Innovation Policy at a Crossroads

Published in the Telegraph-Journal 13th January 2012

One of the challenges of Canada’s tech industries is becoming big enough to achieve the objectives that its entrepreneurs, venture capitalists and policymakers envisage. This means not just producing brilliant ideas, but converting them into profitable commercial reality, creating jobs and yielding the sorts of innovations that revolutionize old industries and spawn new ones.

For more than forty years, policymakers and researchers have agreed that at the root of this challenge is how government can most effectively and efficiently play its role. It’s not simply a money issue. Past recommendations from organizations as varied as the Economic Council to the Science Council to the National Advisory Board on Science and Technology have ranged from a national industrial strategy to an innovation extension policy.

Today, the Canadian Advanced Technology Alliance (CATA) is calling on governments at the federal, provincial and municipal levels to formulate and issue comprehensive innovation plans that together will effectively foster the creation, retention and growth of innovation and entrepreneurship so that Canadians can receive the full benefits of this country’s investment.

Canada’s largest technology association, CATA has called for the federal government to play a critical role by rationalizing its programs supporting business innovation, including the Scientific Research and Experimental Development Program (SR&ED), and rolling them up under a dedicated organization accountable for the successful closure of Canada’s innovation and commercialization gap. Among its immediate action priorities, CATA urges the federal government to focus on creating an environment that successfully commercializes Canadian innovations, long recognized as an impediment to Canadian competitiveness. CATA advocates funding commercialization through the reallocation of a portion of existing SR&ED tax credit expenditures and focusing on Canada’s “Priority Strengths” defined by the Council of Canadian Academies and the Science, Technology and Innovation Council.

This approach would address the funding shortfall for early stage businesses and the financing of growth opportunities in established businesses. It would also promote the rationalization of a currently unnecessarily complex regulatory climate that places a drag on innovation.

Another recommendation is changing the ratio of indirect tax measures to direct support for R&D intensive companies by permitting all companies to qualify for refundable tax credits, regardless of ownership. This would provide incentives for Canadian and American companies to continue R&D in Canada and would involve establishing a pre-commercialization tax credit for product development work beyond purely R&D which would be administered through NRC’s Industrial Research Assistance program (IRAP). A controversy has emerged over whether it is appropriate for Canadian taxpayers to fund R&D projects in which the ownership of some of the corporations may not be Canadian-owned. But the funding for IRAP support of young tech company R&D work is frequently challenging without the range of expertise and investment required to complete the project. Supporting the full range of research for technological innovation if it is undertaken in Canada makes far more sense than some Canadian firms being unable to complete critical R&D or pre-commercialization projects at all. This is of particular importance in smaller provincial and municipal jurisdictions where the number of qualified players may be more limited.

Those involved in the increasingly integrated development environment required by Canadian firms to effectively respond to today’s rapidly changing market opportunities agree that the status quo is unacceptable. The problem is not that substantially more funding is required. Instead we need a coherent and collaborative policy framework that will encourage Canadians to lead as creators, innovators and adapters of next generation technologies. In Canada, we don’t need to reinvent the wheel to achieve our planning goals.  We already have much of the necessary road maps, blueprints and strategies to begin our travel to this destination.

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Filed under economic development, Innovation strategy, Technology engine, Uncategorized

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