Science, Technology and Innovation in the Global Environment: Emerging Trends and Policy Challenges

Remarks by Kevin G. Lynch
Clerk of the Privy Council, Secretary to the Cabinet and Head of the Public Service
at the Canada – OECD roundtable

March 17th, 2008
Ottawa, Canada

Introduction

I welcome this Roundtable --- it addresses timely and structurally important public policy issues in a horizontal “whole-of-government”, “whole-of-society” way.

The stated aim of the Roundtable is very ambitious, and appropriately so: --- “to provide senior federal policy-makers with insights into the emerging drivers shaping the international science, technology and innovation landscape, and the policies and approaches adopted by key global players to realize the benefits of linkages to the global supply of knowledge, ideas and talent.” The challenge for policy makers is to understand the meaning of these trends and developments, and how to capitalize on them.

I also greatly appreciate the participation of the OECD in the Roundtable. The OECD has much to contribute to this discussion and this contribution highlights a real strength of the OECD --- rigorous, cross country comparative microeconomic data which provide a richness of analytic information and capacity for cross sectional hypothesis testing that is simply not available with own-country time series.

Challenges and Opportunity: Innovation and Globalization

But let’s begin at the beginning: why such a focus on innovation and globalization today? Neither is remotely a recent phenomenon.

All true, but what is more recent is a clearer analytic understanding of the role of innovation in driving growth in productivity performance and standards of living. Innovation, the ability to envisage and create new products and services, or to produce existing products in different ways, lies at the heart of modern competitiveness. Joseph Schumpeter noted: “without innovation, no entrepreneurs; without entrepreneurial achievement, no capitalist returns and no capitalist propulsion”.

In short, the modern wealth of nations is driven not only by our physical capital and human capital but also by our intellectual capital, and the dynamic interaction amongst them called innovation.

Similary, while globalisation is hardly new --- consider the trading exploits, population movements and knowledge transfer of the ancient Greeks, Romans, Chinese and Inca --- the pervasiveness and depth of globalization today, facilitated by ICT (information and communications technologies) appears unique, with profound implications for all of us. And that is why this Roundtable is timely.

So how does all of this crystallize into public policy challenges, opportunities, options and choices for Canada, as well as other OECD countries, today and into the future?

Canada’s Approach

The Canadian government, in its 2007 Science and Technology Strategy as well as recent budgets and speeches, has set out the broad architecture for how Canada should approach these issues. To paraphrase, loosely, there are 7 broad aspects to this long term Canadian approach to innovation.

First, the paradigm matters. We believe that S&T has been, and must increasingly be, a core driver of increases in our productivity growth and standard of living. We also believe that, to be successful, a focus on S&T must be complemented by a focus on an increasingly skilled work force.

Second, the macroeconomic framework matters. We believe that a competitive, low inflation, low debt, fiscally balanced, macroeconomic environment leverages good microeconomic policies.

Third, focused priorities and critical mass matter. We need to be clear about our comparative advantages, clear about our core national policy objectives and clear about our priorities and how they align with our strengths and objectives. A mid-size country that attempts to be a leader in everything will be a leader in nothing.

Fourth, attitudes matter. We need to focus more on global excellence, not local excellence, in S&T and innovation. As well, we need more emphasis on speed and agility, rather than process and entitlement.

Fifth, a global mind set matters. The most important implication of pervasive globalization is that all Canadians need to think globally, understand profoundly the opportunities and challenges posed by the rest of the world. We need to infuse this global mind set into not just how we approach business or public policy but also how we approach S&T and innovation.

Sixth, commercialization of publicly funded S&T matters. For Canadian taxpayers to support public funding for S&T there has to be a clear public good, and this means a significant contribution to wealth and job creation in Canada as the paradigm itself suggests.

Seventh, robust private sector investment and involvement in S&T matters. Canada is a market-based economy, and the vast majority of the productivity gains from S&T must come from private sector investment in, and deployment of, S&T. Unfortunately, the record of private sector R&D investment in Canada is very mixed at best.

The Canadian Structure Today

With the government’s 2007 Science and Technology Strategy (“Mobilizing Science and Technology to Canada’s Advantage”) and the 2007 and 2008 Budgets, it is useful to take stock of where we are headed --- the structural vision, and where we are today along that longer-term journey.

(a) Science and Technology

The core “toolkit” of federal public funding for S&T in Canada supports both a solid base in all areas of research, and capacity for global excellence in focussed areas. It includes:

• Granting Councils: annual funding of $1.7 billion in 2008-09 (CIHR ($760 million); NSERC ($760 million); and SSHRC ($210 million).

• Indirect Costs of Research: annual funding of $330 million in 2008-2009 to support university research infrastructure costs.

• Canada Foundation for Innovation (CFI); cumulative funding of over $4.2 billion since its inception in 1997.

• Canada Research Chairs (CRC): 2,000 CRCs at an annual funding of $300 million in 2008-09.

• Global Excellence Chairs (GECs): 20 new global excellence chairs ($10 million per chair over 7 years) in targetted S&T areas.

• Centers of Excellence: through Budget 2007, the government has announced $270 million for 19 centers of excellence including centers with a commercialization focus.

• Genome Canada: cumulative funding of $840 million since its inception in 2000.

• CANARIE: Canada’s high speed research network ICT backbone at a cumulative investment of $330 million since in 2000, with additional funding from the private sector.

• Large Science Facilities: investment in large science facilities including the Canadian Light Source Synchroton; the Sudbury Neutrino Observatory (SNO) and TRIUMF.

• Federal laboratories: a considerable number of federal laboratories and research centres which engage in basic, regulatory and applied research at an annual funding of approximately $2.3 billion.

• Industrial Research Assistance Program (IRAP): assisting private sector firms, primarily SMEs, with technology transfer and adaptation for incremental innovation at an annual funding of $155 million.

• Scientific Research and Experimental Development (SRED): tax assistance in support of private sector R&D activities at an annual tax expenditure of more than $4 billion per year.

• Charitable giving: tax assistance in support of charitable giving to universities and research hospitals.

(b) Skilled workforce

The core “toolkit” of federal public funding for developing a skilled workforce in Canada is largely geared to the individual. It includes:

• Canada Student Loans Program (CSLP): assisted roughly 344,000 full-time students in 2005-06 with total loans of $1.9 billion.

• Canada Student Grant Program (CSGP): will assist roughly 245,000 students at an annual funding of $488 million in 2009-2010.

• Canada Graduate Scholarships (CGS): 4,600 graduate scholars at an annual funding of $125 million in 2008-09, growing to 5,000 awards by 2009-10.

• Vanier Global Scholarships: 500 Phd scholarships to globally excellent scholars to study in Canada at a cost of $25 million per year.

• Canada Social Transfer: annual transfer of $3.2 billion in 2008-2009 to the provinces and territories to support, in part, PSE funding.

• Tax support of $1.8 billion to help students and families save for their education and deal with tuition and other costs.

Where does globalization come in?

No snapshot of what and how a country is doing in S&T/innovation is adequate without an understanding of how it is tapping into, drawing from, contributing to and benchmarking against the global market place of ideas, research and highly qualified people (HQPs).

Here, Canada needs to develop more focussed research alliances with leading global R&D institutions. And here as well, Canada needs to better attract the global best to study and to do research in Canada. In the most recent Budget, the government has taken some truly innovative steps in this regard with the creation of the Vanier Scholarship and the Global Excellence Chairs.

Finally, Canada has to do more to develop its S&T/Innovation “brand” among global researchers, educators and business leaders as part of our economic strategy as well as our S&T strategy.

What are the areas of focus going forward?

Over the last 10 years, Canada has made much progress in creating an appreciably stronger and more confident research foundation.

In terms of public research and development performance (as a percentage of GDP), Canada now ranks first in the G-7 and in the top five among all OECD countries. However, Canadian business spending on research and development performance is lagging, ranking 15th in the OECD.

On the education and skills side, a number of Canadian provinces (particularly Alberta and Québec) are doing well on the K-12 PISA scores, and Canada ranks first in the OECD for the proportion of the population with PSE. However, less than half of the population has some PSE, and Canada ranks less well for university degrees, particularly in the sciences.

Looking ahead, and building upon this, the key challenges are:

• A relentless pursuit of excellence --- pretty good is just not good enough. For example, the 2008 Budget stressed the importance of international peer review by the granting councils and CFI.

• Focus and alignment of our S&T priorities with our national policy objectives and comparative advantages. The S&T strategy identifies four clear areas for focus: environment; natural resources and energy; health; and, ICT.

• Consistent with these excellence and focus themes, the establishment of global research collaborations to move our capacities in these areas to a higher level.

• Greater Canadian private sector engagement in S&T, and greater university commercialization of R&D

Conclusion

We live in an era of profound globalization, with all its opportunities and its risks.  The marketplace has become truly global, where new competitors are as likely to originate in Shanghai or Hanoi as in New England or Michigan.  In this global economy, the constant opportunity is ever bigger markets, and the constant challenge is ever more competitors.

As Tom Friedman has so perceptively observed: “If globalization were a sport, it would be the 100 meter dash --- over and over and over.”  In this world, how do economies best position themselves to meet the challenges and reap the opportunities provided by globalization? Why do some countries, big and small, move ahead of the pack while others, often with similar endowments, fall back?  The answer in part is innovation.

Innovation --- the continuing quest to develop new products, new business processes, new global marketing --- will be one key to Canada’s future competitiveness and improving our productivity.  The future will depend importantly on how well we develop a world class management culture and cadre, encourage more entrepreneurship, and embrace competition and do world class research and development.  We have to do better in S&T, including the commercialization of our research, to be competitive against the U.S., China and India in the decades to come.