Forget Recovery—It’s Time for an Economic Reorientation in Canada
COVID-19 made a shocking hit to Canada’s economy by shuttering business operations, halting trade and travel, and forcing the government to spend money that was never budgeted for so that Canadians and the businesses they work for could financially survive the pandemic.
“We need a new set of policy strategies and tools focused on enabling our job and prosperity engines – Canadian high-growth innovative technology companies – to soar.”
Meaningful recovery should not just aim at recouping the economic losses but also positioning Canada for success in the global economy that awaits us on the other side of the pandemic. For that, we need a new set of policy strategies and tools focused on enabling our job and prosperity engines – Canadian high-growth innovative technology companies – to soar.
Innovation experts have for years said that one essential element in sustained regional growth is the presence of significant concentrations of ‘scale-up’ companies. These are innovative, high-growth businesses whose ability to scale from millions to billions provide the most returns to national economies. Without a strong base of domestic, high-growth companies in Canada, our governments won’t have the critical public wealth necessary to pay down the deficit incurred during the pandemic, now slated to be over $250 billion.
“Without a strong base of domestic, high-growth companies in Canada, our governments won’t have the critical public wealth necessary to pay down the deficit incurred during the pandemic, now slated to be over $250 billion.”
It’s critical that Canadian policymakers begin working closer with market-proven, innovative companies to address their challenges to scale. Policy priorities for the tangible production economy focus on hands-off free markets but these are not the same success drivers in the intangible economy of IP and data.
Strategic, hands-on management is required now because the innovation economy is created, managed and regulated by the government. As seen in the United States, Sweden, South Korea and Israel, governments that work closely with their private sectors to create an ecosystem that allows them to scale up globally are seeing the greatest innovation outcomes. In Canada, an updated policy toolkit for the 21st century global economy would start with a strategy to generate and commercialize the most valuable national business assets: IP and data. Currently, Canada is lagging in patents, and a recent survey of technology leaders conducted by the Council of Canadian Innovators (CCI) found that 75% of Canadian companies either decreased their IP investment activities in research or patenting during the pandemic, or have kept investment levels at pre-COVID-19 levels.
IP and R&D intensity drive the valuation of high-tech companies and are the lead indicators for sustainable revenue growth in the future. A recent US National Bureau of Economic Research report states: “Patents are the most concrete and comparable measure of innovative output over countries and time.” Canada’s future economy relies on innovative companies increasing their R&D investments into intangible assets, like IP and data, and expanding their freedom-to-operate globally.
“Canada’s future economy relies on innovative companies increasing their R&D investments into intangible assets, like IP and data, and expanding their freedom-to-operate globally. ”
The most important things the federal government can do to ensure Canada’s homegrown companies are positioned for success in the post-COVID world is create national strategies for IP and data for our country’s most strategic sectors, including healthcare, cleantech, natural resources, agriculture, smart cities, energy and mining. In 2018, Canada announced a national IP strategy to support the creation and commercialization of IP, but the rollout has been slow. Despite calls from CCI over two years ago, there is still no national data strategy. Implementing the national IP strategy and creating a national data strategy are necessary elements of a successful economic recovery and overdue reorientation towards the innovation economy.
Canada’s recovery from the 2008 economic crises was buoyed by a heavy international demand for Alberta’s oil at its $100 a barrel price tag. In 2020, oil prices are at record lows and the international demand from a decade ago has abated. This is why a reorientation of Canada’s economic strategies towards its domestic innovation firms is required. Canada must be ready to adopt new thinking on innovation and not get stuck looking backwards for solutions for the future.