Op-ed: Canada's innovation policy agenda just doesn't do it

A lack of attention to taxpayer returns on our nation's most successful tech companies could leave Canada behind, argues CATA
John Reid is CEO of Ottawa-based Canadian Advanced Technology Alliance.

The creation of superclusters is a good first step to advancing Canada's competitive innovation ranking. And the proposed USMCA trade agreement keeps the door open to Canada’s largest trading partner, the U.S., which is another important success.

But despite these positive steps, the government's three-year effort to create a more innovative support system for S&T (science and technology) along with a modern IP (intellectual property) regime doesn’t address the perennial and key issue.

Specifically, tech leaders have argued – for close to a decade now – that the critical challenge facing federal governments is how to significantly improve the return on Canadian taxpayers’ investments in S&T-linked business innovation. This isn’t the first federal government to have ignored this critical issue, as innovation agendas have often been developed with limited prioritization given to IP.

A large portion of our S&T graduates, particularly information technologists, take their knowledge straight to the U.S. after graduating. In the computer sciences and engineering domains, the brain drain at some highly ranked universities can be up to 40 per cent of graduates.

In the past five years 183 Canadian companies have been acquired, with nearly 70 per cent of the acquirers being U.S. firms. According to PwC, 77 per cent of Canadian tech founders are planning to eventually exit their company.

How many of these companies selling to foreign entities were funded with taxpayer money? Should more funding go to companies focused on a long-term, stay-in-Canada vision, as was suggested by SOTI Inc.’s Carl Rodrigues in The Globe and Mail in 2017?

There is no shortage of S&T success, creativity and innovation in Canada. The issue is our government's failure to help exploit the country's successes to the fullest benefit of Canadians.

While we haven’t seen a net benefit analysis of the cost of the outflow of Canadian innovations from Canada, the impact cannot be small. A financial audit is necessary to put the issue into perspective.

CATA has consistently argued that there’s no shortage of S&T success, creativity and innovation in Canada. The issue, rather, is our government’s failure to help exploit the country’s successes to the fullest benefit of Canadians.

Governments don’t seem to grasp that a continued, simplistic focus on throwing money at S&T support – either through academia or directly to business in the form of SR&ED (Scientific Research and Experimental Development) tax credits or grants – simply leads to the offshoring of IP rewards for other countries to exploit.

So far, we haven’t seen the federal government show much interest. But it’s time for this government to demonstrate true innovation leadership.

Our call to action, to all party leaders, is to embrace the following five points:

  • Recognize that while Canada remains strong in terms of the quality and impact of its scientific output, the country lags behind in commercializing that output and generating wealth;

  • Create a 21st century tax commission focused on improving the nation's innovation support through fiscal measures, then test all recommended measures through public consultations and deliver a final report in 12 months;

  • Propose improvements to SR&ED and test them through public consultations;

  • Support current work on developing a modern IP system with appropriate fiscal measures for IP exploitation in Canada, while covering some of the costs of the patent process; and,

  • Publish benchmarking metrics comparing Canada to other leading countries building innovative capacity.

If all parties embraced this guidance, it would bring us much closer to a system of innovation in which government, universities and the private sector work closer together to move from invention to commercially viable solutions.

This will not only create jobs and retain Canadian talent, but also provide more solid returns to Canadians.

As Canada's innovation advocacy group, CATAAlliance moderates crowdsourced ideas and guidance from more than 800,000 opt-in members with strong Canadian interests. They provide direction for our efforts to promote positive changes that can provide Canada’s innovation based businesses the environment they need to compete and grow effectively.

Co-authored by John Reid, CEO, CATAAlliance and Russ Roberts, senior vice-president of advocacy, CATAAlliance