John Ruffolo is founder and managing partner of Maverix Private Equity. Vivek Goel is president and vice-chancellor of the University of Waterloo.
We all know the facts: Canada has been the worst performing advanced economy in the Organization for Economic Co-operation and Development since 1976; highly skilled, Canadian-trained tech workers leave the country and head to the U.S. every year in an innovation brain drain that has been circling for decades; and the level of funding our scientists and graduate students receive right now in this country to create the IP that feeds our innovation pipeline is embarrassing.
In short, Canada has a science and tech research and innovation ecosystem that is broken. We continue to fall behind other countries in harnessing the power of science and technology to improve productivity. Particularly with the advent of generative AI, if we don’t get this right we will fall even further behind, perhaps with no chance of ever catching up.
There are many things we must do to meet this challenge. A critical intervention would be to incentivize Canadian business to be more involved in investing in Canadian research and talent.
Britain offers a good road map for one path to this end. The country recently launched a £370-million ($614-million) tech investment plan with the goal of making itself into a science and technology superpower by 2030. The package includes £50-million ($83-million) for “co-investments” – government partnerships with private business to encourage domestic investment in science and tech. When geo-political considerations have meant that some foreign investments in research at Canadian universities may pose a national-security risk, this is the one way to ensure that those lines of research continue.
Businesses are begging for reforms to the Scientific Research and Experimental Development (SR&ED) tax credit. SR&ED is a tax incentive worth close to $4-billion annually. It has been a bedrock public-policy tool for encouraging private-sector innovation in Canada since 1944 and it’s in desperate need of modernization. One simple change would be to deem costs associated with filing IP as eligible for SR&ED.
Canadian companies, particularly small and medium-sized ones, should also be better incentivized to hire Canadian talent emerging from postsecondary institutions, such as co-op students.
The federal government’s Student Work Placement program is already successful. Let’s invest further to help more businesses hire young, digitally fluent workers who have grown up immersed in technology. They can bring new skills and new ways of thinking to workplaces to help improve productivity – which recent Statistics Canada data have shown to have regressed to mid-2017 levels.
Universities have a role to play in incentivizing business to invest in their talent and research too. Institutions should be working to forge long-term, collaborative relationships with business – not just one-off partnerships. There are many examples of countries where these relationships already flourish.
Samsung’s work with South Korean universities is oft cited, and for good reason. In the spring of this year, the company announced new partnerships with three leading postsecondary institutions with the goal of nurturing talent in the semi-conductor space through a new five-year program that integrates graduate and undergraduate students and offers them industry-specific academic training and internship opportunities.
Building such relationships with the private sector requires capacity in academic institutions. Enhanced funding through the federal government’s Research Support Fund would allow for greater support of industry partnerships.
In Canada, the Semiconductor Industry Leadership and Innovation Canada Action Network (SILICAN) – a group founded by the Council of Canadian Innovators, the U15 Group of Canadian Research Universities and key industry partners – is already working on how to follow suit. It’s a one-stop shop for the federal and provincial governments to get ideas on how to build a national strategy for supporting Canada’s chip industry and it will surely include ideas for how to unlock Canadian business investment in the industry.
We come from two different worlds: tech investing and academia. Each of those worlds creates the conditions for generating more wealth for Canada, but each could do so much more to bolster the innovation pipeline if Canadian businesses are incentivized to step up to the plate too. No one part of our innovation ecosystem can fix this issue alone, but we know business will do more with the right motivation.
That’s why we’re coming together now to call for urgent action to safeguard Canada’s future.
We know there is no shortage of brilliant ideas and we know that Canadian businesses want to invest. We just need to continue to offer the right incentives and work together to make sure that investments flow to the place they can do the most good for our country.