Canada gets “C” grade for innovation: Conference Board

Following decades of weak innovation performance, Canada is seeing small improvements in some areas. In the latest Conference Board of Canada’s innovation report card, Canada earns a “C” and ranks 9th among 16 peer countries. This is an improvement over the “D” grade and 13th-place ranking in the last innovation report card.

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“Canada’s improved grade is largely due to an increase in venture capital investment and a strong showing on a new measure—entrepreneurial ambition. These two indicators suggest that a healthier start-up and entrepreneurial environment may be emerging in Canada, an important element of innovation performance,” said Daniel Muzyka, president and CEO of The Conference Board of Canada.

Highlights

• The country has improved on venture capital investment and connectivity, and fares well on entrepreneurial ambition. It remains weak on information and communications technology investment, patents, business R&D and productivity.
• Ontario, Quebec, and British Columbia are the top-rated provinces, while Prince Edward Island and New Brunswick are the lowest-ranked provinces.

Although the set of indicators used is somewhat different than in past years, there is enough overlap to allow for some comparison. In this year’s revamped report, 10 indicators were used to evaluate the innovation performance of Canada and 15 peer countries. This includes indicators in three categories:

• innovation capacity—i.e., investments and resources that provide a foundation for research, idea-generation, and insight-sharing (including public R&D, researchers engaged in R&D, connectivity, and scientific articles);
• innovation activity—i.e., entrepreneurial ambition, investments in ICT and venture capital, and business R&D activity that help to transform ideas into commercialized products, services and processes; and
• innovation results—i.e., evidence of the impact of research, innovation and commercialization as captured in patents, and overall labour productivity.

Canada is a middle-of-the-pack performer on most of the indicators —it gets one “A”, three “B”s, three “C”s, and three “D”s.

Canada earns its only “A” on the new indicator, entrepreneurial ambition—a measure of the share of the working-age population reporting early-stage entrepreneurial activity, such as attempts to establish or own a new business.

Increased venture capital investment in a number of provinces, along with lagging investment in European countries since the recession, has vaulted Canada from being one of the weakest to one of the strongest countries on this indicator. Canada moves from 14th-place and a “D” grade in 2009 to 2nd place and a “B” grade in 2013 (the latest year for which comparable data are available).

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However, much of the growth has been in late-stage funding, which raises concerns about whether Canadian start-ups will have the early stage financing they need to thrive. The country also receives a “B” on scientific articles, measured as the number of peer-reviewed scientific articles produced in natural sciences and engineering per million population.

Canada has made some improvements on connectivity and information and communication technologies (ICT) investment moving from a “D” to a “C” grade on both indicators. The country scores its other “C” on labour productivity (measured as GDP per hour worked), where it ranks 14th among the 16 international peers. The reason Canada scores an average “C” grade on this indicator despite being at the bottom of the list of peer countries is because of the extremely low score of the last two countries in the list.

Canada’s public R&D as a share of GDP has decreased slightly in recent years, going from 0.89% in 2009 to 0.81% in 2013. As a result, Canada falls from “A” to a “B” grade on this indicator.

Already a laggard on business enterprise R&D (BERD), Canada has fallen from 15th to last place among the 16 international peers and receives a “D” grade. While most international peers have seen their BERD rise for much of the past decade, Canada’s BERD has been steadily dropping—both in absolute terms and as a share of GDP.

Moreover, with nearly half all of business R&D conducted by just twelve firms, there is even more reason for concern about long-term BERD performance. Canada also receives “D”s on patents and researchers engaged in R&D (including researchers employed in businesses, higher education and government).

For the first time, this year’s How Canada Performs: Innovation report card includes the provinces in the rankings and reveals that, while some provinces lag international peers, others perform near the frontier of global innovation excellence.

Ontario, Quebec, and British Columbia are the top-rated provinces and each earns a “B” grade overall. Not only do they rank highest within Canada, all three rank in the top 10 of the 26 comparator regions (10 provinces and 16 peer countries). Alberta sits in the middle of the pack and earns a “C” grade; while the remaining six provinces are at the back of the class with “D” and “D-” grades.

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