Innovating in the global economy: a Q & A with the Munk School's Dan Breznitz

Politicians throughout the world aspire to turn their communities into the next Silicon Valley. But Dan Breznitz, the Munk Chair of Innovation Studies at the Munk School of Global Affairs, argues that this may not be the best policy to pursue.

Breznitz is an internationally renowned expert on innovation, and has been an advisor on science, technology and innovation policies to corporations, governments, the World Bank and other organizations. He recently explained his thinking on invention and innovation to U of T News writer Terry Lavender.

You argue that communities shouldn’t necessarily compete to become the next Silicon Valley. Why not? Isn’t Silicon Valley an example of economic success?
People confuse invention with innovation. But innovation is more than just inventing something. Invention is not necessarily the stage that actually translates to jobs and economic growth. After you invent something, you have to take it to market. Inventing the internal combustion engine didn’t create economic growth; it was the continuous improvement of that that created new industries, jobs and growth; for example, the automotive industry. 

With globalization, as soon as you invent something, its components are now produced in various countries, assembled in other parts of the world and then sold in yet others. In Silicon Valley itself, the company may employ just 20 people while there will be hundreds of jobs created in Korea, Taiwan, and in India and thousands of jobs in China. When you look at these countries what you find is not cheap labour but a set of capabilities to constantly innovate around the stages of production.

So then what is the best innovation strategy for Toronto and Ontario?
The question you have to ask is “What kind of people do we have here? What kind of skills do they have?” Then you can start to figure out what will be best done in Toronto and Ontario. For Toronto as a city, novel product innovation might be the best strategy. But for the wider Ontario economy, you have to think about innovation in production, innovation in processing, innovation in how you provide services. 

Our manufacturing sectors have been hurting for a long time, especially in Ontario. We have to start thinking about the kind of innovations that small- and medium-sized manufacturing enterprises need to implement in order to survive. And preferably thrive. 

But hasn’t Canada done relatively well compared to other countries?
Until now we’ve been able to rely on Canada’s natural resources. It’s rather easy to extract them or grow them and then send them somewhere else, but that advantage is diminishing rapidly, especially with the price of oil. 

As oil became more and more important to our economy, we actually became less sophisticated in what we do with it. We did become more sophisticated about how to get it from the ground, but for economic reasons the best profit point was to ship crude oil as fast as possible to the U.S. We completely missed an opportunity to develop a whole set of complementary petrochemical industries; not only in mining and extraction, but everything we do after we get it out of the ground. And yet, these post-drilling industries are actually more sustainable and they supply jobs for a whole swath of our citizens who cannot work in oil extraction. They’re also less dependent on the price of oil.

A few years ago you co-edited a book, The Third Globalization. What is the third globalization and how can we adapt to it?
The first globalization, in the nineteenth century, was defined by expanding trade – goods produced in one country and shipped elsewhere. The second globalization, in the second half of the 21st century, saw direct foreign investment, and the growth and spread of multinational corporations, as well as a push towards freer markets and deregulation.

In the third globalization, the western powers are no longer dominant. Much of the demand that will drive economic growth will come from the BRIC (Brazil, Russia, India, China) countries. 

The first thing is we shouldn’t be complacent. So as long as your major model works – Canada is still rich and we have a high standard of living – the chances that we will want to massively transform our economy are low. But if we wait until we have unemployment of 25 per cent, it’ll be too late. Instead, we should follow the lead of countries like Finland, Denmark, Taiwan and Israel that have successfully transformed their economies into knowledge-based economies. 

What should we do?
You run a set of experiments of different kinds of businesses, different kinds of skills, different kinds of financial systems so when the crisis hits and the mainstay of your economy crushes down, you have a new model to replace it. We should be experimenting a lot, but we’re not. 

Who should be doing the experimenting – business or the government?
In a capitalist economy, private corporations do most of the job and wealth creation. Government can stimulate, can help, can grow capabilities, but if we don’t create something in the private market we’re doomed. This is why we as Canadians should be very concerned that even when we have a great success, for example, BlackBerry, we seem unable to use it to induce more individuals and companies to be more ambitious in growing in Canada. 

What about so-called disruptive companies like Airbnb and Uber. Are they good models to follow?
Airbnb and Uber are creating some wealth, but they do not create a lot of new jobs – at most they’re redistributing existing jobs and wealth from hotel owners to real-estate owners, from taxi company owners to the owners and investors of Uber. Celestica, on the other hand, is a good example of a successful innovation company. It doesn’t invent new products, but it innovates through its supply chain and the services and products it offers, providing both increased jobs and wealth to the Toronto economy. 

You and your family [Dan Breznitz’s wife, Shiri Breznitz, is an economic geographer and a professor at the Munk School] moved to Toronto from Atlanta about 18 months ago. How does Toronto compare to Atlanta?
We love it and the kids love it. The main thing that you have here that you do not have in Atlanta and many American cities is public space. We walk the streets, we meet people, and we say hi. There’s no such thing in Atlanta. We have small stores, we have bookstores, but if you now go to Atlanta and you want a bookstore, you’d have to go to Target.

Where we live in Toronto, in the morning and afternoon there are kids walking alone to and from school. In Atlanta it would be extremely dangerous for a child to try to do that. Toronto can use this to its advantage. Toronto offers true city living with all its stimulants and is still quasi-affordable. However, we have yet to figure out how to make this an advantage that can be a sustained engine for innovation-based economic growth.

Terry Lavender writes about global issues and international affairs for U of T News. This interview has been condensed and edited.