Leading Economic Change: Productivity & Innovation


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Issue #1 of Leading Economic Change from the Nova Scotia Association of Regional Development Authorities.

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Leading Economic Change: Productivity & Innovation

  1. 1. Productivity & Innovation Leading Economic Change Number 1, September 2011What is Productivity? What is Innovation?The productivity gap has become a top concern for “To grow our economy, Nova Scotia needs improvedeconomists across the country. Over the past decade, productivity. That’s not everyone doing more work,the Canadian economy has fallen from 6th most but everyone getting more value from the workproductive in the world to 9th. We are still losing they do.” - jobsHereground. And in many respects Atlantic Canada lagsbehind the rest of the nation. It is often said that Henry Ford’s great invention wasn’t the model-T itself, but the automated assembly lineOne study suggests that this gap has pushed our living that produced it. During the industrial revolution, thestandards below 62% of the USA. Productivity is defined dominant way to make companies & economies moreas the total outputs of our economy (GDP) divided by productive was process innovation. These innovationsthe total labour (hours worked). The formula is simple, can be technologies (like computers & automation) orbut the challenge isn’t. Productivity increases when practices (like ISO & lean manufacturing). Researchcompanies find ways to make more with less. shows us that capital investments and industry associations are some of the best ways to encourageTwo ways that companies try to improve their process innovations.productivity are outsourcing (to lower cost producers)and off-shoring (to lower cost regions). Nova Scotia has While the post-industrial economy is still striving forseen its fair share of ‘near-shore’ investments, such as process efficiency, we are also now racing for ideas.customer contact centres. But our ‘cost leadership’ is Advanced economies can’t stay ahead of developingcontinually eroded by emerging economies. economies with only cost and process efficiencies. We also need to be inventing specialized new products,We have lost hundreds of jobs to lower cost services, and organizational models.manufacturers (Asia) and agri-food producers(Central/South America). For developed economies, “Nova Scotia needs increased investment in newsearching for productivity through cost competitiveness processes, new equipment, and new ideas. To competeis a race-to-the-bottom. effectively, you need to be innovative.” - jobsHere NSARDA is the link between the Nova Scotia RDAs, providing support and collective strength. Since 1999, the Association has helped the Nova Scotia RDAs in improving the economy of communities across Nova Scotia. For more information about NSARDA and the Nova Scotia RDAs please visit www.nsarda.ca. Leading Economic Change: A Discussion Paper Series from NSARDA
  2. 2. Where Does Innovation Come From? How Can Community EconomicHow Can it be Encouraged? Developers Facilitate Innovation?There is a myth that innovation is unique to technology Closed and isolated communities are less innovative andindustries and only happens in R&D laboratories. But less creative. Richard Florida, Meric Gertler and others,innovation is needed in all sectors, and everyone can have been telling us for years that tolerance andinnovate. openness are critical factors for creativity and innovation. Technology is certainly a prerequisite. ButIn their 2002 book, Innovation in Atlantic Canada, the key difference between innovative and stagnantBorgeois and LeBlanc suggest that most industries regions is openness to newcomers and new ideas.“acquire ideas not from in-house R&D, but by tappinginto the knowledge and ingenuity of their workers, Tightly-knit communities need people and organizationssuppliers and customers – by networking with research who can act as bridges into the community, andinstitutions, universities, competitors, governments, connectors within it. A famous definition of creativity isand other stakeholders.” “the intersection of two ideas for the first time.” In other words, we can speed up innovation by making theA wealth of academic research shows us that right introductions!relationships, collaboration, and social networksencourage innovation far better than secrecy and As Community Economic Developers, we are mostprotectionism. For example, Anna Lee Saxenian has effective when we bring people with ideas, skills andshown that ‘technology’ was less important to Silicon resources together at the same table. By encouraging aValley’s success than the structure of its economy: a collaborative culture, we can help adapt from a regiondiverse, interconnected web of many small companies. that competes on costs, to one that innovates andShe has concluded that, “regions are best served by creates.policies that help companies learn and respond quicklyto changing conditions – rather than policies that either Ryan MacNeil, EcD, is Principal of Ryan MacNeil & Co., a companyprotect or isolate them from competition or external that helps development leaders & organizations become focusedchange.” and effective. Reach him at ryan@ryanmacneil.com. Who is working on it? Nova Scotia’s Regional Development Authorities (RDAs) are encouraging productivity & innovation through their Business Retention & Expansion Program. For example, Cape Breton County Economic Development Authority connected Louisbourg Seafoods Ltd. with researchers at Cape Breton University, and funding from the Province’s Productivity & Innovation Voucher Program. Together these partners are inventing a new sea cucumber fishery. Both the Department of Economic & Rural Development & Tourism and the Atlantic Canada Opportunities Agency have completed significant policy work on productivity and innovation. They each published key innovation reports in 2003, and the Province has made “growing the economy through innovation” one of three pillars in its jobsHere strategy. Among its programs, the province has the Productivity Investment Program and the Productivity & Innovation Voucher Program. ACOA’s flag-ship innovation program is the Atlantic Innovation Fund, which has provided $709 million in funding to 279 projects over the past decade. Leading Economic Change: A Discussion Paper Series from NSARDA