Minister of State Goodyear (Cambridge, Ont.) and Industry Minister Christian Paradis (Mégantic-L’Érable, Que.) were both in Toronto last week to make funding announcements aimed at supporting small and medium sized business (SMB) to cash in on made-Canada innovations.
On Feb. 19, Mr. Goodyear, who also serves as minister of state for Federal Economic Development for Ontario, announced more than $18-million in federal funding for SMB innovation in combination with an additional $53-million in leveraged third-party venture capital. The funding will go towards 24 Toronto-area businesses to support the commercialization of innovation and technology upgrades.
Mr. Paradis also announced new incentives for government contractors to make long-term investments in Canadian SMBs as part of their obligations under the federal Industrial Regional Benefits (IRB) program, which requires procurement contractors to reinvest the value of awarded contracts back into the Canadian economy.
The announcements are part of a wider push by the federal government to encourage Canadian businesses to invest more money in research and development (R&D) and turn more of their innovations into commercial products following the 2011 Jenkins report on federal R&D support.
In recent years, federal R&D expenditures in the form of grants and tax credits have topped $7-billion, but Canada has steadily drifted down the World Economic Forum’s annual competitiveness rankings. In its 2012-13 report, the WEF ranked Canada 14th out of 144 countries in terms of economic competitiveness, down from 12th place in 2011-12, and 10th in 2008-09.
Resistance to innovation appears to be part of Canada’s corporate culture. A recent survey by the Conference Board of Canada found that 47 per cent of Canadian firms do not have processes in place to manage their innovations from development through to commercialization. Moreover, the Conference Board found that 40 per cent of companies surveyed did not make efforts to measure their innovation performance.
The Jenkins panel was an effort to reverse this trend by improving returns on publicly funded R&D investment and encouraging greater R&D spending by the private sector. The panel, chaired by OpenText head Tom Jenkins, recommended establishing an Industrial Research and Innovation Council to oversee administration of federal business innovation programs, simplifying the application process for scientific research and experimental development (SR&ED) tax credits, making business innovation central to procurement contracts, and increasing innovative firms’ access to venture capital.
“We’re doing everything from modifying tax treatments, modifying immigration policy, modifying procurement strategies, and we’re realigning the National Research Council—all of this to participate in this area in a much more efficient, innovative, and hopefully effective way,” Mr. Goodyear told The Hill Times in an interview following last week’s funding announcement.
Some of the Jenkins report’s recommendations were evident in last year’s federal budget. Beginning in 2014, R&D capital expenditures will no longer be eligible for SR&ED credits, and the tax credit rate will be decreased from 20 per cent to 15 per cent. While firms will get less for their R&D investments as a result, the government invested $400-million in risk capital funding for innovative firms through Business Development Canada and the National Research Council’s Industrial Research Assistance Program.
Despite the shakeup, Mr. Goodyear acknowledged that it would take time for the changes to begin bearing results.
“On the basic factors of business expenditures on R&D, I’ve yet to see a trend,” he admitted. “We often see a month that looks good—we’ve had one or two of those, but it’s the trends that I’m looking for.”
The long-serving minister of state for science and technology said that the government plans to turn its focus to encouraging greater collaboration between post-secondary institutions and the private sector.
“The next area that I think we’ve seen huge leaps and bounds in is the cooperation and partnerships between universities, colleges, polytechnics, CEGEPs, and our business community,” Mr. Goodyear said. “[T]his is an opportunity for us to now bridge the gap between business and the research capacity at our post-secondary institutions and at the National Research Council.”
The minister also announced nearly $1.8-million in funding for programs to encourage students to enter math and science fields, and another $1.2-million in funding to assist graduate students in science and technology to pursue commercialization.
The changes to R&D support and the new funding initiatives appear sweeping, but Tyler Chamberlin of the University of Ottawa’s Telfer School of Management said that the policies do not go far enough to have an effect on Canada’s innovation track record.
One of his main criticisms was that the increased funding to IRAP was only a shift of funding away from the SR&ED tax credit. He also noted that the government has yet to establish an Industrial Research and Innovation Council, which was one of the main recommendations of the Jenkins report.
“While the Jenkins report doesn’t specifically say the exact number of dollars that need to go into [venture capital], it would have to be a big chunk of money—not $50-million or a $100-million,” said Prof. Chamberlin, who specializes in innovation and entrepreneurship.
And while partnerships between post-secondary schools and private enterprise are becoming increasingly popular in policy circles, Prof. Chamberlin said that such arrangements don’t always work because post-secondary research tends to focus on the long term, while SMEs are more focused on short-term breakthroughs.
He recommended that the government do more to encourage students to take up math and science.
“What really needs to happen is more on the education side of things,” he said. “We might even see a more immediate return if we could try to get more young Canadians developing skills in maths and sciences, who are going to want to be involved in the development of this industry going forward.”
NDP MP Kennedy Stewart (Burnaby-Douglas, B.C.), his party’s science and technology critic, said that the dollar figures being put forward by the government appear substantial, but pale in comparison to other countries’ R&D spending.
Canada’s R&D spending as a share of GDP hit a 10-year low in 2011, down to 1.74 per cent. Countries like the U.S., Germany, Japan, and China consistently spend between 2.5 and 3 per cent of their GDP on research and development.
Mr. Stewart was also critical of the government’s decision to reduce the SR&ED tax credit program when it provides a major incentive for innovative R&D in small and mid-sized businesses.
“That’s really the major stimulus for R&D in the private sector. The Conservatives cut that from 20 to 15 per cent, and they no longer include both capital and labour expenditures under that heading,” he said. “On one side, the government is making large changes, but it doesn’t seem that they’ve consulted enough to make the right ones.”
Original Article
Source: hilltimes.com
Author: CHRIS PLECASH
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