INST Committee Report

            At this point, it is important to take stock of the fact that the unprecedented growth in material wealth and well-being throughout North America — and the Western World for that matter — for most of this century does not simply reflect a quantitative increase in the same goods and services. While history is marked by notable inventions — often coined a general-purpose technology — the greater wealth that we enjoy today is largely the result of new commodities, processed from new technologies, and made of radically different materials. Indeed, people living at the beginning of the past century would surely find today’s marketplace to be made up mostly of goods and services that they could only dream about in their time. In some business sectors, today’s economic reality is in fact running far ahead of these once distant "flights of fancy."

            Sustained material wealth creation is more about working smarter and in new ways than toiling more intensively over longer working days surrounded by more machinery and equipment on a more spacious shop floor. Paradoxically, we are talking about change being a constant, that is, our methods of work should be in an almost constant state of flux, as we broadly incorporate the newest technologies, work rules, managerial processes and business organizational structures across the economy on a routine basis. This state of flux, however, must be sustainable and therefore managed, as Canadians are not automatons that can adapt instantaneously to new ways of work.

            Canada is committed not only to maintaining but improving its high standard of living and quality of life. However, in today’s increasingly globalized and knowledge-based economy, the country’s reliance on its traditional strategies of exploiting our bountiful natural resources and in attaining maximum scale economies in production are no longer the key factors in assuring our competitive advantage. As has been amply demonstrated by very wealthy countries with limited natural resources and small populations, entrepreneurial people who successfully apply human and capital resources to science and technology (S&T) in an attempt to push forward the frontiers of knowledge and then disseminate, apply and commercialize this knowledge can create competitive advantages in industry — Switzerland, Sweden, Norway and, more recently, Singapore and the Republic of Ireland come immediately to mind. So in a knowledge-based economy, a country’s wealth and economic success is no longer found in the ground, in the size of the manufacturing plant, or in the horizontal and vertical industrial expanse of the corporate conglomerate, but in the minds and creativity of its people. Such a competitive advantage, however, can often be short-lived as rivals imitate and strive to catch up.

            Innovation, as founded on S&T, has thus become the principal means for achieving economic success in the twenty-first century. However, such a demanding strategy, which will necessitate the development of a thoroughly comprehensive innovation culture throughout the business sector, will prove difficult for Canada, as Canadian businesses have historically been laggards in conducting R&D — the country’s GERD-to-GDP ratio, or gross expenditure on R&D per unit of gross domestic product, has averaged 1.5% compared to the Organisation for Economic Co-operation and development (OECD) average of 2.2% over the past two decades. Rather than developing new technologies, products and services in an across-the-board way for most of the leading sectors of the economy, Canada has obtained a good deal of them through foreign direct investment, primarily from its southerly neighbour, and by other traditional means. These would include franchising, licensing, subcontracting and alliances, not to mention old-fashion spillover transfers as knowledge leaks out from a pioneering source, trained labour and managers subsequently switch employers, and through improved quality and reliability of inputs provided by local suppliers of the innovating company. However, as a number of interested observers have recently noted, the widening "productivity gap" between Canada and the U.S. — the country we have been relying so heavily on for a number of industrial innovations — is itself largely the result of a widening "innovation gap" between the two countries.