Innovation Canada: A Call to Action

Innovation Canada: A Call to ActionRequire Positive Net BenefitThe primary purpose of government programsin support of business innovation is to improvemarket outcomes to better Canada’s economicperformance. The total benefit of any givenprogram should be greater than the cost offunding, administering and complying with theprogram. Support programs should reduce thesubsidy amount provided — or move to arepayable basis — the closer the activity beingsupported is to market, and therefore the morelikely it is that the recipient firm will capturemost of the benefit for itself. There is also aneed for coordination across the full suite offederal innovation programs — and ideally alsobetween programs of the federal and provincialgovernments — to avoid excessive “stacking”of incentives that may result in subsidies that arehigher than needed to achieve policy objectives.Excessive subsidization not only wastes financialresources, but also risks encouraging orsustaining activities that deliver little societalbenefit. As set out in Chapter 6, all of theseconsiderations are reflected in the adviceregarding improvement of the ScientificResearch and Experimental Development(SR&ED) tax credit. The Panel has concludedthat the program should be simplified to reducecompliance and administration costs. Moreover,the benefit should be restructured to generatesavings for reallocation to other initiativesbenefiting small and medium-sized firms.Favour National Scope and BroadApplicationThe Panel believes that the foundational coreof the federal suite of business innovationprograms should be large national programs ofbroad application — for example, the SR&EDprogram and Industrial Research AssistanceProgram (IRAP) — that support businessinnovation activity generally, empoweringfirms and entrepreneurs to make market-driveninvestment decisions according to their owntimelines and regardless of sector, technologyor region. As set out in Chapter 5, this isamong the reasons the Panel believes thatfunding for IRAP should be increased and thata commercialization vouchers pilot programshould be delivered within the suite of existingsupport mechanisms offered through IRAP.Build Sector Strategies CollaborativelyBeyond programs of broad application, thereis a complementary role for programs tailoredto the needs of specific sectors that thegovernment identifies as being of strategicimportance. For industry sectors that areconcentrated in particular regions, initiativesshould be designed and delivered to workcollaboratively with the relevant provinces andother local interests. These considerationsinform the Panel’s recommendation inChapter 7 to evolve the National ResearchCouncil’s business-oriented institutes intoindependent collaborative researchorganizations, intended to be even moreresponsive to the needs of sectoral researchand innovation strategies. It is also expectedthat the Panel’s recommendation in Chapter 7to use public procurement to promotedevelopment of innovative Canadian supplierswill contribute significantly to enhancedcapabilities in several sectors.Require Commercial Success in RegionalInnovationThe Panel is strongly of the view that regionallyoriented programs to support businessinnovation should focus on creating the capacityof firms in the target region to succeed in thearena of global competition. That is why it isessential for regional innovation programs toapply the same high standards of commercialpotential as are required by programs ofnationwide application. For this reason, thePanel is recommending that the proposedIndustrial Research and Innovation Council set4-2