Innovation in Alberta - are we asleep at the switch?
By Peter Josty
The Alberta economy is booming. Once again we're ranked as one of the
highest growth provinces in Canada. The government has a huge surplus,
and unemployment is almost non-existent. So why should we worry about
the innovation performance in Alberta? There are four signals that we need
to be concerned about?
Low R&D spending About $1 billion is spend on R&D in Alberta each year. That sounds like a
lot of money, but to put it in context, it is 1% of provincial gross domestic product, much less than
the Canadian average of 1.6% and far less than the 2.8% in the US (See table).
Low Venture capital investment Last year about $190 million of venture capita; was invested in
Alberta, 3% of the Canadian total, much less than our population share of 10%. That number
pales into insignificance when compared with the $103 billion spent in the US.
Shortage of high skilled professionals. In a recent survey of high tech companies in Alberta,
the number one concern of CEOs was finding qualified professionals to hire.
Small high tech sector. There has been a major growth in high tech firms in recent years, with
names such as Cell-Loc, Wi-Lan, Nortel Networks, Biomera, but the overall size of the high tech
sector is still smaller than the high tech sectors in BC and Ontario.
Why does innovation performance matter, anyway? Won't our oil and gas and other natural
resources be enough? As a friend of mine said, the Stone Age didn't end because of a shortage
of stones. It ended because more efficient ways were found to meet people's needs (in that case,
the use of bronze and iron.)
We are in the midst of a transition from a resource and industry based economy to what is often
called the knowledge economy. The industrial economy was based on mass production, and the
manufacture of standardised goods and services. The knowledge economy is based on
exploitation of knowledge - in other words, innovation - and is being driven by several key
technologies - information and communication technology and biotechnology.
Does this mean the resource and industrial companies will just fade away? Absolutely not. But
they will do their business in very different ways. 100 years ago, for example, most Albertans
worked on the farm. Today fewer than 5% do, but they produce more food, because of the
application of new technology. We will fall behind others if we don't get more involved in the
knowledge economy.
So what can we do to improve our innovation performance? No one has all the answers to this
question. But if we look at what some other countries have done, the following seem to be
important factors:
1. Build a competitive business climate. Innovation thrives where competition is strongest.
Improving the business climate would include such items as lower tax rates, reduction of
regulation and red tape, higher safety and environmental standards, and keeping the legal
framework up to date.
2. Spend more on R&D. R&D spending can be looked on as an indicator of how knowledge
intensive the economy is. High tech firms spend much more on R&D than resource firms,
because they have to to remain competitive. The provincial government has made major steps to
increase university research by the two big foundations - the Alberta Heritage Foundation for
Medical Research and the Alberta Heritage Foundation for Science and Engineering Research.
3. Train more skilled professionals. The centre of most high tech clusters is a major university
that fuels the cluster with new ideas and skilled graduates such as IT professionals, biochemists,
engineers, managers and entrepreneurs.
4. Encourage entrepreneurship and risk taking. Silicon Valley is probably still the largest and
hottest high tech cluster in the world, even after the high tech meltdown. It has a highly
entrepreneurial culture, which celebrates entrepreneurs and new start up companies.
So, are we asleep at the switch? Definitely not! Do we need to more? Yes, much more. Is it
important? Yes, it will probably determine if we are a have or a have not province by the middle of
the 21st century.
Source: OECD, Statistics Canada.
Data Table
Mexico
Alberta
Australia
Canada
UK
Ontario
Germany
USA
Japan
0.3
1.0
1.6
1.6
1.8
2.0
2.3
2.8
3.1
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Peter Josty is Chair of the Steering Team for the Centre for Innovation Studies in Calgary. He can
be reached at p.josty@thecis.ca