Business and Government in Canada

Chapter Five: Innovation and Development

CHAPTER FIVE INNOVATION AND DEVELOPMENT INTRODUCTION The previous chapter concluded by examining how the security challenge transcends anysingle country despitethe predominance of national systems in many aspects of governance (particularly that of the public sector). This chapter begins by extending this transnational lens to the realm of innovation, since the globalization ofmarkets coupled with technologicalconnectivity creates a widening canvas for developing and sharing ideas. As with security, however, the tentative emergence of a global system ofinnovation faces significantgovernance obstacles, since the regime of intellectual property rights, the basis of incentives and protections for inventors, has traditionally been maintained by guardian mechanisms at the national level. A key reason why strengthening global governance is such a difficult challenge is that countries compete with one another to exploit economic advantages and maximize prospects for domestic development. The diverging interests of the developed versus the developing world are particularly acute, and countries such as China and India often resist new rules, tacitly favouring piracy that enables an influx of new products and knowledge, key to underpinning the growth of knowledge-based industries. New technologies that allow for multinational supply chains and research and development networks further complicate this equation, as it 129 Business and Government in Canada is no longer easy to equate the interests of a globally minded company with a single country. At the same time, despite rising commercial mobility and connectivity, development patterns in most countries retain an important commonality—namely, the importance of proximity and localizing spaces within domestic borders. Much as China is evolving into an economic network of sophisticated and powerful urban centres, mixingpublic infrastructure and private ingenuity, a similar dynamic is unfolding in North America and indeed around much of the world. Accordingly, a key dimension of this chapter is the localization of relations between business and government: cities and communities can and must be viewed as distinct jurisdictions with their own governance systems involving business, government, and, importantly, the community and the civic sector. Drawing primarily on the prism of the Boulding triangle, this third sector is particularly prominent locally given the nexus between territorialproximity and socioeconomicactivity and association. Key lessons in this regard can be drawn from California's Silicon Valley, widely viewed as a governance microcosm of an innovation and network-driven economy. Asinnovation systems and information flows become increasingly dispersed around the world, Silicon Valley personifies how a local space can remain a critical venue for relations between business, government, civic organizations, and the citizenry. Here the collaborative imperative can represent a form of collective advantage (or handicap) for a city or community competing with other locales. I then examineboth Canada's innovation geography through this urban-rural lens and the implications for the growth prospects and stakeholder engagements of companies. Politically, whether local governments are up to the task of orchestrating good governance within their jurisdictions is also a key variable of the importance of place in today's world, one intertwined with the multilevel governance tensions of a political federation such as Canada. 130 Innovation and Development CONNECTIVITY AND PIRACY For much of the twentieth century, economic development as processes of both production and redistribution could be understood primarily through the prism of national governance and a workable balance between commercial and private interests on the one hand and guardian and public interests on the other. Elevating any such balance is both complex and contested: the schism between commercial integration and security considerations pursued mainly through a public interest defined nationally is a case in point. So is the absence of global consensus and the resulting variance in national approaches to creating and respecting intellectual property rights (IPR). The issue is particularly acute in China, where some widely cited estimates place the software piracy rate in excess of 90 percent (Wang, Zhang, and Ouyang 2005). Yet, while piracy fuels Chinese growth across many manufacturing industries, it has done so mainly in low-value, low-cost, commodity-type goods (a category that can often include software programs designed elsewhere). The dilemma for China is that, as it seeks to move up the global value chain by fostering more endogenous innovation, especially in technologyand knowledge-intensive sectors, there are growing calls from within as well as outside the country for strengthening IPR to safeguard economic incentives for innovation and nurture bottom-up clusters of entrepreneurial companies (Eger 2006). China's entry into the World Trade Organization (WTO) is viewed as...