Developing an Inclusive Innovation Agenda for Canada

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December 2016

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Developing an Inclusive Innovation Agenda for Canada

Alexander Murray CSLS Research Report 2016-18 December 2016 Prepared for Innovation, Science and Economic Development Canada

Developing an Inclusive Innovation Agenda for Canada Abstract Inclusive innovation requires that opportunities for participation in innovation be broadly available and that the benefits of innovation be broadly shared. This report considers a number of innovation policy reforms through the lens of this dual emphasis. For policies that would facilitate both innovation and inclusiveness, there is a strong case for implementation. Policies that might promote innovation at the expense of inclusiveness would require that the trade-off be managed or mitigated. Education and training is a potential area of complementarity between inclusiveness and innovation because a highly skilled population is an important facilitator of both. Clusters pose a potential trade-off between the goals of innovation and inclusion, which must be taken into account in the context of policies aimed at supporting their development. There is no strong case for subsidizing small businesses generally. Instead, targeted support should be provided to help growth-oriented small firms to grow. The scope for further regulatory improvement to enhance innovation may be limited, given what Canada has already done in recent decades. But room for improvement still exists in terms of foreign investment barriers and the speediness and accessibility of the legal system. Government investment can play a productive role in an inclusive innovation system; the government should increase direct funding for basic research, especially in clean energy technology.

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Developing an Inclusive Innovation Agenda for Canada Table of Contents Abstract ........................................................................................................................................... ii Executive Summary ....................................................................................................................... iii List of Tables, Charts and Exhibits ............................................................................................... xii Tables ........................................................................................................................................ xii Charts ........................................................................................................................................ xii Exhibits ..................................................................................................................................... xii I. Introduction ............................................................................................................................... 13 II. Inclusiveness, Innovation and Growth ..................................................................................... 16 A. Defining Inclusive Growth and Inclusive Innovation .......................................................... 16 B. Evidence on the Importance of Inclusive Innovation and Growth ....................................... 23 III. Measuring Inclusive Innovation and Growth ......................................................................... 29 A. Measures of Inclusive Growth ............................................................................................. 30 i. OECD Inclusive Growth Framework ................................................................................ 30 ii. The Index of Economic Well-being ................................................................................. 33 B. Other Indicators of Economic Inclusiveness ........................................................................ 38 i. Income Inequality .................................................................................