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David Naylor

Universities and the Innovation Economy

U of T is laying new foundations for prosperity

Even before the Great Crash of 2008, a number of major reports were asking how Canada could compete and win in a globalized knowledge economy. The most recent, from the Science, Technology and Innovation Council, concluded that Canada remains only “a solid middle-of-the-road performer” when it comes to innovation. What, specifically, can universities do to help?

First, we can nurture talent. About two-thirds of all job openings in the near future will require post-secondary education. Canadians attend university slightly below the OECD average rate, and our per-capita output of persons with master’s or doctoral degrees in particular is low. Since 2005, Ontario has wisely invested to increase the numbers of advanced degree-holders. Other provinces need to grow graduate education if Canada is to compete and win in a globalized innovation economy.

Second, we can ensure that talent is nurtured in a range of disciplines. STEM disciplines – science, technology, engineering and mathematics – are essential, but the high-tech sector is only a modest part of any industrialized economy. Successful societies are built around creative and well-balanced communities. That means supporting excellence in both the STEM disciplines and the social sciences, arts and humanities. Business expertise is also essential. As one example, Research in Motion got moving faster after the company recruited U of T commerce graduate Jim Balsillie to help take the BlackBerry global!

Universities can also fill the pipeline of innovation with great research. Canada punches above its population weight in research outputs. University of Toronto professors, for instance, publish more scholarly papers than any other university in the world except Harvard and, by some measures, the University of Tokyo.

Unfortunately, one still hears grumbling about overspending on “irrelevant” basic research. The last hundred years have shown us time and again that basic research, driven by curiosity and arbitrated by peer review, is absolutely essential to human progress – and its practical impacts are totally unpredictable. For example, Tony Pawson is one of a handful of U of T scientists currently in the running for Nobel Prizes. Working from Mount Sinai Hospital, Professor Pawson studies how cells communicate with each other. Sounds arcane – but Pawson’s work laid foundations that enabled the creation of a drug named Gleevec. And Gleevec is saving and prolonging the lives of countless patients around the world with leukemia and gastrointestinal tumours.

Think of it this way. When industry does or sponsors applied research, necessity is the mother of invention. That’s an excellent source of incremental innovation. But when basic research is taken to the marketplace, invention becomes the mother of necessity. And whole new industries can emerge on the backs of disruptive technologies.

We should also be clear about what universities don’t do. Commercialization happens in companies, not in universities. To be sure, universities can collaborate more often and more effectively with industrial partners. We can try to ensure a strong outflow of well-protected intellectual property with interesting potential. And we should promote a culture of civic engagement and entrepreneurship among our students and trainees. The University of Toronto is taking positive action on all those fronts. But the onus in commercialization rests squarely on the private sector.

In this regard, Canada has a disappointingly low level of spending in business R&D, well below many other OECD nations, not least the U.S. In fact, the level has actually been decreasing since 2002.

How do other countries do it? How have they started a positive cycle, with innovation-based companies that reach global prominence and spur business R&D spending?

Countries such as Finland, Israel, Singapore, Taiwan and South Korea have been more strategic than Canada in the use of public funds. They have focused on nurturing early-stage companies based on innovation. To that end, they have augmented – but not controlled – pools of early-stage venture capital that underwrite risks, incubation and collaboration. Once the innovation flywheel gets turning, talent rather than technology and people – not patents – become the key enablers of change and prosperity.

As Canada’s strongest research engine and largest single source of talented people with advanced education, the University of Toronto has met – and will continue to meet – important responsibilities in helping lay new foundations for prosperity. Meanwhile, whenever some pessimist tells me that an economic recovery will never happen, I have a ready response: Given the energy, creativity and entrepreneurship of our 400,000 alumni worldwide, it’s just a matter of time.

Adapted from an address to the Economic Club of Canada. The full text is at

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