Montreal — Ottawa’s Innovation and Skills Plan offers only part of the solution to Canada’s innovation challenge. Current initiatives focus too much on generating new technology and innovation through R&D tax credits, subsidies, and venture capital, and they do not address the broader issue of low uptake and market demand for leading-edge technologies, says a new study by the Institute for Research on Public Policy.

Canada’s poor record on productivity growth and business R&D is widely acknowledged and has long been viewed as a policy priority. Yet decades of government-led attempts to promote productivity and innovation through supply-side measures like R&D tax credits have not produced the desired results. Jakob Edler (the study’s author and a top expert on innovation policy in Europe, who was asked to comment on Canada’s innovation strategy) argues that the real source of the problem lies on the demand side: if businesses do not use the latest technologies they fall behind in productivity; if businesses do not sense the market is ready to absorb their innovations, they are reluctant to innovate.

“Canada’s innovation policy needs to address these demand-side problems, and more effort should be made to mitigate what businesses consider to be the biggest obstacles to innovation: uncertainty and risk,” says Edler.

In his view, a more balanced approach is required ─ one that intervenes on the demand side to accelerate the diffusion and adoption of new technologies, and to create new markets, by

• increasing the public sector’s ability to demand and absorb innovations, and hence be a better partner for innovative firms,
• calling for innovative solutions to address societal challenges and mobilizing citizens, businesses and public bodies as buyers of these innovations, and
• connecting producers and users to encourage user-driven innovation that is responsive to market needs.

Edler concludes that linking societal purpose and economic benefit should be the guiding focus for a future-proof innovation policy in Canada.

A Costly Gap: The Neglect of the Demand Side in Canadian Innovation Policy, by Jakob Edler, can be downloaded from the Institute’s website (irpp.org).

The Institute for Research on Public Policy is an independent, national, bilingual, not-for-profit organization based in Montreal. To receive updates from the IRPP, please subscribe to our e‑mail list.

Media contact: Shirley Cardenas   tel. 514-594-6877  scardenas@nullirpp.org