The current narrative about innovation in Canada misses the mark. Our problem isn’t the amount we spend on research and development. Nor is it the number of patents we take out or how much our productivity lags that of the US. Our problem is that we are not creating enough world class companies. We aren’t doing an effective job transitioning companies from startup to scaleup. The research in this section looks at macro issues about our behaviour as a nation in an attempt to influence public policy.
In a prior report on patenting we identified that Canada has a significant problem in that it frequently doesn’t commercialize its own inventions. In this report, we wanted to look at whether part of that problem might be due to a lack of government support particularly in the area of Physical Technologies.
Physical Technologies are distinct from other types of technology because of their long and complex commercialization path. And yet there are no government programs that support the early-stage physical technology commercialization without requiring some external matching of funding.
However without market validation, which you can’t get in Physical Technologies without a significant investment to prove out the value proposition, venture capitalists and other investors will not provide that external funding. Without their support, no matching funds are available so it is often easier just to license the technology to a third party who can afford the investment.
Canada’s Patent Puzzle
The prevalent Canadian narrative is that as a country, we struggle to compete in the global innovation economy. One metric that is often cited as proof of this is the number of patents we are granted in comparison with other advanced countries. In this scaleup research, we have looked more closely at Canada’s performance in the numbers of patents granted.
What we found isn’t that we have a problem securing patents, it’s that we have a problem with the commercialization of them. Canada’s success in obtaining patent grants in the US has improved by 143% over the last ten years. The number of patents with one or more Canadian inventors climbed to 8,903 patents in 2015, placing us eighth on a per GDP basis against competitor countries in 2015.
However, of the patents granted to Canadian inventors by the US Patent Office in 2016, 58% were assigned to companies domiciled in other countries. This is up from 45% in 2005. This means that Canada earns a return through commercialization for less than half of the patents granted in the US to Canadian inventors.
Patenting is an international, not a local activity; and the nuances of the process must be considered before the numbers are aggregated into a single indicator for the purpose of policy making.
Canadians lag Americans in their attitudes to innovation
Our study on attitudes towards innovation found that there are 29% more Americans than Canadians who have a strongly positive attitude towards innovation. Americans outscore us in almost every dimension of attitudes towards innovation, among managers and employees, men and women, and among all age groups.
While many reports bemoan Canada’s lack of spending on Innovation compared with the OECD, we haven’t been using the same definition of R&D and this has caused it to be under-reported. Furthermore, numerous reports on Canada’s innovation economy have pointed out not only that Canada’s BERD expenditures are lower than the OECD average but also that they appear to be declining over time. This white paper looks at why our definition differs and what that difference has meant to Canada’s reporting of R&D expenditures.
Thinking Inside the Box
My first study at the Impact Centre has shown that Canadians lag Americans in their attitudes to innovation. The study found that there are 29% more Americans than Canadians who have a strongly positive attitude towards innovation. Americans outscore us in almost every dimension of attitudes towards innovation, among managers and employees, men and women, and among all age groups.