What is the new Superclusters initiative and what does
it mean for Canadian businesses and SR&ED?
The Federal Government recently announced the launch of the Innovation Superclusters Initiative (ISI). The new $950 million, five-year program seeks to encourage the growth of “superclusters” in seven specific industries:
- Advanced manufacturing
- Clean resources
- Clean technoology
- Digital technology
- Infrastructure and transportation
What is the Innovation Superclusters Initiative (ISI)?
The Innovation Superclusters Program Guide states the purpose of ISI is, “to accelerate the growth and development of business-led innovation superclusters in Canada, translating the strengths of [Canadian] innovation ecosystems into new commercial and global opportunities for growth and competitiveness.” (1.1) It is proposed this will be achieved by applicants submitting a “Supercluster Strategy” that, “will support long-term growth and advantage for the cluster that translates into major commercial opportunities, boosts productivity, creates jobs and drives economic growth.” (2.2)
Who can apply for ISI?
The program was designed to; “encourage large-scale collaboration,” (2.1.1) among Canadian businesses and any participants must be organizations incorporated and active in Canada. The consortia must be represented by not-for-profit entities that will distribute the funding amongst the businesses within the consortium.
“Firms of all sizes,” and, “at least one post-secondary institution,” must be included in the consortia. (2.1.1) This indicates that large multi-national companies, start-ups, small to medium enterprises (SMEs) and universities, colleges or polytechnic institutions, will be encouraged to work together to create consortiums.
The applications, however, can only be led by businesses within the consortium, and not post-secondary institutions.
What costs will the ISI cover?
Consortiums must also match any funding requested and these must be costs incurred in Canada unless the not-for-profit entity has received written confirmation from Innovation, Science and Economic Development Canada (ISED) prior to incurring costs outside of Canada. (2.3)
The ISI, however, includes multiple eligible costs, including (18.104.22.168-2):
- Salaries for not-for-profit entity staff (not including Board Member salary costs);
- Communication and marketing costs;
- Travel costs (according to the National Joint Council Travel Directive);
- Membership recruitment activities and other networking costs
- Operating costs (including materials and supplies, etc.)
- “Equipment, facility and supplies, including purchase, rental, operation and maintenance costs, and user fees,” and
- “Room or facility rental for projects”
Administration and operating (A&O) costs can make up 15% of the ISI funding, however, ISI will only cover up to 75% of the A&O costs. Other levels of government (e.g. alternative government funding) can, however, meet the remaining 25%. (22.214.171.124)
What does this mean for Canadian businesses?
The not-for-profit entity will receive the funding and then distribute it to consortium members based on the priorities and objectives of the consortium, and the activities proposed in the ISI application.
The ISI funding is intended to benefit the innovative projects and activities of the consortium, allowing the combined efforts of a consortium to benefit its members, as emphasized in the program guide, “program funding is intended to drive the growth of the supercluster as a whole, it will be important that the benefits of these investments extend beyond the Applicants themselves.” (2.1.3)
As the ISI encourages collaborative working and partnerships, it offers Canadian businesses the opportunity to work together towards common, innovative goals and potentially benefit from funding that can be led by just one business in the consortium. It has been argued that more funding should be provided earlier in the pipeline of innovative business, with Scott Inwood, Director of Commercialization at the University of Waterloo, stating the ISI, “doesn’t address the challenges at the initial stages of development.” The ISI however, presents the opportunity for businesses and research institutions to benefit from funding that they do not need to individually apply for.
What does the ISI mean for SR&ED?
Consortiums that apply for the funding are encouraged to “seek out provincial and territorial programs,” (2.3.1) to contribute to their match funding. This suggests that SR&ED tax credits could potentially be used as a source to contribute to the match funding required by the ISI.
The program guide also emphasizes the role increases in research and development (R&D) expenditure contributes to advancing innovation and the five themes of “activity eligible for co-investment,” under “Technology Leadership” include “collaborative R&D projects.” (2.2.1) Additionally, activities that fall under Technology Leadership must be included in the “Supercluster Strategy” and these activities must focus on, “advancing platform technologies central to firms’ future competitiveness and to building a competitive advantage for the supercluster.” (2.2.1)
For more information on the Innovative Superclusters Initiative, the full Program Guide can be found here (PDF link).