A blue-chip panel of experts has come up with 10 simple - and relatively cheap - ways to help turn Canada into a "nation of innovators," including overhauling the $3-billion federal R&D tax credit regime and leveraging government purchases to spur inventions.
In report being unveiled Wednesday, a coalition of 54 executives, academics and heads of funding agencies says Canada is losing the innovation race and urgently needs to come up with a fresh strategy.
"Canada cannot hope to prosper in the face of increasingly intense global competition, and meet the needs of an aging population, by doing what we have always done," concludes the report by the Coalition for Action on Innovation in Canada, co-chaired by GlaxoSmithKline Canada president and chief executive officer Paul Lucas, and John Manley, president of the Canadian Council of Chief Executives.
Several of the key recommendations centre on getting more out of Ottawa's popular $3-billion-a-year Scientific Research and Experimental Development (SRED) tax credit - its costliest R&D program. The coalition wants Ottawa to make the credit available to public companies, expand eligible innovation-related expenses, and give refundable credits to companies that hire R&D workers. To make the changes "fiscally neutral," Ottawa could lower the credit cap, now set at 35 per cent, according to the coalition.
Currently, companies that go public are ineligible. And credits can only be used to offset profits, making it of marginal value to thousands of money-losing startups with good ideas.
However, critics say expanding the program to public companies would allow well-capitalized companies to get the government to sponsor the research and development they would do anyway.
The Harper government announced a review of its entire R&D effort in its last budget.
Government and business leaders have long been frustrated that Canada doesn't seem to be getting enough results from the roughly $7-billion it spends every year on R&D, directly and through tax breaks.
The nine-page report, a copy of which was obtained by The Globe and Mail, includes 10 "priority items" that the group says could be done within 12 months and at relatively low cost. The items include targeting a 90-per-cent high-school graduation rate (up from about 86 per cent now), getting governments to follow the British model of using their purchases to spur unproven technologies, and tapping retired entrepreneurs to mentor small business startups.
"We do not believe ... that government can close the innovation gap simply by throwing more money at the problem," said coalition members, who include prominent executives, entrepreneurs, academics, former politicians and top bureaucrats.
"Most of our recommendations for government action focus on removing obstacles to innovation, or on realigning existing resources to get a bigger bang for the same buck."
The group also floats a clutch of more expensive options that it says could be put in place once Ottawa balances its budget. These include: expanding the energy and mining flow-through share model to other research-based companies; introducing a 30-per-cent tax credit for Canadians who invest in innovative businesses; and providing tax breaks for companies that recruit foreign research talent.
Coalition members include Governor-General and former Waterloo University president David Johnston; University of Toronto president David Naylor; Research In Motion director of government relations Morgan Elliott; Ontario Research and Innovation Council chairman Adam Chowaniec; former deputy foreign minister Peter Harder; Toronto businessman and philanthropist Joseph Rotman; and Arthur Carty, former president of the National Research Council.
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10 PATHS TO CREATIVITY
Ten things Canada can do quickly - and pretty cheaply - to become a leader in innovation:
1. Make R&D tax credits open to public companies and businesses that lose money.
2. Create government-sponsored "co-investment funds" with private investors to finance emerging companies.
3. Adopt the world's strongest intellectual property regime.
4. Launch pilot partnerships between retired entrepreneur coaches and startups.
5. Enlist more retired executives to help the government dole out R&D funds.
6. Use the federal government's buying power to spur adoption of new products and services.
7. Set a national target of a 90-per-cent high-school graduation rate and boost master's and doctoral graduates.
8. Help foreign graduate students gain permanent immigration status.
9. Form a national network to share know-how among existing clusters of innovative companies and industries.
10. Create an independent advocacy group to push innovation by Canadian companies.
Barrie McKenna
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EXPERT PANEL REVIEW
The federal government on Thursday will announce the members of an expert panel that will look into why federal spending to support private-sector research and development hasn't had more of an impact on Canada's middling innovation record.
According to a government source, junior science minister Gary Goodyear will outline the terms of the review at Toronto's MaRS Centre for Innovation.
The review will focus on programs such as the Scientific Research and Experimental Development tax credit and the Industrial Research Assistance Program.
Jeremy Torobin