Innovation essential to economic growth: Report
Comparatively lower investment in business research and development puts Canada at risk of falling behind other countries in terms of economic growth and profitability, according to a federal report.
The first annual report card from Canada’s Science, Technology and Innovation Council (STIC) ranked Canada 15th among 30 Organisation for Economic and Co-operation Development (OECD) countries and second to last among G7 countries when it comes to business R&D investment as a proportion of gross domestic product.
Business R&D and innovation is important because it is closer to the market than research at universities and colleges and therefore has a greater affect on Canada’s ability to turn research into new products and services it can sell globally, states Canada’s Science, Technology and Innovation System: State of the Nation 2008.
“Those Canadian firms that do more R&D have greater sales of new products and are also more productive,” states the report. “In general, Canadian firms have increased their R&D investments, but in relative terms, we are falling behind our major competitors, and the gap is growing.”
Report calls for government incentives
To turn this around, the report recommends Canadian governments provide incentives for innovation and foster a business culture that sees innovation as a key driver of business success. These investments will also help the country bounce back more quickly from the current global economic downturn.
Economic growth and productivity are dependent on better technologies, tools and processes, said Finn Poschmann, vice-president of research with the C.D. Howe Institute, a Toronto-based public policy think tank. Innovation will put these tools in workers’ hands, making Canada more competitive on the world stage, he said.
“If we’re concerned about growing Canadian workers’ incomes, Canadian investors’ incomes, we need to succeed in a competitive marketplace and that means staying ahead of the game and that means being innovative,” said Poschmann.
The report recommends that Canada focus on four priorities: environmental science; natural resources; life sciences; and information and communication technology (ICT).
Most Canadian companies fall into these categories and are uniquely positioned to contribute to these areas on a world stage, said Sam Shaw, president and CEO of the Northern Alberta Institute of Technology (NAIT) in Edmonton and a member of STIC.
“We have bench strength in them,” said Shaw. “We’ve got some excellent research that is going on in those areas.”
More collaboration needed
However, where Canadian businesses are lagging behind is in collaboration with other companies, researchers and governments. Canada ranks 24 out of 26 OECD countries when it comes to the amount of collaboration between businesses and public and private partners, finds the report.
“We need to engage businesses and industry into looking at how we can work together, not only in the research end but in the commercialization and tech transfer. Doing research is one thing but looking at the application of that research also becomes equally important,” said Shaw.
One group that’s helping with collaboration is the Ottawa Centre for Research and Innovation (OCRI). It’s a member-based economic development corporation that connects business, research, education, government and talent to advance the competitiveness of the city’s knowledge-based industries and institutions.
“Our role is to provide the linkage between all of these different groups,” said Claude Haw, president and CEO of OCRI. “It’s really just making sure somebody building a business knows what’s available to them on the research side or on the government program side.”
The centre also supports industry clusters, where several organizations in the same field come together to share ideas and then the centre can market the entire cluster internationally to help secure foreign investment.
Learning from colleges
Organizations can also benefit from leveraging the resources and knowledge available in colleges and technical institutes, said Shaw.
“We are well placed to work with business and industry,” he said. “We have a really privileged position to help them with looking at the applied research and commercialization.”
To help that along, NAIT is appointing an applied research chair, sponsored by business and industry. This kind of collaboration will result in more industry-driven research, which will result in products and services that meet a real need and give Canada a competitive edge globally, said Shaw.
“It’s not just looking at research, it’s really looking at how can we do things better, more efficiently and more effectively,” he said.
The report found that while Canada ranks first in the OECD in the proportion of the workforce who have a post-secondary education, it ranks 21st in the number of science and engineering degrees as a percentage of new degrees. To increase this proportion, the report recommends educating students about job opportunities in these fields.
OCRI does this by co-ordinating math and science programs in elementary and secondary schools and providing networking opportunities between industry and post-secondary students so new graduates will already have connections in various organizations.
One of Canada’s strengths is its support, through tax credits, for R&D, states the report. For example, The Scientific Research and Experimental Development tax credit provides businesses with about $3 billion to $4 billion in tax rebates every year.
“Canada has one of the most favourable tax regimes there are for pure R&D investment and innovation,” said Poschmann.
However, this program could still be improved, said Shaw. Companies only get the cash rebate after filing the previous year’s tax return.
“Is it helpful? Absolutely. But there’s a problem of cash flow,” he said.
Once a company gets bigger, it doesn’t qualify for the tax credit but can apply 25 per cent of the R&D investment to offset their taxable income. However, mid-sized companies that are too big for the tax credit but aren’t yet turning a profit don’t qualify for either benefit, said Haw.
While research is all well and good, there also needs to be more financial support for turning ideas into commercial products and services, said Haw.
“We are investing significantly in pure research. That is fundamentally a good thing. We do need to focus even more attention on the commercialization piece,” said Haw. “We can be a lot bigger and bolder on the world stage if we can take a lot of that to market in the form of products and services.”
The National Research Council’s Industrial Research Assistance Program helps companies do just that, said Shaw. The program supports small- and medium-sized enterprises, through advisory services and financial aid, in taking ideas and turning them into commercial products and services. Research in Motion, the Waterloo, Ont.-based creator of the Blackberry, was a former recipient of the program, said Shaw.
The Alberta government also has a voucher program where organizations can receive up to $50,000 worth of services to help go from the idea stage to commercialization. One of the services offered through NAIT is prototyping, where an organization can have a prototype of its idea created to help secure investors, said Shaw.
