The key to innovation

On Tuesday there was an interesting discussion on the innovative edge of the Canadian economy on CBC [Innovation: Losing the Edge]. It highlighted reasons for the decline of innovation and possible solutions for its long-term development. Problematic aspects addressed, included: the narrow view of policy on high-tech sectors, the sometimes ‘too local’ approach, the missing focus on the commercialization process of innovative ideas and the underinvestment into human capital – including forms of education, the support of raw talent and the pace of hiring and firing.
All of the contributors, Roger Martin (Rotman School of Management), Ilse Treurnicht (MaRS Discovery District), Armine Yalnizyan (Canadian Centre for Policy Alternatives) and Kunal Gupta from Polar Mobile, agreed upon the fact that there need to be long-term solutions for Canada to get its edge in innovation back. They suggested education elements fostering innovative thinking, the overall prioritization of innovation in politics, tax breaks for growing companies and an immigration strategy that fosters entrepreneurs and raw talent.
These are all viable solutions to being innovative in the long-run, but what the discussion was missing from my perspective was the networking aspect of creating such as success. Only once, Ilse Treurnicht raised the issue of connecting young to growing companies in order for them to learn and become bigger. To my mind, this aspect should go beyond this connection. As said in the clip, government is spending a lot of money on innovation, but the output is never properly measured or tracked. Instead, government often overspends on high-tech development without addressing the underlying structure for innovation to happen and affect the overall economy. Local networks are the ones that enable knowledge flows between firms and the cooperation between government, research and industry – regardless of the sector. Networking leads to higher levels of productivity, innovation and employment. The rational for the relationship between networking and performance levels is that 1) productivity is enhanced by lowering transaction costs, which is fuelled by local industry agglomeration; 2) innovation is dependent on interactive knowledge exchange, enhanced by networking; and 3) employment results from new business formation is aided by learning, communication and commercialization – attributes that have been ascribed to networks (1, 2). Further, in order to create communication channels between actors and create a vision for stakeholders, a broker, network manager or facilitator can help to not only connect different actors in the network, but also help government to fund at the right time, with the right amount, the right entrepreneurs, firms or ideas. This is the key to innovation.

1. Karaev, A., Koh, S. C. L. and Szamosi, L. T. (2007), “The Cluster Approach and SME Competitiveness: A Review”, Journal of Manufacturing Technology Management, Vol. 18, No. 7, p. 818-835.

2. Porter, M. E. (1998), “Clusters and the New Economics of Competition”, Harvard Business Review, November-December, p. 77-90.

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