Science, Technology and Innovation Council evaluates “deteriorating business innovation” in Canada

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Though the Waterloo region in Canada boasts the second most significant startup density in the world — trailing only Silicon Valley — a new report from the Science, Technology and Innovation Council in Canada said that poor business innovation is still the biggest challenge in science, technology, and innovation (ST&I) development in the country.

In a development first reported by Canadian Business, the ST&I Council said that the Canadian business landscape is not globally competitive — which was reflected in a lack of investment in business R&D by private companies.

“In 2013, Canada ranked 26th among international competitors on business enterprise expenditures on research and development.”

At the same time, Canada’s investment in R&D also saw a significant decline— from 2007 to 2014, Canada’s overall investment in business R&D dropped by over $1 billion.

“Proactively pursuing—and achieving—a sustainable competitive advantage in ST&I is the path to higher living standards and a superior quality of life for Canadians,” said Kenneth Knox, chair of STIC. “Success requires that all players in the ST&I ecosystem work more closely together in a ‘systems’ approach. It requires better integrating organizations, activities and funding mechanisms in a more coherent, coordinated whole to help us realize more impact from the investments we make.”

The report also noted that Canada is “out of step” with international competitors in the balance between direct and indirect government support for business R&D. In 2013, Canada had a fourth place ranking in indirect funding, like tax credits, but also took a 28th place ranking in direct funding.

“Canada has fallen behind its global competition on key performance indicators, reflected most tellingly in business investment in research and development. In 2013, Canada ranked 26th among international competitors on business enterprise expenditures on research and development as a share of gross domestic product,” added STIC member Sophie Forest, a managing partner at Brightspark Ventures. “Addressing this performance gap is critical to Canada’s future.”

To address these issues, the report recommended the following:

    Close the gap on firms’ investment in innovation;
    Redress the imbalance of direct and indirect government funding for business R&D, to provide greater direct support for high-risk, high-reward business R&D;
    Embrace risk-taking;
    Boost higher education expenditures on R&D to keep pace with other countries’ support for “intellectual infrastructure”;
    Invest strategically, further focusing government funds to build globally competitive critical mass in targeted areas.

Related: OMERS’ John Ruffolo talks Canada’s new startup lobby group and using the government for leverage