Despite the presence of companies such as BlackBerry, OpenText, Mitel Network, Sierra Wireless and newcomers such as Hootsuite, Canada received an extremely poor grade when it comes to innovation.

Canada ranks second-to-last among its peers in venture capital investment and business R&D spending, according to The Conference Board of Canada’s ranking of innovation among the world’s leading economies. And the rest of the report card doesn’t get much better, as Canada ranks 13th in the 16-country How Canada Performs benchmarking.

Daniel Muzyka, president and CEO of the Conference Board of Canada, said despite a decade or so of innovation agendas and prosperity reports, Canada remains near the bottom of the pack among its peers on innovation.  Governments and other organizations, along with many individuals, have done their best, but gaps remain in innovation investment and activities that have created serious consequences for the economy and society. More importantly, Canada may have reached a point where it impacts the wealth and opportunities for following generations.

“It may seem counter-intuitive due to our low overall ranking, but Canada actually gets above-average grades on the quality of its scientific research and the creation of new businesses. But these signs of promise are not being turned into commercially viable products and services, and successful, globally competitive companies are not emerging from our creative ideas,” he said.

According to the rankings, Switzerland, Sweden and the United States earn overall “A” grades.

Canada is weak at all three categories of the innovation process – creation, diffusion, and transformation — and performs poorly on most of the 21 indicators.
Canada is above the 16-country average on six indicators: top-cited papers, ease of entrepreneurship, government online services, new firm density, scientific articles, and aerospace exports. It is about average on public R&D spending.

Canada performs poorly on most of the 21 indicators in this year’s revamped Innovation report card. By grade, Canada gets 13 “D”s, two “C”s, six “B”s, and no “A”s.

Eleven new indicators were added this year:

· New firm density – “B”, 2nd of 15

· Ease of entrepreneurship index – “B”, 4th of 16

· Government online services index – “B”, 4th of 16

· Top-cited papers index – “B”, 5th of 10

· Public R&D spending – “B”, 8th of 16

· ICT investment – “D”, 8th of 15

· Connectivity – “D”, 14th of 16

· Patenting firms less than 5 years old – “D”, 13th of 15

· Patents index – “D”, 14th of 16

· Venture capital – “D”, 14th of 15

· Business R&D spending – “D”, 15th of 16

Canada gets a “D” grade on venture capital investment. The rate of venture capital investment in Canada amounts to less than half of that of the “A” performers – the United States, Sweden, and Switzerland. Canada needs a larger and more dynamic equity and venture capital industry that is ready to invest in and provide guidance to Canadian seed, start-up, and early-stage companies.

The Conference Board report, Financing Innovation by Established Businesses in Canada, discusses the tools and metrics innovators need to use to attract investors.

Canadian companies are also poor spenders on R&D —regardless of the business they’re in, the report found.

Canada has been a “D” performer on business expenditures on research and development (BERD) since the 1980s, and spending in Canada fell from 1.29 per cent of gross domestic product (GDP) in 2001 cent to only 0.89 per cent in 2011. The United States spends twice as much as Canada on BERD, and Canadian businesses spend only a third (as a percentage of GDP) of what businesses in Finland spend on R&D. Canadian business leaders must recognize that the cost and risk of not spending on research and innovation are outweighing the cost and risk of spending and innovating.

How Canada Performs is a multi-year research program at The Conference Board of Canada to help leaders identify relative strengths and weaknesses in Canada’s socio-economic performance. The How Canada Performs Web site presents data and analysis on Canada’s performance compared to 15 other peer countries in six performance categories: Economy, Innovation, Environment, Education and Skills, Health, and Society.

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