Canada getting more innovative

For decades, Canadians have worried about how this country's prosperity can be maintained without an improvement in our mediocre level of industrial innovation. A new study confirms that Canada could indeed do better, but hints that this might be starting to happen.

The 43-page document, produced by the business intelligence and forecasting unit of The Economist and sponsored by Cisco Systems, the big U.S. maker of Internet servers, ranks Canada a modest 13th among 82 industrial economies for innovativeness.

That's far behind the leaders, Japan, Switzerland, the U.S. and Sweden. On the other hand, it's better than South Korea, Norway, Singapore or Britain.

The presence of countries like Switzerland and Sweden at the top of the rankings highlights one of the counter-intuitive findings of this study, which is that small countries - those with populations of less than 10 million - actually tend to perform better than big ones.

Among the top 10 innovators, the only big countries are Japan, the U.S. and Germany. There are more than twice as many small ones: Switzerland, Sweden, Finland, Denmark, Taiwan, the Netherlands and Israel. On the other hand, there are only a few big, rich countries, so one might take this conclusion with a grain of salt.

The study's authors suggest that there's actually a "small-country advantage" because education and welfare services are better there and networking is easier.

This wouldn't apply to Canada, which is closer in population to the medium-sized nations that join us in the also-ran zone of this ranking: France at 12th, South Korea at 15th, Britain at 18th, Italy at 19th and Australia at 21st.

But Canada has its own advantage: proximity to the U.S., one of the world's great innovation incubators.

That might help explain why the study, whose rankings are based mainly on patents issued over the past five years, predicts that Canada's rank will jump two notches to 11th over the next five years.

To the south, Mexico seems to be benefiting from this same effect, with a current ranking of 45th predicted to leap all the way to 39th.

The U.S. is, after all, the epicentre for new discoveries and commercial applications in the crucial technologies of our time, computers and biotechnology. even if it isn't the overall patent champion.

There's another, home-grown, aspect to the predicted improvement for Canada. This country has a balance of good performance both in direct influences on innovation, such as technical skills or broadband penetration, and indirect influences, such as a healthy economy or openness to foreign investment.

Other countries near our rank tend to be weaker in at least one of these influences on the innovation environment.

Although some would still argue that Canada's corporate culture could stand to be more aggressive in areas like training and research spending, this study's authors conclude that our overall environment for innovation seems to be moderately good and improving.

While we wait for this happy circumstance to do its good work, we can console ourselves that neither this study nor any of the previous work it examined seems to show a close link between innovation and national economic growth.

At first blush, this seems strange, since there is strong evidence - including some produced right here by Statistics Canada - that shows innovative firms to be more successful. If a country has more of these firms, shouldn't the whole economy be more successful?

But maybe there's no contradiction here. As Canada's own recent history demonstrates, there are different ways to become prosperous. Basically, you can be innovative or you can be lucky.

These days, Canada is lucky. After a long period when our natural resources fetched only modest prices, we're riding a worldwide boom in the value of commodities like oil, natural gas and industrial metals. As a result, Canada's economic growth right now is stronger than that of either the U.S. or Japan, despite their much more impressive record of innovation.

Eventually, however, the luck runs out. It's a safe bet that when commodity prices eventually come down to earth, we'll be much better off if we've learned to be more innovative.