More on Canada’s innovation and growth challenge

Does Canada have an innovation problem or a corporate growth problem?

Another week goes by and another tree gives it life to a story about Canada’s ongoing innovation problem. Case in point is this story in the Globe and Mail which notes that “Despite bright spots in Waterloo, Ont., and Ottawa, the country’s performance on most of the important benchmarks of innovation has been deteriorating for years.”

To put why this matters in perspective, here’s the recently released 2013 Forbes list of Most Innovative Companies. Of 100 companies on the list, just 1 makes it home in Canada. That company, Valeant Pharmaceuticals (formerly Biovail) is a generic drug maker. By way of comparison, there are 39 US companies on the list, 13 Japanese, 7 French, and 5 from both Germany and the UK.

If one wanted to do a more detailed look at this “geography of innovation,” one might break the list down on a per capita basis. Based on GDP, Canada ranks dead last amongst the 20 countries measured, significantly behind comparatively similar economies in the UK, France and Germany. By population, ditto, as we saddle up beside Spain and watch every other comparable economy race past us.

No matter how you cut it, the end result is the same – Canada ranks dismally on a relative scale of innovation prowess. This despite government spending on R&D that is amongst the highest in the OECD, and despite consistently high scores on  measures of startup activity (see here and here). So what gives?

As Anthony and I write in our May 2013 report on “Driving Canadian Growth and Innovation,” Canada’s innovation problem is tied directly to an equally significant growth problem. We do a poor job graduating small firms into large, innovative ones. And so while the funnel of entrepreneurial startups may be wide, our success at channeling them into billion-dollar global leaders is weak.

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