Balsillie panel points us in right direction, but much more will be needed

TORONTO—In a dire warning, the National Institute on Aging in a new study forecasts that the cost of public care just in nursing homes and private homes alone could more than triple from $22-billion now to $71-billion annually by 2050 (in 2019 dollars), equivalent to 19 per cent of personal income tax revenues in 2050 compared to nine per cent now. This is just one example why Canada’s success in commercialization of new ideas and scaling up of our most promising young companies matters so much. There is a tight link between being able to afford what we want to do to meet the needs of an aging society and fund the other public goods and services we want and our ability to create the wealth and jobs to pay for the public and private goals we aspire to. But creating and growing a new knowledge-based economy where the real economic value increasingly rests in intangible investments—such as patents, branding, business organization, skills and training, R&D—rather than the tangible investments in machinery and equipment and other physical assets that were hallmarks of the industrial age will require policies and business systems quite different from those of 30 to 40 years ago. It will be, for example, through our success in converting the new ideas that we are generating in our universities, colleges and research institutes into businesses producing new goods and services that will provide the wealth we will need for a successful society. For this new generation of companies, it is their intangible assets—and especially their ownership of their knowledge through patents and other forms of intellectual property (IP)—that will constitute their real value and the basis for their potential success. Our intangibles economy is also a digital economy, with a growing importance of data and its expanding collection through digital platforms such as Google, Facebook, Apple, Amazon, and Instagram along with the internet of things, and its manipulation though artificial intelligence and machine learning. In a report last year, Statistics Canada found that the economic value of digital economic activities in Canada in 2017 accounted for 5.5 per cent of the gross domestic product, compared to 4.8 per cent for mining, quarrying and oil and gas production. Yet despite the urgency of success, there is still too much complacency. A panel of five experts, chaired by former BlackBerry Co-CEO Jim Balsillie, on intellectual property in Ontario’s innovation system recently reported that Canada’s GDP per capita is three per cent below its 2010 level while U.S. per capita GDP is 35 per cent higher in the same period. We are not doing as well as we think we are. As Balsillie’s panel reported, “the digital transformation over the past 30 years has resulted in a new economic reality in which the basis of wealth and power is derived from the ownership of valuable IP, and more recently, the accumulation and control of data. IP and data are now the world’s most valuable business and national security assets.” Balsillie’s report had a narrow, but important mandate: to advise the Ontario government on how to capture more value for Ontario from its major public investments in education and research at the province’s universities and colleges and research hospitals. Balsillie and his fellow-experts were asked how to improve the use of IP protection in start-up companies emerging from university, college and research hospital technology transfer offices, incubators and accelerators. They found that the importance of protecting IP was not widely understood and that tech transfer offices and other intermediaries lacked the skills and money to help start-up companies and researchers pursue IP strategies, recommending a number of steps to make IP strategy a key part of their operations. A key idea would be to centralize IP and commercialization activities through a province-wide entity that would have the resources, knowledge and accumulated experience that’s impossible to replicate in individual tech transfer and similar entities. There are more than 130 tech transfer offices, accelerators, incubators and other entities at Ontario universities, colleges and research hospitals. But this is only part of the answer. As the expert panel reported, “we are witnessing the global race by large firms and advanced nation-states to own critical IP, especially patents, particularly for areas that have both economic and non-economic impacts.” It is why, for example, that the U.S. is trying to weaken Chinese competition by blocking access to U.S. IP. For Canada, there’s a related challenge—that the main economic benefits from our significant investments in education, especially science and engineering in our universities, may be flowing to foreign corporations that set up research and product development facilities in Canada, but with the resulting IP and economic benefits from that IP benefiting the foreign parent company, not Canada. A U.S. study on the globalization of R&D found that U.S. multinationals, in the face of a serious domestic shortage of needed talent, were looking to other countries to meet their talent needs. This globalization of U.S. multinational R&D, the study concluded, “has reinforced the technological leadership of U.S.-based firms." It’s why Google, Microsoft, Facebook, Uber, Amazon, and Apple are building up R&D and product development branch plants in Canada, but with the IP owned in the U.S., Google, for example, recently announced plans to hire another 5,000 new employees in Canada. These multinationals are also free to buy our promising tech start-ups and their IP since we have negotiated trade deals that enable this. But if we want to build a successful Canadian society, we have to find a better way of ensuring that more of the talent and research ends up with strong IP assets in Canadian companies providing good jobs and the wealth creation needed to fund a prosperous future. The Balsillie panel points us in the right direction, but much more will be needed. David Crane can be reached at crane@interlog.com. The Hill Times