The IPL newsletter: Volume 15, Issue 309

INTRODUCTION

This newsletter is published by The Innovation Policy Lab at the Munk School of Global Affairs, University of Toronto, and sponsored by the Ministry of Research and Innovation. The views and ideas expressed in this newsletter do not necessarily reflect the views and policies of the Ontario Government.

OECD Science, Technology and Industry Outlook 2014

OECD
Squeezed R&D budgets in the EU, Japan and US are reducing the weight of advanced economies in science and technology research, patent applications and scientific publications and leaving China on track to be the world’s top R&D spender by around 2019, according to this new report. The report finds that with R&D spending by most OECD governments and businesses yet to recover from the economic crisis, the OECD’s share in global R&D spending has slipped from 90% to 70% in a decade. It warns that with public finances still tight in many countries, the ability of governments to compensate for lower business R&D with public funding, as they did during the worst of the economic downturn, has become more limited.

Finding Its Own Way: Ontario Needs to Take a New Tack

Institute for Competitiveness and Prosperity
Ontario’s prosperity gap with its North American peers is going in the wrong direction. In 2013, Ontario slipped to fifteenth out of sixteen peer jurisdictions on GDP per capita. Furthermore, the prosperity gap widened to $11,180 in 2013, up $180 from last year. Now, more than ever, public and private sector leaders in this province need to work together and take a new tack to get the economy moving in the right direction. This Thirteenth Annual Report highlights four fundamental issues that have played a role in contributing to, and could form a base for a solution for, Ontario’s subpar economic performance: shifts in industrial composition; under performance in key education indicators; lagging business growth; and inadequate levels of innovation. Without substantial change in these areas, Ontario will fail to close the prosperity gap and will continue to trail the competition.

New approaches need to address four significant challenges.

Industrial composition has shifted: Using extensive data on employment, wages, exports, and clusters for Ontario and the North American peers, the Task Force has unearthed some alarming trends and likely contributors to Ontario’s low productivity.

• Ontario has lost economic activity in important infrastructure industries, such as nonresidential and utility system construction.
• Business support industries, like human resource services and management of companies, have grown more slowly than in US peers.
• Ontario has a smaller advanced manufacturing sector than its peers and the share Ontario has is dominated by the motor vehicle parts industry, leaving Ontario vulnerable to negotiation and global economic forces.

Education system is under performing: Ontario must move to ensure that quality education emphasizes quantitative and technical capability. Occupations requiring math and science have the highest wages and most promising projections for growth. Yet Ontario students are falling behind students in peer jurisdictions in these two areas, despite significant government investment. Steps must be taken to ensure that students today have the math and science skills to fill the labour market needs of the future.

• Ontario students’ performance in science and math deteriorated in the last decade. Ontario ranked well relative to the OECD average, but performed poorly when compare to its North American peers.
• Math and science knowledge among teachers is significantly lower in Ontario than in its peers. Only 19 percent of students were taught math by a teacher with a major in math, and only 44 percent of Ontario students learned from a teacher who majored in science.
• Some teachers have argued that changes made to the math and science curriculum in 2000 are also proving to be very difficult for students, reducing their performance and understanding of the subjects.

Business growth lags: Ontario continues to fail to build globally significant companies, and provides incentives to “stay small.” To compete in the economy of the future, the province will have to consider new ways to inspire growth.

• Introduce smart regulations that reduce the cost and time of starting and growing a business.
• Encourage competition by opening industries up to trade, since competition drives innovation and productivity.
• Amend the government’s historic view of tax policy, to incentivize growth rather than favour the status quo SMEs.
• Rebalance and consolidate direct and indirect support for R&D.

Levels of innovation are inadequate: For years, the Task Force has noted that the province’s private sector could make more investments and innovations necessary to compete on a global scale. Now, Ontario must take a new tack to foster a competitive innovation ecosystem.

• Improve intellectual property protection laws so that home grown innovations stay close to home.
• Introduce a patent box to incentivize corporations to retain and repatriate their intellectual property.
• Set up a crown corporation to protect patents abroad.
• Build “innovation infrastructure” such as better benchmarking data and establishing a Productivity Ontario initiative.
• Continue efforts to teach innovation in secondary school.