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

2. 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

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

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

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

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

7. 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

8. 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

9. 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

10. 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

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

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