Innovation Canada: A Call to Action (2011)

On October 17, 2011, Innovation Canada released their Review of Federal Support to Research and Development. The report was compiled by an expert panel and features recommendations for the improvement of Canada’s R&D investment, as well as a call for the simplification of the SR&ED tax credit program in Canada. An overview of the report’s findings and suggestions is given below, along with a link to the full review in .PDF format.

Source: Review of Federal Support to Research and Development website.

Ottawa, October 17, 2011 – The expert panel leading the Review of Federal Support to Research and Development (R&D) submitted its final report today to the Honourable Gary Goodyear, Minister of State for Science and Technology. It makes a series of recommendations that call for a simplified and more focused approach to the $5 billion worth of R&D funding provided by the federal government every year.

“Government needs to do a better job helping our innovative small and medium-sized enterprises (SME)s grow into larger,world-competitive companies in Canada. Relative to the size of the Canadian economy, government support for business R&D in Canada is among the most generous in the world, yet we’re near the bottom of the pack when it comes to seeing business R&D investment,” said panel chair Tom Jenkins. “Our report took a hard look at this problem and with valuable input from businesses, scientists, and the academic community; we’ve come up with some practical solutions.”

With a mandate to provide advice on how to enhance federal programming in support of a more innovative economy, the Jenkins panel met with more than 160 stakeholders across Canada, received 228 written submissions, surveyed over 1000 businesses, and consulted with numerous experts in Canada, Europe, Australia, Asia and the United States. The review could neither increase nor decrease overall funding, nor could it touch regulatory research done by federal laboratories or basic research conducted by institutions of higher education.

“What we found was a funding system that is unnecessarily complicated and confusing to navigate,” said Jenkins.  “There are also significant gaps that hinder the ability of our businesses to grow and that keep Canada from taking full advantage of this country’s innovations.”

Highlights from the panel’s recommendations are:

• The creation of an Industrial Research and Innovation Council (IRIC) to deliver the federal government’s business innovation programs.
  • There are currently more than 60 programs across 17 different government departments. The creation of an arm’s-length funding and delivery agency – the Industrial Research and Innovation Council – would begin to streamline the process as the development of a common application portal and service to help businesses find the right programs for their needs (a “concierge”).
• Simplification of the tax credit system used to support small and medium-sized businesses.
  • The current Scientific Research and Experimental Development (SR&ED) program is unnecessarily complicated: many small businesses hire consultants just to submit an application. This discourages eligible businesses from applying and may cost successful small Scientific Research and Experimental Development (SR&ED) recipients a good portion of the credit received. By basing the SR&ED credit  solely on labour costs, the panel believes SR&ED will be more effective.
• Make business innovation one of the core objectives of procurement.
  • The federal government spends billions of dollars every year but it ranks low internationally when it comes to using that purchasing power to encourage Canadian innovation. The encouragement of home-grown innovation a part of government procurement is commonsense.
• Transform the institutes of the National Research Council into a series oflarge-scale, collaborative centres involving business, universities and the provinces.
  • The NRC was created during World War I to kick-start Canada’s research capacity. It has a long and storied history of discoveries and innovation, including numerous commercial spin-offs. While the NRC continues to do good work, research and commercialization activity in Canada has grown immensely.  In this new context, the NRC can play a unique role, linking its large-scale, long-term research activity with the academic and business communities. The panel recommends evolving NRC institutes, consistent with the current strategic direction, into not-for-profitcentres run with stakeholders, and incorporating its public policy research into other departments.
• Help high-growth innovative firms access the risk capital they need through the Business Development Bank of Canada
  • Innovative Canadian companies face real challenges in getting start-up funding and late stage risk capital financing. In many cases, the gap is filled by foreign investors, which means that too many commercial benefits and intellectual property end up leaving the country. Directing the BDC to work with angel investor groups and develop late-stage risk capital/growth equity funds will pay dividends.
• Establish a clear federal voice for innovation and work with the provinces to improve coordination.
  • Currently, there is a lack of government-wide clarity when it comes to innovation. Responsibility is spread across a number of cabinet portfolios. The Prime Minister should assign responsibility for innovation to a single minister, supported by awhole-of-government Innovation Advisory Committee, evolved from the current Science Technology and Innovation Council (STIC), composed of external stakeholders, who would then work with the provincial and territorial governments to initiate a collaborative dialogue to improve coordination and impact.

“I commend Minister Goodyear and Prime Minister Harper for recognizing that the federal government needs to rethink the way it supports R&D in this country and I hope they will find our recommendations useful,” concluded Jenkins. “I would also like to thank my fellow panellists – Bev Dahlby, Arvind Gupta, Monique F. Leroux, David Naylor and Nobina Robinson for their contributions. Together, we have come up with some very practical solutions that will ensure that Canada unleashes its potential to be one of the world’s innovation leaders.”

The full report is available online at www.rd-review.ca.

This article is presented only for informational purposes and does not constitute legal advice. You should retain legal counsel if you require legal advice regarding your individual situation.