Canada faces commercialization gap, not innovation gap: CATA Canadian Advanced Technology Alliance’s white paper urges fed to overhaul SR&ED and streamline commercialization. By CHRIS PLECASH, Hill Times
February 28, 2012

A leading national industry association representing Canada’s technology sectors is urging the federal government to rethink the country’s so-called “innovation gap”
ahead of the 2012 budget.

The Canadian Advanced Technology Alliance’s recent white paper, Canada as a Competitive Innovation Nation: What Needs To Be Done, formed the basis of the organization’s
2012 pre-budget submission to Industry, Finance and PCO officials in December.

“I think where we’re at, an annual budget can not only shape some of the key changes that can immediately be achieved, but it can also provide the ongoing framework for that change to evolve through other budgets and programs as consensus and leadership develop,” said Russ Roberts, CATA vice president for tax and finance.

While Canada’s innovation record continues to be disparaged in policy circles, the CATA paper identifies a commercialization gap as the real drag on the Canadian  economy. The problem is not the quality of research and development in Canada–the country is a world leader in the public funding of R&D at post-secondary institutions, and innovation clusters such as Vancouver, Toronto, Waterloo, and Montreal are hotbeds for small and medium enterprises. The problem is that little of the innovation actually gets commercialized in Canada.
“The federal government has done a lot of heavy lifting in supporting initiatives that encourage research in the country,” observes Rx&D president Russell Williams, whose organization, which represents the country’s pharmaceutical research sector, contributed to the CATA white paper. 

“What we haven’t done well is take that research and stimulate productivity.” In other words, Canadian R&D—which last year accounted for $7-billion of federal spending—is “feedstock for other nations growth” as CATA spokesperson Terrence Matthews puts it. The feds’  Scientific Research and Experimental Development tax credit (SR&ED) accounts for nearly half of that figure. But while the government funds R&D, foreign companies frequently buy out Canadian innovators and reap the commercial profits. 

CATA supports many of the recommendations of the federally commissioned Jenkins Panel, whose 2011 report advised the government to limit SR&ED tax credits to labour costs and use the savings to invest directly in the commercialization of promising innovations. The white paper goes further, however, and argues that the savings from dropping R&D equipment and capital spending would be less than if the SR&ED program eliminated “retrospective claims filed for previous years”—a measure that CATA estimates could free up as much as 30 per cent in funding to be redeployed into direct investment. 
The alliance also endorses the Jenkins Report’s recommendation of an Industrial Research and Innovation Council that would streamline and coordinate innovation policies across governments and agencies, but argues that such a council be responsible for administering the SR&ED tax credit system as well. CATA advises that such a council working in conjunction with the Finance Department to maximize SR&ED’s effectiveness and reform the program to improve its efficiency. 

“What good is indirect funding being outside of such a council when it’s one of your major tools for promoting innovation and ensuring that you leverage the results and maximize the returns here in Canada,” questioned Dr. Roberts, who co-authored the report with fellow CATA executives and the assistance of several partners including the University of Waterloo, the Conference Board of Canada, Public Works’ SMEs office, and BIOTECanada. 

Another of the report’s key recommendations is that more be done to encourage collaboration between SMEs and industry leaders. 

“To compete and survive, small companies need to collaborate among themselves, as well as with large anchor companies that have built-in channels to the market. Canada does not have a culture of collaboration,” the report states, citing findings that 53 per cent of surveyed companies compete in the market without collaborating with industry peers. 

“The government must encourage collaboration among Canadian industry companies on a much larger scale than at present, where most of the incentives were focused on  collaboration between government labs and industry and on ways to get more academic institutions to license their inventions to industry,” the report states. 
Regulatory reform has been a hallmark of the majority Conservative government, particularly when it comes to environmental regulation, but Dr. Roberts emphasized the need for similar reforms when it comes to simplifying federal assistance for Canadian innovators. 

He added that the Treasury Board’s recent Red Tape Reduction Commission Report was a promising sign that the federal government will begin to reduce the obstacles to  commercializing innovations in Canada. 

“We’re looking for federal programs to be integrated, understood and available so we have one-stop shopping rather than a series of bureaucracies and overlapping application and due diligence models,” Dr. Roberts told The Hill Times. “There’s a lot of cost involved, but there’s also an awful lot of difficulty for firms in adjusting to all of the different requirements of different programs.”
The Hill Times