The Role of Innovation in the Canadian Economy
Innovation and productivity are important aspects in the modern economic world. The quality of life individuals in society live depends on the value of goods and services that they can produce within a given period of time. The driving force behind sufficient productivity in any economy comes up as a result of positive innovation.
Innovation in simple terms can be defined as an improved way of doing things. There is a very small difference between innovation and invention. Economic innovation takes place when an advanced progression in business or any sector of the government that affects the economy is put into practice in an appropriate manner. According to Organization of Economic Corporation and Development (OECD), innovation involves the process of executing new scheme in an organization, business, or outdoor relations. For innovation to be successful, several factors must be put into account, for instance, resources investment, market evaluation, sales planning, and lawful analysis. There are several types of innovations, which are game changers in the modern times. The most common ones are the internet and automobile. Other innovations are procedurally applied to gain economic significance. The most underlying factor about innovation in productivity growth is that it must be adapted to the concerned parties.
Innovation in the Canadian Economy
Looking at the Canadian productivity growth clearly indicates that there is a problem in the business innovation. The Nation with all its resources, for instance, recorded a productivity growth rate of 0.6 % in the years 2000-2009 which is far less than normal OECD nations. This low productivity level in Canada is majorly as a result of low multifactor productivity growth (MFP). MFP growth is the driving gear that accelerates the engine of innovation. With regard to this fact, it is evidently clear that Canada’s low productivity is characterized by a low innovation in the business sector.
Before looking at the roles of innovation in the economy of the Canadian Economy, the types of innovation and their support in the Canadian Economy are discussed below.
In any competitive market, new products and services with value added attract many consumers. Additionally, they are highly profitable because they do not have stiff competition costs incurred as compared to old goods and services in the market. Examples of these types of products are the ICT devices, software’s, and pharmaceutical products. For product innovation to take place there must be a thorough research and development to come up with better means that satisfy consumer needs (Nicholson 2011).
Process innovation’s main intention involves altering the way products are created and conveyed to consumers. This whole process objective is to reduce the average cost of production and make them opportune for the consumers. For instance, developing an online base platform for internet shopping is an example of process innovation. In as much as the process in convenient for consumers, it is also cost friendly to business organizations.
Organization innovation is the ability to incorporate inventiveness, equipment, and consumer knowledge into marketable innovation. This is a role played by corporate managers in order to ensure innovation is adequately managed and entails individual resources management and training.
Market innovation involves aspects like exploring and expanding to new geographical markets globally. Handling and addressing markets should also be changed to fit the current trends like the internet incorporation. Market innovation leads to market monopolization and does away with market competition.
Role of Innovation in the Canadian Economy
Innovation in Research and Development
For the Canadian economy to be enhanced, businesses must be ready to invest in Research and Development (R&D) in its innovations. In many organizations, research and development is undertaken with an aim of understanding current market trends and needs of consumers.
Definition of Research and Development
Research is the hypothetical activity aimed at attaining fresh information and acquaintance about essential facts with no specific point of view. The main reason for applied research is to get new knowledge, which is intended for a particular intention. Experimental research on the other hand is gaining of information from the existing practical case at hand to get new ideas.
Canada’s annual spending directed towards research and development by the business fraternity is referred to as BERD (Business Expenditure on Research and Development. Research and Development by the higher educating sector on the other hand is abbreviated as HERD (Higher Education Expenditure on R&D).
Many Canadian organizations spend less in BERDs and others do not undertake it. For Canadian organizations and businesses to thrive and support the economy, they must invest in Research and Development through BERDS. This will play a critical role in the innovation procedure. R&D ensures that organizations understand current market requirements and needs. Additionally, they are in a position to acquire the required technological equipments which ensure the goods and services produced are transformed to align with current consumer trends.
In the industry sector, R&D is the fundamental element that ensures that they come up with products that give them competitive advantage. Canadian industries therefore should step up and incorporate R&D like all other Nations to boost productivity. Translate this will at the end to a better economy both within its borders and externally.
Innovation in Business Strategies
Business strategy innovation will ensure that organization in Canada come up with platforms, which will address their competitive strategies. With this in mind, businesses will be able to regularly find new markets for their products and services within and across the board. Innovative business strategies will also ensure organizations come up with correct goods and services to fit in the competitive market. In general, terms, innovative strategies are as a result of the following factors, which are crucial in high productivity within the Canadian economy.
For any firm or organization to be successful, two important aspects must be indentified which are getting to know what the consumers want and the opportunities that are in the market. These concepts are addressed by business based strategies innovations whose main aim is to address the consumers need and coming up with ways to create demand for a particular product.
This is important in identifying the markets trend. They determine whether clients are innovation is oriented or traditional consumers. Questions emerging out of this concept for instance are, do the clients need more standard product? Alternatively, who is the end user of our product?
This will ensure that organizations are able to cope up with the competition arising from other organizations producing same goods and services locally and globally. Organizations are able to know if they are to keep up the spirit of innovation for survival as a result of evolving customers.
Atmosphere for new undertaking
This will see to it that organizations are able to be part of innovation assembly, which can make available complicated financial schemes, quality knowledge as compared to other organizations.
This is the general company culture in accordance to its operations. It explains what risks the organization is able to take and to what level is it ready to expand.
The following factors addressed constitute organizations that are able to support the economy of Canada. Organizations need to take up innovation based strategies that are to be incorporated through research and development. This will result into a strong competitive strength that produces a significant motivation for the businesses. At the end, the end result of competition is innovation, which will further foster production of quality and competitive products in the market. This productivity will be translated to the production of quality goods and services both locally and globally hence increasing net exports, which will have the final boost to the Canadian economy.
Knowledge and Idea Innovation
Organizations and business entities in the Canadian economy need to take into account ideas and knowledge, which practically is the output of research and development. This information is from either the external environment or in-house community in an organization. Research and development is not the sole channel that organizations acquire knowledge. According to research conducted, it is confirmed that knowledge and ideas in improving organizations productivity comes for organizational workers, clients and other competition organizations. In addition to this, it is one thing to have these new ideas and another thing to incorporate them in organizations. This is the point where research and development comes in to address cases of complications in implementing the ideas for easier understanding. Organizations, which are well equipped technologically in their R&D, are in good position to take up new innovations that originate from external factors.
In Canada, the higher education sector and government are responsible for innovations. They should work in line with the requirements of businesses needs in the country. Major education institutions like Universities should undertake essential research incorporating other economic sectors. Learning institutions should concentrate on organizations that take in hand issues of commercialization and economics. Government led laboratories should be mandated to carry out research that will support public integration of business entities to boost the economy.
The secondary and tertiary institutions should also be able to generate individual minds that can be spread across all sections of the economy comfortably to fit in all sections of the economy. University programs too should be mandated to produce professional minds to be able handle complicated ideas economy for a total break through. Institutions too should give birth to the minds that can assist organizations to be commercialized.
Canadian innovation economy requires the minds of all the parties mentioned for a strong foundation. Students should not only attend classes as normal routine but take part in research that will enable them deal with real issues of business they come across in future. Practical aspects of education should be given the first priority for all students like in the area of entrepreneurship, which will positively contribute to the success of the economy of the nation through application in their future employment. Post business programs in research are also relevant to prepare students for effective job market, expose them to new ideas, and make them flexible in their business undertakings.
Production of innovative works within the Canadian economy is must initiative to be incorporated. This should not be hindered by demographic factors because that will provide a limited supply of workforce. These skills could also be tapped from the immigrants that would be vital improving the Canadian economy.
Network, Collaboration and Linkage Innovation Input
This is coming together of all businesses, government agencies, and education fraternity for the sole purpose of creation of new goods, services, and processes within the Canadian economy. In order for organizations to appeal to the global platform, they must have connections that are beyond boarders, share their research findings and risks so that they can discover and make full use of new markets. This means that it is crucial for all entrepreneurs in Canada to have a constructive bonding that aid in business innovations. Adequate collaboration between business organizations and education sector entirely depend on the relationship of supply of research discoveries and demand of exploitation of new findings. Several players take part in this connection to help bring on board favorable economic solutions. These parties include technology shift offices that are mandated to display education created findings and scholar property to the where it to be implemented. Public research institutions should also involved in these programs like the National Research Council of Canada.
Education institutions in Canada are the best place to provide research findings regarding the business innovation sector. As such, clear collaboration within these sectors should be established for the realization of gains in the economic revival. In as much as research information is commercialized, there should be mechanisms created in order to ensure industries can be able to reach special equipments and personnel for their enhanced productivity. Universities research findings have been floated to the public domain that is opportune to organization to use them for effective productivity.
Capital and Financing Innovation Input
For effective innovation, organizations require resources in order to venture into risk endeavors. This capital source could be either internal or external in order for the innovative ideas to be translated to commercial practicability. Canadian forms of this capital are in the following variety.
This is the minimum resources required to fund the initial phase of a business development. They involve goings-on like product build up and preliminary marketing. The common source of this capital is from the founders of the venture, friends and investors. Investors play a crucial role in mentoring too due to their past experiences having been in the field successfully most likely in a different locality.
These are resources that are made available for organizations that have successfully passed the first stage of startup capital. The professionals generally provide it where in most cases involving several investors.
Public Market Acquisitions
These funds are for business developments that are beyond the first two initial stages that require. Organizations at this stage are able to get support and funding from financial institutions to support their expansion programs.
There must be effective and vigorous sources of capital in the Canadian economy to fund these business innovation developments. This will lead to reduced cases where innovations made in the nation being exploited in other nations that have ready capital supporting the ventures. Canadian venture capital has been quite low, which affects venture in both the private, and public sectors.
To add on that, Canada needs to put up capital asset on machinery and equipment that will offer the basic foundation for innovation within organizations. These assets will be vital for business ventures of innovative ideas especially in cases where they present most recent trends and technology (Durufle 2009). Given that the country boarders the United States which a superpower, it should be very persistent in knowing what is the latest trend or requirement in the market so as to boost their productivity.
According to the Institute of Competitiveness and Prosperity, Canada has not incorporated the technological investments because of the following reasons. First, there is a high tax rate in capital investment and second the absence of competitive strength. The country should be in position to handle this situation on the tax font so as to ease capital funding (Parsons, Mark & Nicholas 2007). Corporate tax rates should be reduced, all the capital taxes is done away with and provincial and federal sales tax organization be concurred to favor capital investment. Lack of competitive market is as a result of small geographical markets, which are brought about by laws, which hinder organizations and business to freely go international. Businesses should be guided to go beyond boarders, as this will be the only stimulant for increasing competition strength
Rationale for Government Support of Innovation
The Canadian government has a role to play in mediating with the private sector business operations so as to ensure a positive market outcome for the growth of the economy. The government has to come up with initiatives that ensure that markets respond positively to all business innovations. The most basic measures the government has to take include controlling monopolization of prominent organizations, protecting all property rights, encouraging and making available public goods like research findings that are important in the economic sector and making sure sufficient information reaches the intended parties in the commercial industry. Other governmental interventions are ensuring a level playing ground for both local and export goods to ensure equity in terms of subsidies so as to have a favorable competitive advantage.
In this regard, it is also the role of the government to ensure that it motivates initiatives that will promote business research and development. Many business innovations will play a crucial role in ensuring that many ventures are set up. This will be beneficial to the Canadian economy since productivity will be boosted and their expansion will be vivid due to new findings and explorations as a result of innovations. The government should make available enticements, which set the pace for more research and development performances like cutting down tax credits.
The Canadian government should motivate initiatives that will hinder disadvantages of venturing into commercial activities like initial internships to give firsthand experience.
Innovation as we have seen is the backbone of any commercial activity success. It increases productivity of a particular goods and services. This is due to the new ideas and knowledge business entities explore and put in practice in their operations. As such, firms will also be in position to understand market requirements. This will further increase the sales volume of organizations thereby motivating them expand. Through innovation, organizations are able to get competitive strength that is vital for increased productivity beyond boarders. Canada as a country has not yet tapped the aspect of innovation to boost its productivity and economy. Given the fact that it shares its border with the U.S., which is the economic powerhouse globally, Canada has a great potential to increase its economic power through innovation.
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