Establish Canada as hub for next wave of knowledge industries and make it a national priority If you're a nation looking to build a knowledge economy, you need knowledge workers, and plenty of them. By ARVIND GUPTA Published November 16, 2009

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VANCOUVER, B.C.—If you want to get into the mining business, you need an ore body. If you're going into the oil business, you need oil. And if you're a nation looking to build a knowledge economy, you need knowledge workers—and plenty of them.

Therein lies the conundrum facing our governments as they seek to transform our resource-based economy into one fuelled by knowledge. Canada has invested billions into building one of the best university networks in the world: on a per capita basis, our country is in the top five in just about every OECD metric when it comes to university-based research. So why have these investments not translated into Canada becoming a knowledge powerhouse?

Canadian industry is significantly underperforming its international competitors in R&D investments. Our one per cent GDP investment pales in comparison with the U.S. (1.89 per cent) and the OECD average (1.56 per cent). And our competitors are increasing their investment much faster than us. If we are serious about transforming our economy, we must reverse this trend.

The lack of R&D industrial investment limits opportunities for graduate students who want to stay in Canada. We have a classic chicken and egg problem: Fewer R&D jobs means students are not incented to pursue graduate work. Those who persevere, too often leave the country in search of better opportunities. As a result, we lack the critical mass of knowledge workers which reduces the capacity for Canadian industry to become R&D intensive.

The situation has become dire. Canada now ranks 23rd out of 30 OECD countries in PhD graduation rates. At 0.9 per cent, we are well below the OECD average (1.4 per cent), the U.S. (1.4 per cent) and far below Germany, U.K., and Sweden (2.2 per cent). And our best and brightest continue to leave.

Educating a single student from Kindergarten through to PhD is estimated to cost taxpayers a minimum of half a million dollars. So, why should we invest in producing even more PhD's? When they leave, we not only lose this investment, but also their substantial GDP contribution and higher earnings.

Some have suggested that it doesn't matter if our best students leave—we can simply attract others. But when it comes to attracting the brightest, our nation lacks the "star" power of nations such as the U.S.A., U.K., and Australia. In what has become a global competition to attract knowledge workers, we are getting outflanked.

Are we truly committed to making the transformation we so often talk about? The task is not impossible. U.S. regions such as Silicon Valley, the Boston Miracle, and the North Carolina Triangle have leveraged their universities, concentrating their best highly-trained individuals, both American and foreign, to create powerful knowledge industries.

We must make it a national priority to establish Canada as the hub for the next wave of knowledge industries. Success will mean retaining our home-grown talent and attracting the world's best-effectively making us the "Juilliard" for knowledge workers.

Such a transformation is not easy, requiring us to re-think how our universities and industries can build upon each other strengths. Could our graduate students, those most affected, act as the bridge? Could they bring challenges from industry to academia and ideas back to industry? Could they become the business case for industry, accelerating investments in innovation? We've witnessed the power of co-op programs—now is the time to do the same for R&D.

And what of the numerous government reports indicating our graduate students don't have the business savvy of their U.S. peers? Well-rounded and productive knowledge workers require the technical and professional skills industry is demanding. They must be able to communicate effectively and understand business processes. This type of skills-training and entrepreneurship is characteristic of fast-paced knowledge societies.

In a recent address to the Canadian Foundation for Innovation, Charles Baillie, retired chairman of TD Bank Financial Group, summarized the crux of the problem: "The best way to guarantee commercialization of innovations is to have the private sector directly involved in funding the research."

Funding basic research is critical to the long-term vibrancy of our innovation agenda. At the same time, smart investments linking industry and academia weave innovation into the very fabric of our industrial base. Critically important is that we also reach out to small-and medium-sized enterprises, traditionally furthest removed from research. We must also recognize the not-for-profit sector (governments, hospitals, etc) represents about 40 per cent of GDP and must be part of the innovation agenda. The fact that we are debating this issue is an encouraging sign but it will take hard work and innovating thinking to reach our goal.

Arvind Gupta is a professor at the University of British Columbia, editor of two book series on industrial mathematics and is president of the 2011 International Congress on Industrial and Applied Mathematics. He is also scientific director and CEO of MITACS, a federally-funded research network.