Roundup: SR&ED and Innovation in the News (August-November 2015)

With the recent Canadian federal election held on October 19th and the newly elected Liberal government under Prime Minister Justin Trudeau, there has been a revived discussion surrounding innovation in Canada. We’ve pulled key articles from major newspapers on innovation and R&D that were published between August and November 2015. Read the summaries provided to help keep yourself informed about the ever-changing environment of Scientific Research and Experimental Development (SR&ED) and innovation in Canada.

Current R&D Environment in Canada

Toronto-Waterloo Corridor Could be Canada’s Own Silicon Valley (August 19, 2015)

In this article, Globe and Mail columnists Iain Klugman and Kevin Lynch praise the would-be innovation “super ecosystem” in Ontario’s Toronto-Waterloo area, but also note that the government needs to help bolster the innovative potential of this geographic area to help ensure that Canada does not lose talented innovators to California’s so-called “Silicon Valley”. Klugman and Lynch explain why the Toronto-Waterloo has the potential to become an innovation super ecosystem and offer suggestions for strengthening the area’s draw for innovators and businesses (emphasis added):

• These innovation “super ecosystems” share key attributes: an entrepreneurial culture where geeks are gods, deep talent pools, great research universities, abundant risk capital, enormous scalability of new innovations and the brand power to continually refresh themselves from globally mobile capital and talent.
• With its strong research universities and technical colleges, major international airport, population density (more than six million), vibrant immigration and nascent entrepreneurship culture, the Toronto-Waterloo corridor already has many of the ingredients essential to building a Silicon Valley-like innovation super ecosystem in Canada.
• It requires an incredibly intensive interplay among world-class university research, targeted government support for technology development, industry R&D, venture capital and astute early adopters of the newly created technology.
• Canadian entrepreneurs have repeatedly shown they can build game-changing technology right here at home, but too often these successes have been in spite of, not due to, the business conditions faced by our innovators.
• We need a bold vision and even bolder leadership from government, the private sector and universities, buttressed by the ambition and confidence that we can take on the world and win. We also need to create concrete conditions for success, including more direct government support of technology development, faster transit links, financial lending services tailored to knowledge-based startups, strategic procurement by both governments and large firms, expedited visas for global talent and clear numeric targets for creating billion-dollar firms and tech jobs.¹

The Research Challenge Canada Faces (November 30, 2015)

Globe and Mail science reporter Evan Semeniuk sat down with Kirsty Duncan, the newly appointed Minister of Science, to discuss pressing issues in Canada’s science sector. Ms. Duncan explains her ministerial mandate — namely, to foster a) a healthy research environment and b) a government that supports “evidence-based decision-making” (emphasis added):

• The messaging could hardly be clearer. In contrast to the Stephen Harper government’s commercially oriented take on the role of research, the members of Prime Minister Justin Trudeau’s cabinet are being told to bring “scientific considerations” into all aspects of their decision making.
• […] Ms. Duncan spoke from personal experience, describing conversations with researchers she knew in government labs who felt they couldn’t communicate their findings publicly. “It was really difficult to watch former colleagues not being able to speak about their work,” she says.
• But many wonder how she and her cabinet colleagues can accomplish what they have been asked to do – not just reverse the policies so unpopular under Mr. Harper but craft a new role for science that has never been present in Canada’s government before and, even more important, boost the value of science to the economy.
• Based on her mandate letter, Ms. Duncan’s job also includes strengthening basic research, reviewing and reforming environmental assessment, increasing co-op placements for science and engineering students, establishing new research chairs in sustainable technologies and helping to examine the role of climate change on marine ecosystems.
• Since 2006, Canada’s private sector has slipped from 18th in the world to 26th in how much it devotes to research and development. Total investment in business innovation has now fallen below 1 per cent of gross domestic product (GDP).
• Policy analysts tend to agree that it’s inaccurate to suggest the Harper government somehow shut down science. Rather, it shifted research priorities in a way that often reflected a small-government, pro-business agenda. Under Mr. Harper, there was more emphasis on applied research with commercial outcomes, and the National Research Council was effectively repackaged as a contract service for industry.
• What differentiated his government was its apparent insistence on controlling, and even blocking, the exchange of factual information, which is central to how science works in modern society.
• In a 2012 editorial, the journal Nature suggested that the Harper government could not distinguish between environmentalism and environmental science. Mr. Trudeau’s team will have to be more deft at distinguishing between research and activism as it tries to forge policies it can sell to Canadians while staying honest about what the science says.²

Proposed Changes to Canada’s R&D Environment

Tech Alliance Pushes for Federal Innovation Ministry (October 21, 2015)

Two days after the federal election results were announced, The Globe and Mail published an article detailing The Canadian Advanced Technology Alliance (CATA) wish list for Trudeau’s new government, including a greater ministerial focus on bolstering innovation in Canadian businesses (emphasis added):

• The recommendation from the Canadian Advanced Technology Alliance (CATA) includes dissolving Industry Canada and consolidating federal efforts around science, technology and business innovation under a single, senior minister. Such a scenario would dovetail with Justin Trudeau’s stated intention of appointing a federal cabinet on Nov. 4 that comprises a smaller number of ministers who are empowered to implement a transformational agenda.
• As envisioned by CATA, the new minister would have the resources and the mandate to boost the country’s tepid private-sector R&D effort.
• Other items on the list include a more effective Scientific Research & Experimental Development (SR&ED) tax incentive program for encouraging business innovation and a federal-provincial joint effort to improve regulations related to crowdfunding startups “that enable startups to raise up to $50-million from anyone.”³

Canada2020: Supporting Small Businesses While They’re Still Small (November 19, 2015)

iPolitics.ca summarized the proceedings from a panel discussion held in November to address innovative entrepreneurs in Canada. This discussion was part of the 2015 Canada 2020 Conference (held November 18-20th), which addressed “5 Burning Platforms for Canada’s Future”. One of the “platform” panels at this year’s conference was called “Supporting Innovators and Entrepreneurs”. As per Canada 2020’s stated objective to “inform and influence debate, to identify progressive policy solutions and to help redefine federal government for a modern Canada”⁴, the panellists, featuring representatives from the Business Development Bank of Canada (BDC) and Google, proposed the following policy solutions (emphasis added):

• […] panelists spoke about challenges entrepreneurs face, including lack of access to suppliers, financing and distribution channels, and areas government can help grease the wheels of innovation
• [Michael Denham, president and CEO, BDC] spoke about the need to ensure access to financing for medium-sized companies that want to get big, and also promoted the use of Scientific Research and Experimental Development credits to help small businesses start up. “I think SR&ED credits help a lot,” he said.
• [Tom Rand, a senior advisor at MaRS] said there is “a lot of good government support” once firms become “statistically relevant” in size but need help much earlier on, noting early-stage capital is difficult to find. Rand wants to see the federal government – and provinces – show commitment to developing the clean technology sector by stating clearly its development will be a strategic priority for them.⁵

Government Policy Surrounding Innovation

Trudeau’s Promise to Revive Labour Fund Credit Won’t Boost Innovation (November 8, 2015)

The Globe and Mail’s Barrie McKenna offered up some critical analysis of Prime Minister Trudeau’s promise to reinstate a widely criticized tax credit for investors in labour-sponsored venture capital funds (emphasis added):

• But there is another promise that should stay buried in the party’s campaign platform – a vow to reinstate a 15-per-cent tax credit for investors in labour-sponsored venture capital funds, such as GrowthWorks and the Quebec Federation of Labour’s $11.1-billion Solidarity Fund.
• The Conservatives wisely moved in 2013 to phase out the tax break ending in 2017.
• The credit cost the government $140-million in lost revenue last year, adding to the billions of dollars it has spent on the tax break since the mid-1980s. It’s not clear what the country got in return for that money. The federal Finance Department acknowledged in 2013 that the credit is “an ineffective means of stimulating a healthy venture capital sector.”
• The Liberal platform defends labour-sponsored funds, saying they “help small and medium-sized businesses get off the ground, creating jobs and economic growth … [and in Quebec] serve as an important retirement savings vehicle.”
• The labour-sponsored fund sector has generally been in decline across the country, except in Quebec, where the Solidarity Fund remains popular with investors. Elsewhere, the industry has been badly tarred by fund failures, poor returns and Ontario’s 2010 decision to end a matching provincial tax credit.
• Very little of the fund’s money is invested in what most people consider true venture capital – tech startups and the like.⁶

Muzzled Canadian Scientists Now Free to Speak with Media (November 6, 2015)

The Star reported on an announcement about the “un-muzzling” of scientists under the new Liberal government. Navdeep Bains, the newly-minted Minister of innovation, science and economic development, explained the revised rules surrounding communications between scientists and the media (emphasis added):

• For years, scientists who worked for the federal government were silenced by strict rules that made them seek departmental approval before speaking to the press.
• “Our government values science and will treat scientists with respect. That is why government scientists and experts will be able to speak freely about their work to the media and the public,” [Bains] said in a statement provided by his staff. “We are working to make government science fully available to the public and will ensure that scientific analyses are considered in decision making.”
• Prince said the strict communications policies put into place while former prime minister Stephen Harper was in power “frustrated” his colleagues.
• Prime Minister Justin Trudeau made freeing scientists part of his larger campaign pledge to open up government to the public and improve relations with the civil service.⁷

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