Innovation, Competitiveness and Economic Development: The Case of Canada AFDC Biennial Forum 2006 September 21, 2006

Key Messages Innovation system consists of many complex and complementary activities A multi-pronged strategy is required: Government investments to address market failures and large externalities Sound economic environment

Links Between Innovation, Competitiveness and Economic Development Creating a flexible, productive economy is key to competitiveness Drivers of productivity: Physical capital Human Capital Innovation

Sources of Innovation Basic scientific research R&D in businesses External sources Key challenge: Transforming ideas into practical and marketable technologies

Canadian Efforts to Promote Innovation Canada is a world leader in publicly funded research…

Canadian Efforts to Promote Innovation (continued) …However, Canada lags in the G7 when it comes to R&D spending in the private sector

Canadian Efforts to Promote Innovation (continued) Steps to improve innovative performance: Strengthened publicly funded research Programs to help convert public research into marketable products and services Venture capital measures R&D tax incentives

Creating a Climate for Innovation Most important role for government: Create framework conditions for innovation Framework Condition #1: Macroeconomic stability Gives businesses the confidence and means to invest

Creating a Climate for Innovation (continued) Canada’s macroeconomic framework Low, stable and predictable inflation Sound fiscal management Competitive tax system Floating exchange rate regime

Creating a Climate for Innovation (continued) Framework Condition #2: Openness to trade and investment Competition increases incentive to innovate FDI provides access to new ideas, technologies and management practices Access to global markets increases returns to innovation

Creating a Climate for Innovation (continued) Framework Condition #3: Effective intellectual property rights Potential obstacle to innovation in developing countries

Innovation, Competitiveness and Economic Development: The Case of Canada AFDC Biennial Forum 2006 September 21, 2006