SUPPORTING A HOMEGROWN AND ENTREPRENEURIAL DIGITAL ECONOMY IN BC (2021)
BC has an established and thriving digital tech start up ecosystem. However, BC’s tech companies are relatively small and still face challenges in scaling up. There is a risk that if companies are not able to scale up and fail to grow there is a risk that the province loses out on important opportunities for economic growth, such as the creation of well-paying resilient jobs, attracting investment capital and creating spin offs, which solve new problems, encourage investment in R&D and drive economic prosperity.
Background
The rise of the intangibles economy (what has been described as “capitalism without capital”) is, and indeed already has, transformed foundations of the global economy. However, Canada and British Columbia’s current mix of policies toolkit is centred on a world of tangible assets. The tangible economy is centred on capital and labour as the main factors of production, investment and trade, raise everyone’s boat. The growing trend towards intangible assets is described in detail by Speer & Asselin (2019), where they note the growing trend and importance of data, brands and IP, and the fundamental shifts required in policies and programs to support the new economy.
Even prior to COVID-19, the global economy was going through a major adjustment, being shaped by new technologies and technological applications, such as artificial intelligence and nanotechnology. These technologies, and others emerging technologies have the potential to suddenly upend sectors, firms and workers.
To highlight these changes, Speer and Asselin note that the S&P 500, is a telling barometer of how profound the unfolding transition to a data-driven economy is. In 1976, 16 percent of the value of the S&P 500 was in intangibles assets (i.e. brands, IP, data, etc.). Today, intangibles assets comprise 91 percent of the S&P 500's total value. Together, the world’s five most valuable data-driven companies are worth well over $4 trillion (Canada’s annual GDP is about $2 trillion), but their balance sheets show only $225 billion is in tangible assets, or just over 5 percent of their total value. Increasingly, this is a radically different economy, with new commanding heights.
Canada’s Digital Technology Supercluster was launched in November 2018 with $153 million in funding from the Ministry of Innovation, Science and Economic Development and funding commitments of over
$200 million from its initial cohort of members. The Supercluster leverages BC’s strengths by bringing together private and public sector organizations to address challenges facing Canada's economic sectors including healthcare, natural resources, manufacturing, and transportation. Through its investments, the Supercluster helps position Canada as a global hub for digital technology innovation and contributes to the generation of new jobs, growing GDP and increasing Canada's global competitiveness1.
While BC has a growing number of mid-sized companies, it continues to trail more mature tech sectors in Ontario and Quebec. BC’s tech sector faces challenges with scaling up its businesses, with many remaining small or selling at an earlier stage than they would in other jurisdictions: the province’s tech sector includes nearly 11,000 companies, however, the vast majority of them (80 percent) employ less than 10 people. In fact, only 220 BC tech businesses have over 100 employees, of which only 22 employ 500 employees or more2.
Scaling and keeping homegrown and entrepreneurial businesses in BC will help with the creation of well- paying resilient jobs, attract investment capital and create spin offs that solve new problems, encourage investment in R&D and drive economic prosperity. A data and intangibles plan for BC that focuses on cultivating local companies, growing technology ecosystems and commercializing data and IP in the province would set the ground work for these efforts. This could take the form of establishing innovation precincts, such as the discussion around the new St. Paul’s campus regarding health research and development, with ties to the burgeoning life sciences corridor nearby.
In light of significant in-province investments already being made to foster an innovation ecosystem, the BC government is in a strategic position to support these efforts and anchor emerging solutions, technologies and businesses in BC and realize the associated economic growth.
THE CHAMBER RECOMMENDS
That the Provincial and Federal Governments:
- Advance a data and intangibles plan for British Columbia, which would focus on cultivating and scaling local companies, growing the technology ecosystem, and commercializing data and IP in BC. The plan should:
- Invest in efforts to provide faster, streamlined, coordinated and comprehensive access to data and facilitate and create data-driven advances in research and innovation;
- Encourage the federal government to use tax policy not only to support and encourage the undertaking of certain innovative activities in Canada but also to incentivize the retention of IP in the country;
- Aim to increase ties between post-secondary institutions and the private sector to support an innovation based economic development strategy that leverages the research funding in the province to support the commercialization of new technologies and retain IP in BC.;
- Support innovation inside governments through the utilization of local technologies; and
- Invest in a talent retention strategy to support local companies’ growth.
1https://www.newswire.ca/news-releases/canadas-digital-technology-supercluster-officially-launches-with-153m-in-funding- from-the-ministry-of-innovation-science-and-economic-development-and-funding-commitments-of-over-200m-from- members-701364801.html
2 KPMG. (2020). 2020 BC Tech Report Card: Tackling the scale up challenge. (Online). https://kpmg.pathfactory.com/l/bc-tech- report-card?utm_source=cpabc&utm_medium=article&utm_campaign=bc-tech-report-card-followup-2&utm_content=cp