April 29, 2009

Innovation and Business Strategy: Why Canada Falls Short

The Expert Panel on Business Innovation

Summary

Innovation is the manifestation of human potential and creativity. It allows societies to solve problems, and seize new opportunities, and achieve higher standards of living. Innovation is what makes businesses thrive. Canadian businesses, however, seem to lag in innovation behind the United States and other comparable countries. To find out why, Industry Canada asked the CCA to assess the innovation performance of Canadian business.

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The Question

  • How should the innovation performance of Canadian firms be assessed?
  • How innovative are Canadian firms, and what do we know about their innovation performance at a national, regional and sector level?
  • Why is business demand for innovation inputs (for example, research and development, machinery and equipment, and skilled workers) weaker in Canada than in many other OECD countries?
  • What are the contributing factors, and what is the relative importance of these contributing factors?

Key Findings

Despite an outpouring of research and commentary over the years on the innovation behaviour of Canadian business, the understanding of it remains incomplete. The aim of this report was to contribute to a greater understanding through analysis and diagnosis based on existing literature and the experience of panel members.

The Expert Panel on Business Innovation approached innovation as an economic process, rather than a science and engineering activity. The Panel provided a long-term perspective on the fundamental factors that connect business strategy, innovation activity and productivity growth.

The Panel’s principal conclusion is that Canada’s poor performance in respect of innovation is due to the prevalence of business strategies that do not emphasize innovation as a key competitive tool. It follows that the starting point of any exercise that aims to improve Canada’s productivity performance should be to understand why so many Canadian businesses and entrepreneurs choose business strategies that place little emphasis on innovation. A focus on the determinants of business strategy, rather than on innovation activities themselves, is the most significant new contribution of this study.

 

Expert Panel

The Expert Panel on Business Innovation