Governments in Atlantic Canada often opt to douse innovation before it’s allowed to catch fire
Innovation is a fickle concept, and patents only tell part of the story. Yet when you see that Atlantic Canada ranks last and well below the national average, it’s hard to deny we have a problem.
Last fall the C.D. Howe Institute published a report titled, Measuring Innovation in Canada: The Tale Told by Patent Applications detailing the situation.
Readers of Entrevestor.com are savvy about the vibrant East Coast start-up scene, considering its size. But venture capital and start-ups aren’t identical to innovation. They represent the fuel behind new ideas, and as any good Cub Scout knows, a flame goes out without a supportive structure to help it grow.
Meanwhile, governments in Atlantic Canada have often opted to douse innovation before it’s allowed to catch fire. Just look at the government of Nova Scotia’s pending decision to crackdown on Airbnb, a technology platform for travel accommodation.
Airbnb is among one of the most successful start-up companies but to Nova Scotia’s established accommodation industry it’s a threat. The Tourism Industry Association has been successful in lobbying the government to crackdown on everyday folk renting out spare bedrooms.
There’s no doubt this and similar interventions have put a chill on Atlantic Canada’s start-ups, and outsiders looking in. Take Bungalo.com, a start-up developing a peer-to-peer platform for cottage rentals. It recently chose to open an international headquarters in Halifax. I asked Bungalo founder and CEO, Haukur Gudjonsson, about how the Airbnb crackdown will affect them.
“If we were making the decision today to move our office to Halifax, this would definitely be taken into the decision-making process,” he said. “And the decision on where to locate the team is usually based on facts like what location is most open and supportive to your type of start-up.”
What’s lacking is experiencedcapital, says Godjonsson. “The majority of young businesses get their early-stage funding through governmental grants and loans, but would in many cases benefit more from getting experienced investors or VCs into the companies to guide them; to motivate them to chase sales instead of more grants.”
With many talented entrepreneurs like Godjonsson, what’s keeping experienced investors away from Atlantic Canada is the institutional embrace of permissionless innovation. Investors are quick to discount a great idea by its regulatory risk, given the power of new rules to stop a fast-growing business in its tracks. Permissionless innovation adapts to challenges as they arise, rather than shutting down new ideas to protect the status quo or out of excessive precaution.
Consider where Canada as a whole has excelled: drone technology. In the United States, the Federal Aviation Authority has all but banned the commercial use of drones by requiring drone operators to obtain a pilot license and seek explicit permission from the agency.
In turn, Amazon and many start-ups experimenting with drones have moved north, in particular to British Columbia, thanks to Transport Canada’s broad exemptions for permissionlesscommercial drone use and easy-to-acquire certificates for larger drones. Canada has now excelled with complementary innovations, such as the world’s first insurance product for commercial drone operators.
Drones have many applications, from film production to crop monitoring. But what makes Transport Canada’s embrace of permissionless innovation so exciting is the drones’ commercial potential. New applications are being discovered everyday as entrepreneurs are given freedom to experiment, creating opportunities.
This is just the tip of the iceberg. The last few years have seen major breakthroughs in off-grid energy and genetic sequencing. In each case, interest groups and antiquated laws ensure innovative ideas flow to the jurisdictions with the most progressive regulations.
Our leaders haven’t recognized that encouraging innovation doesn’t require another spending program or more capital. What’s often missing is the promise of government self-restraint.
Meanwhile, our provinces are preoccupied with balancing budgets and creating disruptions. Given this fiscal climate, expanding tax credits and the like aren’t getting far. The good news is Atlantic Canada’s governments can choose to embrace permissionless innovation without it costing taxpayers anything.
Doing so would spark innovation. The alternative is to allow our economy to continue to wither.
By Samuel Hammond
Samuel Hammond manages social media for the Atlantic Institute for Market Studies (AIMS.ca). He earned his Masters in Economics from Carleton University, and will begin further graduate studies in economics at George Mason University in the fall.