies are arms-length they have the freedom to fail, learn from their mistakes, and then try again.
“What they do have is that clear mission, clear autonomy to do something about the mission, and clear capability to constantly mop up what doesn’t work in the innovation system in Israel, develop tools and try them out,” Breznitz said.
For Canada’s part, the agency will be operationally independent and will support Canadian businesses undertaking research and development aimed at developing novel disruptive technologies, according to Bouchard.
The new agency will attempt to solve coordination issues and coordinate collective action – think consortiums of SMBs that could share intellectual property to help compete against multinational companies – lowering risk and uncertainly in R&D. It will also have to ability to experiment to find out what works and what doesn’t, according to Breznitz.
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He added that the agency will need to focus on is figuring out what kind of intervention – or policies – are needed to shift things so Canadian companies in every sector and every region of Canada will start to engage more with innovation.
Based on the models it’s been studying, the Canadian agency is likely to be around 300 people, according to Breznitz. Israel’s has roughly 100 employees, and 200 technological evaluators on contract.
Like the foreign agencies, the Canadian one intends to recruit people from the business sector to work with it. That way, Breznitz said, “it’s not a group of capable civil servants in Ottawa trying to figure out what the R&D needs of the private sector in Winnipeg is.”
“We’ll know in five years”
By and large, the response to the announcement of the innovation agency has been cautiously positive. Technation, the national group representing members of the ICT industry, called it critical that industry joins government at the table, and that especially the design of the new agency is collaboratively done with tech industries of all sizes.
For its part, the Council of Canadian Innovators (CCI) advised the government to move quickly to create a permanent council of economic advisors to guide current and future economic policy development and review. “This is especially important for the success of the new Canadian Innovation and Investment Agency, which will require new frameworks and policies to ensure it doesn’t become just another granting agency of the Government of Canada, and instead propels Canadian innovation globally,” CCI said.
“At the end of the day, the private sector has to drive this and show leadership in it.”
Paul Dufour, a senior advisor in science policy for several Canadian agencies and organizations over the past 30 years, believes that for the agency to be successful it will need to engage the provinces, which are developing their own innovation strategies.
“Why not make this a national project as opposed to a federal project involving the private sector,” Durfour said. “At the end of the day, the private sector has to drive this and show leadership in it.”
Dufour also believes the model should be Canadian-based rather than following the leads of other countries.
“It’s not like we don’t have models already,” he said. “We’ve learned a lot from … the National Research Council of Canada [NRC]. One could argue it’s a kind of innovation agency; it’s mandate is to drive innovation with private sector interests and support and it has labs across the country, it’s a national agency, it has support for small- and medium-sized businesses.”
The NRC could easily be pivoted into a new kind of agency, according to Dufour. In fact, the 2012 Jenkins Report on Canadian innovation argued precisely that, recommending that the NRC become a “constellation of large-scale, sectoral collaborative R&D centres, involving business, the university sector and the provinces.” Mandated by the then Minister of State Science and Technology (which would ultimately morph into the Department of Innovation, Science and Industry), the Jenkins Report was a comprehensive review of support for research in development in Canada following a string of studies that showed business innovation in the country lagged behind other highly developed countries.
But Dufour noted the present Liberal government has made it clear that they’re going to create something new as opposed to changing something that already exists.
Like others, Derek Eaton, director of public policy research and outreach for the Smart Prosperity Institute think tank at the University of Ottawa, welcomes the idea of the agency. And, like others, he has concerns.
He echoed to BetaKit Dufour’s worry that the agency may find it difficult to coordinate and collaborate with the provinces, as aligning federal priorities with provincial governments is clearly challenging. “We need to be looking at an economy-wide mandate here,” Eaton said.
He also noted that a range of different funding bodies exist across the federal government. “There’s a need for clarifying how all of these fit together in the financing landscape and how that interacts with private capital,” Eaton said. “That’s certainly not clear.”
Eaton did add the creation of the agency is a positive step forward for improving the country’s industrial strategy, “there just seems to be a lot of details that need to be worked out.”
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What would success look like? Expressing his personal opinion, Breznitz said, “the metrics should be very focused but broad enough that we’ll allow experimentation. I would argue that it should be something along those lines: the maximization of business R&D and innovation across all sectors in all regions of Canada with a secondary objective that they lead to more exports.”
Don’t expect results any time soon though. Breznitz said if everything goes without a hitch, the agency would only begin recruiting staff in 2023, and “you won’t see anything on the ground” until late ‘23, early ‘24.
“Then it will take about five years before you can judge the results,” he said. “If by 2029 we don’t see a real impact [from the agency] then we can starting thinking about whether they need to change the management team.”