Could Trudeau’s Japan visit give Canada’s innovation brand a boost?

Prime Minister Justin Trudeau will meet with his Japanese counterpart this week — can entrepreneurialism and innovation breathe new life into bilateral economic relations? Canada's former ambassador to Japan identifies five areas of cooperation to consider.

By: /
May 20, 2016
Abe
Japan's Prime Minister Shinzo Abe. REUTERS/Yuya Shino

Prime Minister Trudeau’s official working visit with Japanese Prime Minister Abe from May 23 to 25, ahead of the Japanese-hosted G7 Summit, offers our new federal government an opportunity to bring some political heft and additional economic vigor to one of Canada’s major long-term relationships. 

If the Prime Minister is looking for some leading themes in these talks, innovation and entrepreneurialism could provide a formidable and constructive starting point in both playing a substantial role in the Canadian government’s current economic agenda, while also injecting some new and exciting content into future Canada-Japan business relations.

Highlighting these themes could provide a platform for helping brand Canadian “innovation” credentials in Asia and elsewhere. Success in Japan would not only showcase Canadian innovation and entrepreneurial talent in one of the world’s technology giants, but could also bridge into further opportunities in other Asian countries through Japanese business connections.

For many decades Canada-Japan business relations have been dominated by a simple but positive complementarity: we sell Japan our resources and agricultural commodities and they sell us their manufactures and technology products.  Japanese investments in Canada have tended to follow the same pattern.  With some notable exceptions (such as Manulife's investment in life insurance in Japan, and Toyota and Honda’s automotive plants in Ontario), this still remains largely the case. 

This formula has brought significant economic benefits to both sides. There have been occasional issues, but by and large this has been a match made in heaven.

But new impetus is very much needed.  Shifting Canada’s diplomatic efforts towards the creation of a more current and coherent policy that substantively leverages the power of Canadian business innovation in Asia could be the shape that such an impetus takes. Facts point to the conclusion that the traditional formula has ceased to deliver the earlier rates of expansion.  Complacency has crept into play. Other opportunities (read China) have come along and taken away attention and effort. Flat or marginal economic growth in Japan over almost 3 decades has had its impact.

The fundamental question remains where can this new “buzz” and growth come from?  Is there another complementarity that can be tapped into and exploited?

The answer is “yes,” and it is linked to innovation and entrepreneurialism.

This was the conclusion of a Futures Forum held in Toronto in late March, organized by the Centre for International Governance Innovation (CIGI) in partnership with the Japanese Embassy and the Centre for Global Enterprise at the Schulich School of Business.

Entitled “Fostering Entrepreneurialism and Innovation Partnerships” the Forum started from the premise that both Canada and Japan face challenges in building the entrepreneurial cultures and innovation eco-systems needed to ensure their businesses enjoy success in the global marketplaces of the 21st century.  

The Forum determined that there is a complementarity of interest and experience that could eventually lead to business successes in each other’s markets and, through international partnering, in the Asia Pacific and beyond.

Indeed, the often-stark differences in corporate size, culture and experience between Japan and Canada, and the contrasting eco-systems for innovation and entrepreneurial development were not, as might be expected, barriers to collaboration: rather they opened up opportunities for cooperation in several respects.

Here is an indicative list of five potential areas of cooperation that Prime Ministers Trudeau and Abe, and their delegations, might consider.

First, while both countries face challenges in fostering entrepreneurialism, the Global Entrepreneurship Monitor for 2015 puts Canada in 2nd place with Japan lagging well back in 27th.  In these circumstances there is opportunity for Canadian and Japanese centres of expertise and business associations to consider why that gap exists and what could be done to close it, engaging entrepreneurs from both sides directly in the process.  For example, Canadians could benefit from the approaches that established Japanese businesses have taken traditionally to strategic market development and long-term focus, while Japanese businesses writ large could stand to learn about how to succeed in the riskier start-up environment and to overcome their engrained fear of failure. The reciprocal gains meant to be shared from such are great.

Furthermore, some leading-edge Canadian research at Wilfrid Laurier University in Waterloo isolates two key factors that contribute to business success by start-ups: managerial competency and proceeding with aggressive sales and marketing even as the technology is in development.  While management skills are strong in Japan, marketing is given very little weight.  Thus there might be opportunities to pair well-managed Japanese start-ups with Canadian partners who can bring the marketing talents to the table.

Second, while increasing numbers of young high performing Canadians are attracted to business careers and are more than ever launching their own start-up companies around innovative technologies and ideas, there is not the same level of interest among similarly talented young Japanese who have traditionally preferred to work within established companies or go into government.  There is thus a “youth dimension” that could be leveraged to build long-lasting business relationships by introducing Japanese business students to the Canadian start-up culture through, for example, more inter-company internships and business school/university exchanges.

Third, because of the un-encouraging business environment in Japan for “start-up” activity, there is a growing trend among young Japanese entrepreneurs to set up their companies abroad.  Canadians should be doing everything possible to attract these innovators to establish their operations in Canada, to partner with Canadians, and to build long-term business bridges back into Japan and Asia.

 Japanese start-ups are also trending to “go global” because of impacts of a declining population and a shrinking market for growing successful businesses. Canadian companies already know that a smaller domestic market requires being present in the global market place.  There is thus a strategic avenue for cooperation between experienced Canadian and less-experienced Japanese start-ups seeking to “go global” in related technology sectors, both in Asia and beyond.

As another option, a coalition of Canadian and Japanese universities could work with the Canadian and Japanese Chambers of Commerce and young entrepreneur associations to develop a bilateral network of expertise that could be available to “going global” start-ups and SMEs in both countries.

Fourth, there was a lively discussion at the Forum as regards the contribution of Intellectual Property policy to a supportive eco-system for innovation. The Japanese government is moving from its traditional preference for high levels of patent registration and protection, to a more “open innovation” policy stance; companies are taking a more nuanced IP management approach that includes making IP publically accessible as a strategic business decision. This should open the door to a forward-looking discussion between Canadian and Japanese officials on the evolving role of IP in high innovation economies and whether less restrictive rules around the protection of IP and more “freedom to operate” (and perhaps collaborating internationally along those lines) would be more in each nation’s interest.

Fifth, the Forum heard that a number of Japanese financial institutions are actively looking for good investments abroad in innovative technology companies given the apparent lack of home grown opportunities, with a particular eye for “disruptive” technologies of the future.   This is an extraordinary opportunity for forging more Canada-Japan investment partnerships in innovative sectors where there are strong complementarities of national interest, such as ICT, “clean technologies” and medical and health technologies.

While these five points illustrate the opportunities available, one has to be realistic.  Many of them would have to be tackled as “start-up” and learning activities given the relatively low intensity of business arrangements, networks and habits of collaboration in these areas.  Exploiting this new complementarity will require deliberate and innovative engagements involving businesses, academic institutions and business schools, with governments providing leadership and encouragement, to build connections and make things happen.  And it will take time. 

Perhaps Prime Ministers Trudeau and Abe could start the ball rolling by agreeing to create a Japan-Canada Innovation Network of leading representatives from these key stakeholder groups to drive this process forward, reporting back to them in a year’s time.

Partnering on the themes of innovation and entrepreneurship will not replace the fundamentals of the current complementarity, but it would bring some much needed new life and focus, and install a critical 21st century growth engine into our valuable economic relationship.