Three Ways to Bridge Canada's Innovation Gap

This op-ed was originally published by the Toronto Star on Tuesday, April 9, 2013. Read it on the Toronto Star's website.

On Thursday the Conference Board of Canada continued the steady drip of disappointing news about Canada’s research and innovation performance.

Ranked 13 of 16 industrialized countries for innovation and related metrics, Canada faces what can only be diagnosed as a crisis of complacency.

What else could it be? When it comes to revving up our innovation engines, we’ve got everything we need.

We’ve got the human capital, thanks to the country’s world-leading rates of post-secondary education attainment; we’ve got the financial capital, with an estimated $600 billion in so-called “dead money” smothering corporate balance sheets; and governments have shown they’re willing to spend the political capital: Canada has one of the most accommodating research and development tax structures in the Organization for Economic Co-operation and Development.

We’re innovation laggards in spite of ourselves.

The good news is that we have the power to change things for the better.

We have to stop thinking of innovation as marginal improvement of a handful of financial measurements driven by incremental policy tinkering. Those measurements – even when they’re tracking in the right direction – are merely scattered proxies, inconclusive symptoms of a far deeper cultural and economic circumstance.

Innovation accelerates society’s capacity for revitalization and growth. It’s a phenomenon that flows from the optimized interplay of the right inputs. But what are they?

Educational attainment is part of it, and so is wealth and so is political will. The gap for Canada is our underutilization of universities as hubs for innovation, the absence of robust access to capital and our dangerous retreat from basic research.

Universities aren’t inevitably or obviously well-springs of innovation – but they can be, with the right mix of policies and priorities. Most importantly, universities should adopt inventor-owns intellectual property policies as magnets for the world’s best and most entrepreneurial researchers. They should foster the innovation that naturally follows.

Entrepreneurial researchers are a package deal. They develop valuable IP to drive private sector innovation and business relocation, and they attract entrepreneurial students who in turn create local businesses and wealth if you give them the tools and capital access.

The University of Waterloo’s inventor-owns IP policy and our co-operative education program draw entrepreneurial students en masse to our campus, where huge spaces are now dedicated to student entrepreneurial space and start-up incubation. Since 2008, student entrepreneurs from our VeloCity program alone have created 45 businesses and generated $70 million in revenue.

Access to capital is another key ingredient, conspicuous in its absence from the Canadian innovation mix. Without access to capital, good ideas go south of the border. It’s that simple. Creating a critical mass of capital accessibility requires smart policy and direct public investment to improve our national venture capital system. Public investment has been key to bringing fledgling VC markets to viability across the United States, in Israel and elsewhere. Already in Canada, companies awarded major defence contracts are normally required to reinvest in the Canadian economy through a range of approved expenditures, under the Industrial and Regional Benefits policy. Why not make VC investment eligible and encouraged under these government procurement rules?

Basic research is the third absentee from Canada’s approach to innovation. A profound and dangerous misunderstanding about the value of research is pervading Canada’s public discourse. We need to snap out of it. Funding for applied research – that is, research specifically designed to achieve a commercial purpose – is holding steady or rising, while funding for basic research is on the wane.

Cuts to basic research dam up the flow of human knowledge and understanding, and thus the ability of societies to revitalize and grow. Basic research is the ultimate source of human knowledge. It’s who we are: discoverers, explorers and beholders of the world around us. Basic research – like theoretical physics and quantum information science – dives deeply into the big questions of matter, movement and meaning, and the only reason it doesn’t look like commercial opportunity is because it’s simply too far upstream to perceive its potential.

We need to bring university innovation, access to capital and basic research to the table – now. This month, the University of Waterloo will host the first annual Leadership Innovation Conference, designed to further understand and expand the innovation ecosystem that has catapulted Waterloo, Ont. to the top end of global innovation ecosystem rankings such as Startup Genome. We’re bringing researchers, entrepreneurs, investors and visionaries together to build on our regional success, and to signal a way forward for regional economic ecosystems in Ontario and across the country.

In Waterloo Region, massive investments of vision and capital from legendary innovator Mike Lazaridis are leveraging the University of Waterloo’s global leadership position in quantum information science to create the new Quantum Valley. Here in Canada’s innovation capital, we know that deep research, entrepreneurialism and VC systems are each indispensable enablers of innovation.

We’re going to tell our story and offer solutions by taking concrete action – that most elusive and critical innovation enabler of them all.