By Alice de Koning and Yrjo Koskinen

The

Mark Carney

government is right to emphasize infrastructure such as pipelines, ports and power grids. But let’s be clear: Canada cannot grow prosperous by shipping raw materials alone. We’ve played that game for decades. It has made us stable, but not dynamic. To thrive in today’s economy, Canada needs to move up the value chain.

The latest Global Innovation Index (GII) makes the challenge plain. Canada ranks 13th in innovation inputs: strong universities, research spending and human capital. But we rank only 20th in outputs: patents, trademarks, high-tech exports and commercialization. In other words, we are good at setting the table, but poor at serving the meal.

This “innovation gap” explains much of Canada’s mediocre productivity. We spend on research, but fail to turn it into profitable companies. We generate ideas, but see them scaled up abroad. We train world-class graduates, but too often lose them to companies south of the border. That’s not just wasteful; it’s dangerous in a world where intangible assets such as brands and software drive wealth creation.

Canadian business culture is part of the problem. Too many firms are risk-averse. They underinvest in R&D, shy away from bold bets and stick to incremental improvements. The result is a steady flow of good, but not great, companies.

Worse, when Canadian startups do succeed, they often fail to scale up. The lucky ones are sold early to foreign buyers. Others hit a growth ceiling and stagnate because of limited domestic venture capital and a lack of managerial expertise in scaling up global operations. We end up as a farm team from which the best players move elsewhere to make their mark.

Meanwhile, competitors are racing ahead. It is not just the United States, but the European powerhouses of Switzerland, Sweden, Denmark, Finland and the Netherlands that are way ahead of us.

Countries that outperform us in the GII don’t just build research capacity. Their businesses and investors build commercialization engines. They foster strong industry-university collaboration, enforce intellectual property rights and channel financing into firms ready to grow. They make sure good ideas turn into globally competitive companies.

What should Canada do? First, we need to reward risk-taking. Strengthen tax credits for R&D and set clear expectations for Canadian businesses to take advantage of them. Make government procurement a launchpad for Canadian technologies. Give startups a chance to sell to their own government before being forced to look abroad. Likewise, Canadian businesses need to step it up and start adopting made-in-Canada innovations.

Second, we must fix the scale-up gap. Deepen venture-capital markets. Encourage pension funds to invest in Canadian innovators rather than defaulting to foreign safe bets. Build management programs that help founders make the leap from promising start-up to global player.

Third, Canadian companies need to treat intangible assets as seriously as physical ones. That means investing in intellectual property protection, building brands and cultivating the skills needed to compete on design, software and data. The goal is to come up with superior value-added products and services that deserve premium pricing in the global marketplace.

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Infrastructure matters, but pipelines and ports won’t solve our productivity malaise. Canada’s future prosperity depends on our ability to innovate, take risks and grow our own global champions. We have the people and the resources. What we need now is the ambition — and the courage — to back them.

Alice de Koning is a professor of entrepreneurship and innovation at the Haskayne School of Business, University of Calgary, and the academic director for the Hunter Hub for Entrepreneurial Thinking at University of Calgary. Yrjo Koskinen is the BMO professor of sustainable and transition finance at the Haskayne School of Business, and research director at the Institute for Sustainable Finance at the Smith School of Business, Queen’s University.