Generously funded by the government, the creation of a Quebec research and development (R&D) ecosystem and companies specializing in artificial intelligence has so far achieved none of its objectives. On the contrary, a portrait of the Quebec digital industry published this Thursday by the Institute for Research in Contemporary Economy (IRÉC) concludes that it is foreign companies that benefit the most.
One of the main aspects of the Quebec artificial intelligence (AI) investment strategy that began in 2016 was to stimulate the creation of technology-based companies by facilitating the transfer of academic research to the private sector. However, certain data tend to show “the existence of a deficit of patents and a flight of emerging companies”, writes the researcher specializing in economic sociology, Éric N. Duhaime. According to him, it could be that with his strategy, “Quebec will only come to play the role of an R&D subcontractor for the benefit of foreign companies”.
The economic news of recent months tends to support this conclusion. In November 2020, the Montreal company Element AI — seen as the best example of the success of Quebec’s AI strategy — announced its takeover by a Californian company for a sum far below its estimated value until then. Its neighbor in what was dubbed the Cité de l’IA in Montreal’s Mile-Ex district, the pioneer of the medical imaging application Imagia, another jewel of metropolitan AI, has completely evaded any mention of the AI of its business model. It merged two weeks ago with Canexia Health, an expert genomics counterpart in Vancouver.
From 2016 to 2020, the government invested $1.17 billion in various such AI projects and the result was equally disappointing in most cases: almost all of the projects funded by the funds over the past five years have experienced a takeover by foreign companies. This raises “very serious questions about the effectiveness of this method of financing,” observes researcher Éric N. Duhaime. In its current state, this model is incapable of ensuring “sustainable creation of businesses and jobs in Quebec,” concludes the IRÉC.
A new kind of exodus
In AI, as in other digital sectors, for example in video games, the main economic factor invoked by the government for its investment is the creation of jobs with more advantageous conditions than the average of the labor market in general. In this regard, the government strategy is achieving its target, but only partially.
Job creation has indeed taken place, continues the IRÉC, but the foreign ownership of companies that hire professionals in Quebec makes their status more precarious than if they worked for employers here. In the same vein, some of these companies have contributed to the precariousness of other groups of workers, by promoting an on-demand economy, microwork and networking.
Added to this polarization of work is a massive drain of the intellectual property created within these companies. According to data compiled by economists at the University of Calgary, the number of patents created in Canada nearly doubled between 2007 and 2017. The number of patents created each year in the country and held by Canadian interests has an increase of only about 50%. Over the same period, the share of patents created in Canada belonging to American companies quadrupled.
In technology as elsewhere, commercial applications resulting from patented intellectual property generate revenue that goes to the owner of the patents. In a dematerialized economy such as digital technologies, it is the main way to create value that is highly prized by governments.
In Quebec, a good part of this value is simply lost. A handful of professionals specializing in artificial intelligence technologies today enjoy advantageous employment conditions thanks to public funds invested in the sector. But this has come at the cost of a loss of value elsewhere in the labor market and in the application of the fruits of academic research.
More inclusive
In its report, the IRÉC recommends that governments review their investment strategy in the digital economy and artificial intelligence in order to better regulate the way in which the intellectual property created by researchers working in the country is produced and then protected. This recommendation echoes the desire expressed over the past few years by other representatives of the technology industry across Canada.
“Government innovation policies tend to favor the expansion of foreign branches rather than the growth and success of local companies nationally and internationally. For too long, the repercussions of these policies have been negative in terms of the ability to transform local businesses into global giants”, already wrote in an open letter published at the end of 2018 by business people gathered within the Canadian Council of innovators.
Ottawa has since reinforced its own strategy on intellectual property, in particular via the Canadian Intellectual Property Office, which comes under the Department of Innovation, Science and Economic Development. But the government could go further with a more inclusive policy. The IRÉC suggests that public bodies and SMEs give priority to royalty-free technologies and encourages the adoption of technologies that are better suited to the challenges of the social economy, “in order to bridge the gap that is widening between quality jobs and new forms of precarious work”.