Good question.

Government can play a big role in helping to facilitate and grow an industry. The two examples that immediately spring to mind are the gaming industry in Montreal and the film industry in Canada. The flourishing gaming industry in Quebec is a great story, and I believe there is significant economic development and world class expertise that has been established and continues to grow at a phenomenal rate. Montreal is now home to some of the leading gaming companies in the world, a great success story.
The important points to consider about this success are the approach of all three levels of government. Government incentives should be focused on developing world class expertise. There are only so many dollars to go around, spend them wisely.

The type of incentives were primarily tax credits targeted at gaming and IT companies, multi-media tax credits and salary tax credits. While government had a role in the building of the gaming industry the success came more from the private sectors use of these incentives. The government incentives essentially acted as a catalyst for the existing Montreal ecosystem.

Montreal was a city already rich in artistic talent with many design studios and an artistic culture. I attend Montreal’s first barcamp and was inspired by two things; the artistic influence and the harmony and balance of the cultural duality of English and French. Montreal is also a city rich in technology talent with a number of Universities, Colleges and tech companies. A natural extension and logical choice was to develop the gaming industry. Would Ottawa have achieved the same success if we had tried to create a gaming cluster, probably not? Not for lack of technology talent, but for the lack the same level and depth of artistic culture. Governments need to provide specific incentives relative to the depth and breadth of the regional strengths.

The other key aspect in all of this is that the government indirectly incented the growth and success of the gaming industry. This hands off approach that provides minimal government administrative bureaucracy and maximum benefit to the ecosystem is without a doubt in my mind the most effective use of government funding. Success comes from the grass roots and other elements of the ecosystem the best use of incentives is to ensure that funding gets into the hands of those within the ecosystem, not into building bureaucracies.

My premise is that Quebec’s success in building the gaming cluster and incenting innovation is directly related to their use of tax incentives and providing funding to early stage businesses through LSIF. Ontario has cancelled the LSIF (don’t get me going) and has a more direct method of administering funding for innovation. With the recession deepening it will be interesting to see how Quebec’s indirect model or Ontario’s direct model fair.

Next post, Innovation – how do you measure it?

Ian Graham

Filed under: Innovation by Ian
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