Tag Archives: Konrad Yakabuski

Business research and development and Canada’s innovation gap (the last of this 4 part informal series)

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This is definitely the last in this informal series on Canadian innovation with an occasional foray in the nanotechnology scene. I have commented more frequently in my postings on government funding of R&D (research and development) but Canadian business should also be included in the equation.

Canadian businesses don’t tend to invest as much in R&D as their counterparts in other countries. From the Mobilizing Science and Technology to Canada’s Advantage report issued in 2007 by the Industry Canada,

Businesses in Canada need to do more to improve their productivity. Canada’s private-sector R&D as a proportion of GDP is below levels in Japan, the US, Germany, and France. Similarly, the number of patents produced in Canada is low compared with many other OECD countries. Canadian firms also invest less in new machinery and equipment, which embody the latest innovations, than do many of their competitors.

Whether you agree with current patenting laws and trends or not, it is a standard measurement for innovation. Konrad Yakabuski’s article in the Globe and Mail’s Report on Business, which kicked off this series, notes this Canadian business R&B investing,

Between 1981 and 2000, Canadian companies’ expenditures on R&D grew by almost 10 per cent annually. But since 2001, they have been flat in real, after-inflation terms and have declined by fully one-fifth when expressed as a percentage of gross domestic product.

Yakabuski’s article goes on to paint a bleaker picture of Canadian business investment in R&D.

There are many reasons for these problems as noted in the Industry Canada 2007 report. However there’s one reason that I didn’t see mentioned and it may be due to geography.

I live in British Columbia (Canada) and the Vancouver area has a very active technology community where I worked for some years as a technical writer. My observation (it’s not unique but I note it because I haven’t seen any analyses which mention it) is this: the business plan for most of these companies (over 90% and I think I’m being conservative) is simple.

  1. Get an idea for a technology.
  2. Start up a company.
  3. Get some R&D funding from the government.
  4. Get some interest from the media.
  5. Sell the product and grow the company to a few million dollars in revenue.
  6. Now, sell the company to another larger business (usually from the US) and retire.

The local branch of PricewaterhouseCoopers produced a BC TechMap (the version I saw was produced in either 2004 or 2005) that depicts visually the number of technology companies started in BC and the assimilations and mergers over the years. There were hundreds of companies and it was extraordinary to see that most had been acquired. (I think the map starts in the 1980s and the 2004/5 version gave viewers information valid to 2003.) To summarize brutally, the business plan is to sell the business not grow it or invest in it for longevity. I suspect that where BC and nanotechnology are concerned that the same business plan will apply.

Tomorrow, science’s exquisite corpse.

Finland, Canada, innovation, and risk taking

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In Konrad Yakabuski’s article (I started commenting on it yesterday), Canada’s innovation gap, Finland is held up as an example of where innovation has fueled economic success. In yesterday’s posting I included quotes from the article which outline some historical reasons why the Finnish have embraced innovation. Now it’s Canada’s turn.

Yakabuski mentions Harold Adams Innis (an influential professor of political economy at the University of Toronto) and his work,

The staples theory was originally developed in the 1920s by historian Harold Innis to explain Canada’s development as a provider of valuable raw resources – initially fish and fur – to the British Empire. …

Though the staples theory seemed outdated as Nortel rose to prominence and Ontario’s auto sector grew to overtake Michigan’s, it has been revived recently by economists to explain the slide back into resource dependence. Raw or lightly processed resources declined steadily as a share of Canada’s exports between 1960 and 2000, falling by half from 90 per cent to about 45 per cent. But since the beginning of this decade, their share of exports has risen dramatically to 65 per cent in 2008, according to new research by Canadian Auto Workers economist Jim Stanford.

Not everyone buys this picture of Canada’s role as a “drawer of water and hewer of wood.” Preston Manning, former politician and leader of the Reform Party of Canada (which later merged into the Progressive Conservative Party) doesn’t. In his May 27, 2009 speech, Stimulating an Ailing Economy: The Crucial Role of Science, Technology and Innovation, at the Public Policy Forum’s Science Day in Canada he suggests that Canada’s founding was more than just a vision of uniting British North American Colonies into a single country.

From Manning’s speech,

But what few of us fully appreciate is that there was also a science-based dimension to that story and vision. A generation earlier the leaders and people of those same British North American colonies launched a scientific endeavour which was to contribute as much to the building of Canada as the BNA Act and the Canadian Pacific Railway. It was called the Geological Survey of Canada and began with a £1500 grant from the legislature of the United Colony of Canada to carry out a geological survey of its territory.

…

Why do I make reference to the historical role of the Geological Survey of Canada (which still exists today) in the formation of Canada? Because it reminds us that the Fathers of Confederation recognized that scientific investigation, and the technologies, innovations, and economic activities which flowed from it, had a vital role to play in the realization of the national vision. And if that was true in their day and generation, when many aspects of scientific investigation and technology were in their infancy, surely it is even more true today in an age when the scientific method has become the principal approach to problem solving and where science based technologies have become the principal drivers of the modern knowledge based economy.

Given the current emphasis on funding scientific and technological infrastructure over research and development (see Rob Annan’s postings on Don’t leave Canada behind for many examples including this one on Arctic research stations) I think we’re not taking risks, which is an essential element of innovation.

Finland is not an economic miracle right now, nor is Nokia. According to a June 30, 2009 statement from Finland’s Minister of Economy, the country is moving towards an 11% unemployment rate and as much as a 7% contraction in its economy. Nokia which has had economic woes since last fall, announced (April 16, 2009) that its earnings plummeted 90% year to year. Buying the Nortel division (mentioned in Yakabuski’s article) is a gutsy move and contrasts strongly with how Canadian business is dealing with the current economic uncertainties.