Nudges will not be enough to make up for Canada’s persistent innovation deficit
So why can’t Canada translate its ample supply of the supposed raw inputs of innovation into more output? Start with the fact that, according to the latest research from Nobel Laureate Edmund Phelps, the main determinant of innovation is societal attitudes and values, not some laundry list of government policies. After all, the Soviet Union also had high levels of human capital and abundant energy but failed miserably at innovation.
Instead of cultivating risk-taking and entrepreneurship, the budget continues the grape-shot approach of scattering money across a wide variety of programs and industries: $15 billion over five years for the Canada Growth Fund, $1.0 billion over five years for the Canadian Innovation and Investment Agency, $750 million over six years for Innovation Clusters , $1 billion for a new Strategic Innovation Fund, and $1.2 billion more for regional development slush funds.
These investments will have no measurable impact on innovation because they are only about one per cent of the $216 billion businesses currently invest annually and they don’t address the underlying problem of values and attitudes.
The federal government’s inability to design an effective approach is hardly surprising given its lack of understanding of innovation. The budget laments Canada’s last-place global standing in business investment in research and development, but on the next page admits “invention is not enough.
The $38.3-million increase in funding for Canada Research Chairs exemplifies another flaw in government attempts to boost innovation. The budget claims the CRC program has created 2,200 lucrative positions at Canadian universities since its establishment in 2000.
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