This article summarizes the report of the Expert Panel on Business Innovation appointed by the Council of Canadian Academies. The report presents a fresh look at innovation as an economic process rather than primarily as a science and engineering activity. Noting that Canada’s productivity has been falling further behind that of the United States and many other advanced countries for the past 25 years, the report argues that lagging productivity growth has been due to subpar innovation. Innovation is interpreted broadly to encompass the day-to-day activites of all kinds of businesses looking for new or more efficient ways to serve the needs of customers. The panel concludes that too many businesses in Canada are technology followers, not leaders, and that a fresh discussion on innovation in Canada is needed, one that focuses on the factors that influence adoption of innovation-based business strategies.

INNOVATION—NEW OR BETTER ways of doing valued things—is the creative capacity to transform the imagined into the real. Innovation matters for businesses because novel products and more efficient processes are the principal means of making businesses more competitive. It is through innovation that businesses find ways to generate more value from existing resources. Innovation is, directly or indirectly, the main driver of productivity growth and is thus the principal source of national prosperity. Canadians should therefore be concerned in the face of evidence suggesting that Canada’s business sector on the whole, though with notable exceptions, is lagging in innovation relative to many of our peer group of economically advanced countries. The question is “why.” If innovation is good for business, why is Canadian business apparently less committed to innovation than analysts and policy-makers believe it should be? The question has been asked for decades, yet the situation has not changed much in relative terms. The causes of Canada’s innovation deficiency must therefore run deep in the nature of the economy, and perhaps in Canadian society as well. To bring to bear a comprehensive contemporary analysis of the issue, the federal Minister of Industry asked the Council of Canadian Academies to appoint a panel of business, labour and academic experts (Box 1) to answer the following questions: