Needing better grades
Report card says province must attract venture capital

Nova Scotia excels in the area of innovation but its progress is being slowed considerably by a lack of venture capital funding - a necessity for smaller growth companies that fuel the province's economy, a report card released Monday shows.

The 2003 study revealed that Nova Scotians are leading the way when it comes to the fundamental elements of innovation, such as research and development and job-related training, but Nova Scotia doesn't see the payback in terms of productivity and exports.

"Our ability to innovate, to create and commercialize ideas more quickly than the competition is hindered by weaknesses in the process, which prevents us from achieving the levels of productivity we need," said Michael Gardner, chairman of this year's fundamentals report card committee.

"If Nova Scotia is to build more productive, export-ready companies, we need to improve our ability to raise venture capital, adopt new technology and increase exports."

The 2003 report card was assembled by NovaKnowledge, a non-profit group dedicated to the strengthening of Nova Scotia's economy. The group presented the review to business and government officials at a Halifax conference Monday. Using weather icons to indicate the status of each economic area - strengths were labelled with sunshine, while problem areas showed raindrops - Mr. Gardener summarized the issues facing Nova Scotian businesses today.

"We've hit on some of the areas of deficiency here," he said after his presentation.

"Low productivity, low levels of investment relative to the size of our economy. . . . poor export performance and not enough companies in the export market."

Mr. Gardner said employment growth is doing well but too many jobs are being created in below-average wage-earning sectors.

"That is critical," he said.

It wasn't all bad news though.

Nova Scotia scored highly in terms of overall spending for research and development. Its budget rose 33 per cent over the past decade, levelling out at $342 million in 2001.

Mr. Gardner said that's mainly thanks to our universities, which are consistently responsible for the greatest share of research and development activity.

The province also earned top marks in the areas of business startups, investment in new technology and overall life satisfaction.

These highlights outweighed the negative notes for Nova Scotia's minister of economic development.

"In general I think the report card was very good for Nova Scotia," Ernie Fage said in an interview.

The government will take a closer look at any recommendations that come out of Monday's conference, the minister said, especially in the areas of immigration and venture capital.

"These two areas are areas that as government, and I think as a province, we see them as challenges but they're really opportunities," Mr. Fage said. "They're going to be key, both of these, to the economic viability of this province."

In his presentation, Mr. Gardner noted that in 2003 Nova Scotia had the second-highest growth rate in Canada in terms of the amount invested in venture capital. But compared to other provinces, we're still at the bottom of the pack when it comes to the average venture capital investment per $1 billion gross domestic product.

John MacRitchie, this year's chairman of the report card's venture capital committee, explained that the private sector accounts for 78 per cent of jobs in Nova Scotia and yet these businesses are the ones sometimes struggling to survive financially.

"These are the kinds of companies that we need to nurture and they've told told us that access to a local source of venture capital financing is the largest obstacle to growth," he said.

Copyright © 2004 The Halifax Herald Limited