Canada and Ireland face similar innovation policy challenges
Canada will hold a general election on 19 Oct and with the economy confirmed on 1 Sept to have been in recession in the first half of 2015 due to the collapse in oil prices, the three main political parties have policies to improve on the dismal innovation performance. However, Jim Balsillie, co-founder of Research In Motion (RIM), now BlackBerry Ltd., says the maker of the world's first smartphone, was an anomaly in Canada and the country "isn’t equipped for global competition." Last July Damien English, minister of state for research, promised that Ireland would have a new "ambitious and visionary" strategy for investment in science by October — a visionary strategy may not be a credible one and policymakers need to understand the difference between invention and innovation.
Prof Danny Breznitz, an innovation specialist, spent 4 days in Ireland at the invitation of Enterprise Ireland in June 2007 and he said Ireland’s research infrastructure was too narrow in its focus and may not be sustainable. Ireland was not creating enough new businesses, and when new businesses were set up, the financial supports were not there to keep them innovating.
The Israeli native who was then at the Georgia Tech, said he feared that Irish research was too narrowly focused on biotech and the ICT, or information and communications technology industries. Breznitz's book 'Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan, and Ireland' was a study on state support for innovation in these 3 countries and he said in 2007 that if a country wanted sustained economic growth it had to focus on innovation, not only on the research side but on commercialisation and the growth of productivity.
Prof Breznitz is now based at the University of Toronto and this month wrote on Canadian politicians: "Our political leaders have failed us on this front for the past 15 years, those now campaigning to be our leaders offer no new ideas, and when they talk and write about innovation, they reveal a shocking lack of basic understanding about what it is...Technically, invention is the process of coming up with a truly novel idea, while innovation is the process of using ideas to offer new or improved products for the same overall cost of production. This is the reason why the most effective innovation agency in the world for the past 50 years, the Israeli Office of the Chief Scientist, has one clear and simple mission: the maximization of business-sector research and development (R&D) activities."
He adds: "For the past 15 years, Canada’s business spending on R&D has been in constant decline. Canada’s business R&D, now at 0.88% of gross domestic product, is so low that it is half of the Organization for Economic Co-operation and Development average of 1.64%, and about a third of what’s spent by countries such as Sweden or Finland."
In a separate op-ed article he co-wrote on the same topic:
"To compound this concern, there is an even more troubling fact. Canada is among the biggest public spenders on research and development. Not only do we have one of the highest levels of spending on research in the world by our postsecondary institutions, but Canada also has one of the most generous tax-incentive programs to support research-and-development spending. In fact, this is the key area where our leaders have failed. Instead of having an effective innovation policy, they have continued to rely on, more and more, tax incentives. Indeed, Canada is a global leader in proportions of R&D funding by tax incentives as opposed to direct spending programs. There is a problem with this approach: Tax incentives are the least effective tool to spur the creation of new technologies and new industries. At best, they may stimulate a moderate increase in R&D spending."
Innovation is high-risk and even where there is success, profit may be low as rivals enter the market with competing products. Two-thirds of new consumer products flop in the market place within 2 years according to GfK, Germany's leading market research firm, while over a third do not survive three months.
A focus on invention may not produce many jobs as the winners may be the innovators — ARM Holdings, the UK's biggest tech company, develops the technology for the flash memory chips that are installed in devices such as the smartphone. It only employs 3,000 people compared with over 100,000 at Microsoft.
Breznitz stresses that as governments cannot predict what future products or services are the ones that companies should focus on, policy should be geared towards spurring growth by stimulating companies and individuals to develop products, processes or services that we cannot, by definition, predict. "This is why it is so important for governments to constantly and rapidly experiment with different tools and different programs, kill what fails, scale up what works and continuously change their innovation policies in tandem with technology, industry and the global market."
With the regional fragmentation of products and services in global supply chains, governments have to choose the area where its companies could excel.
The Nobel Prize in Physics 2010 was awarded jointly to Andre Geim and Konstantin Novoselov "for groundbreaking experiments regarding the two-dimensional material graphene." The Russian-born scientists isolated the so-called "miracle material" at the University of Manchester in 2004:
In 2012 Prof Andre Geim wrote in an op-ed in The Financial Times:
[When in 2004 my University of Manchester colleagues and I discovered graphene, a material one carbon atom thick with extraordinary industrial potential, I set about trying to patent it. When I approached a representative of a multinational electronics company, I received a put-down that I recall whenever I am asked about patents. “If after 10 years we find graphene is really as good as it promises, we will put a hundred patent lawyers on it to write a hundred patents a day, and you will spend the rest of your life, and the gross domestic product of your little island, suing us.” As an executive from his main competitor told me this year: “He did not need to be rude but unfortunately this is how it works.” By then I knew enough about patents to appreciate the original advice. While I was outraged by its tone, it did save the taxpayer a lot of money in costs.]
George Osborne, UK chancellor, is a strong supporter of commercialising graphene in the UK and the FT reported in May 2014 that of the 11,372 patents and patent applications worldwide relating to graphene, the UK has filed just 101 — equivalent to less than 1%.
Nearly two-thirds were made by Asian companies or organisations, according to figures compiled by Cambridge IP, a UK-based technology strategy company.
China in particular has stepped up its bid to find the best ways to commercialise graphene. Between 2012-2013, it made more than 80% of all patent applications.
Jim Balsillie, the co-founder of Research In Motion, has highlighted the imbalance of small countries asserting rights to intellectual property (IP) ownership when the US controls the system of enforcement:
"Canadian politicians and policy-makers need to update their understanding of how the innovation economy works. Our American counterparts realized this long ago by jointly developing sophisticated intellectual property and commercialization expertise between the public and private sectors, and then aggressively using it. This was evident in the high-profile patent battle between Apple and Samsung, involving billions of dollars of annual royalty payments...Countries that owe their prosperity to innovation rely on sophisticated engagement between entrepreneurs and policy-makers. Google executives, including co-founder Larry Page and executive chairman Eric Schmidt, have visited the White House 230 times since Mr. Obama took office, an average of nearly once a week. If Google, Apple and other US tech companies get help from all branches of government to advance their collective prosperity, why are we insisting that Canadian entrepreneurs do it alone?"
Statistics Canada reported in 2012 that foreign-controlled firms accounted for 35% of R&D expenditures in Canada in 2010.
The comparable level in Ireland in 2013 was 65% and 54% in the UK.
We have recently covered issues of Irish innovation policy and patenting here.
The challenges facing Canada show that the civil servants that are working on a new science strategy for Ireland have not an easy task.
The Enterprise, Jobs and Innovation Department told Finfacts in 2012 that annual technology licensing income was below €1m.
Science Foundation Ireland's (SFI) 2012 target "in which Ireland in 2020 is the best country in the world for scientific research excellence and impact," was to politely put it not realistic for a small country with a dependence on American companies.
On being nimble and ensuring that innovation policies are adjusted based on feedback, the OECD said in its Economic Survey of Ireland in Sept 2013:
1. Reflecting significant uncertainties about the effectiveness of various innovation policy tools, independently and regularly evaluate all actions in this area, strengthen programmes with proven higher returns, and wind down the others. To promote effective evaluation, ensure all innovation and enterprise supports have sunset clauses;
2. The number of programmes and agencies multiplied during the period of booming growth. There are now over 170 separate budget lines, sometimes for very small amounts of money, and 11 major funding agencies involved in disbursing the Science Budget, although it is small by international standards. This fragmentation raises overheads, risks duplication and hampers resource reallocation. Gains would be achieved by consolidating funding into a drastically smaller number of agencies, with one group dealing with science and basic research, and another with applied research and innovation. This should be coupled with a high-level co-ordination committee to prevent gaps or duplication.
It appears nothing has been done on these matters in the past two years.
It should be kept in mind that science sometimes follows innovative technologies e.g. aviation flight, electricity and quinine for example are among many other key innovations for humanity where the science came later.
Policymaking should not depend on hunches and and screening out bitter truths.