One-half of GTA’s private sector believes government responsible for driving innovation

See little ROI in new technologies, innovative skills training, R&D
||Last Updated: 11/02/2012

One-half of Greater Toronto Area (GTA) businesses and organizations perceive little to no return on investment in new technologies, innovative skills training product development or fostering research and development partnerships with academic institutions

That’s according to a study released by George Brown College, based on a survey of 314 GTA employers.

Toronto Next: Return on Innovation reinforces Canada's well-known reputation for a lack of private sector investment in innovation, with 50 per cent of respondents saying government bears the primary responsibility for driving investment in innovation.

Only 21 per cent of respondents put the responsibility on the private sector.

In ranking the importance of productivity, innovation and creativity to their business, more than 90 per cent of GTA employers said productivity was the most important, found the survey.

Yet one-half perceive a modest or no tangible return on an investment in new technologies, innovation skills training, development of new products and services or fostering research and development partnerships with academic institutions — all of which have been aggressively promoted by Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney as key ingredients in enhancing Canada's productivity scores, said the college.

"We anticipated employers would take a pragmatic view with a bias towards tangible, short-term returns on innovation," said Anne Sado, president of George Brown College. "But we did not expect to see such a profound deference to government as the primary innovation engine nor the lack of strategic investment in new technologies and R&D partnerships that enable strong productivity.”

Although a majority (76 per cent) of respondents acknowledged the positive correlation between innovation and the competitiveness of an organization and a regional economy, few (41 per cent) see an explicit link between a culture of innovation and productivity.

"We clearly need to view these results in the context of a sluggish regional and global economy that would give any organization reservations about investing long-term," said Sado. "But the low value placed on innovation as a driver of productivity, coupled with dependence on government to spark our collective innovation potential may pose the biggest risk to productivity and growth.”

However, larger businesses were very likely to invest in innovation if it helped make an existing process more efficient and effective — at 66 per cent — while small business — at only 56 per cent — were very likely to invest when presented with the same this scenario, found the college.

When presented with the premise that investment in innovation would increase long-term profitability but reduce profits in the short-term, 36 per cent of mid-sized to large businesses said they would be very likely to invest. Small business owners were much less motivated by long-term gains, with only 24 per cent saying they would be very likely to invest.

"There is a common perception that small businesses and start-ups tend to have a higher risk threshold and see the explicit value of spending money to make money. But GTA businesses we surveyed are proving to be the exception," said Robert Luke, assistant vice-president of research and innovation at George Brown College. "We are seeing a considerable level of risk aversion and focus on short-term gains amongst small businesses which, given the huge influence of small business on our regional employment and economic condition, may be a key barrier to long-term innovation and enhanced productivity."

When it comes to the primary barriers to innovation, difficulty sourcing innovative employees (72 per cent) and concerns that upfront investments will not deliver long-term gains (74 per cent) were the top two barriers, found the survey.

However, when asked to identify reasons for Canada's lagging innovation record, the number one response for one-third of respondents was Canada is too dependent on "old economy" industries. One-quarter blamed a lack of private sector venture capital investment.

The full report is available at George Brown.

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