Canada's competitiveness ranking masks innovation weakness: Conference Board

Although Canada’s global competitive ranking remains unchanged from last year, the country is languishing behind in innovation due to too little being spent on research and development, says a Conference Board report released Wednesday.

“Playing catch-up is not a winning formula — it is a path to mediocrity,” said the report, titled Canada’s competitiveness and Innovation Doldrums.

“Canada needs to focus its attention on blazing new trails that foster competitiveness and enhance its innovation and commercialization performance to create value-added growth and economic and social benefits.”

Overall, Canada remained at the 14th spot for a second consecutive year, down from the ninth position in 2009. In terms of innovation, was ranked 25th, a drop from 21st last year and 15th in 2011.

“When it comes to business innovation, Canada is seriously underperforming,” said Michael Bloom, the board’s vice-president of operational effectiveness and learning in a news release.

“Canada actually fell four places in factors related to innovation and business sophistication, and that’s a real concern.”

No other top-ranked country has dropped more in the competitiveness sub-index category, added the report.

Earlier Wednesday, the Conference Board’s partner, the World Economic Forum, also released its annual Global Competitiveness Index.

The Forum ranked Switzerland in the top spot for a fifth year in a row, followed by Singapore and Finland. Germany and the U.S. moved up two spots to fourth and fifth place respectively. Northern European countries continued to dominate the rankings, which are published annually.

The U.S. turnaround reflects “a perceived improvement in the country’s financial market as well as greater confidence in its public institutions,” the report concluded.

The Forum ranks a country’s competitiveness according to factors such as the quality of its infrastructure and its ability to foster innovation.

Klaus Schwab, the Forum’s founder and executive chairman, said innovation was increasingly the key ingredient in an economy’s ability to prosper.

“I predict that the traditional distinction between countries being ‘developed’ or ‘less developed’ will gradually disappear,” he said. “We will instead refer to them much more in terms of being ‘innovation rich’ versus ‘innovation poor’ countries.”

Canada maintained its overall ranking despite lower competitive scores because nine of the top 15 countries also suffered lower scores. The Forum said Canada continues to benefit from highly efficient markets, with its goods market coming in at 17th; labour market at seventh, and financial markets at 12th.

It said Canada ranks seventh in health and primary education, 12th in infrastructure, 14th in terms of well-functioning and transparent institutions and 16th for higher education and training.

The report said Canada’s competitiveness would be further enhanced by improvements in its innovation ecosystem such as increased company-level spending on research and development and government procurement of advanced research products.

While the time is right for Canadian businesses and governments to seek new ventures and markets, the Conference Board said the required steps aren’t being taken to be competitive citing that businesses under invest in technologies, new machinery and equipment and in staff training.

The survey viewed Canada as having the soundest banks, with Canadian businesses coming in at 26th in access to bank loans and 23rd in venture capital that help fuel the commercialization and innovation.

The breadth of its value chains, which is the process from resource extraction to production, marketing, design, sales and distribution, was ranked 57th. Canada’s competitive advantage ranking improved 31 places but was only 52nd out of 148 countries.

Trade barriers also continued to drag down Canadian efficiency. Canada ranked 65th on the prevalence of trade barriers, 58th on the extent to which rules and regulations discourage investment and 36th on the burden of customs procedures. It was 118th on imports as a percentage of GDP and 100th on exports as a share of the economy.

“By not maximizing the value of its institutions, infrastructure, natural and human resources, and financial and goods markets, Canada is missing out on major opportunities,” said the Conference Board.

— With files from the Associated Press