Alberta government is trying to spur research and innovation during the downturn

Canadian businesses are spending less and less money enterprising research and development (R&D), but the Alberta government plans to spur innovation during the recession.

Richard Hawkins, a professor in science, technology and innovation policy, says R&D is a key area for innovation, yet Canadian businesses don’t pursue the activity.

 “One per cent of companies engage in activities that we consider to be research and development,” says Hawkins.

The numbers are striking: from approximately 2.3 million enterprises in Canada, only about 50 companies do half of all the R&D in the country, according to Hawkins.

Bombardier, BlackBerry Limited, and Magna International lead the pack in R&D spending in Canada. BlackBerry, the number two spender, cut investments by 40.7 per cent from 2013 to 2014.

It doesn’t end with BlackBerry, data shows that Canadian innovation has been declining. In 2011, Canadian businesses spent $16.9 billion on research and development, and $15.5 billion in 2015, according to Statistics Canada data.

Dan Munro, a researcher for the Conference Board of Canada, says there has been a downward trend for quite some time now.

Canadian research input has decreased over the last five to 15 years, and never matched its global peers, observes Munro. “We’ve always been the laggards.”

Munro explains the reason is because Canadian businesses have been only as innovative as they needed to be. That’s because pursuing research and development is a high-risk activity, often yielding few rewards.

Often companies get new technology from another business—a safer and cheaper route. Despite the risks linked with R&D, Munro says it is beneficial to both the business and the country.

“In the long term, firms that invest in R&D and economies that see high rates of business R&D spending, they tend to do better,” says Munro.

Direct vs. indirect innovation support

Israel is one of the leading countries in the world when it comes to research and development, thanks to their extensive plan of direct investment support for international corporations. Photo courtesy of Ishai Parasol, Creative CommonsMunro says Israel is an example of how a country turned into a “Start-up Nation”— producing technological components for companies all over the world.

Israel in the 1960s decided to adopt a technology-intensive economy, and attracted multinational corporations to set up R&D facilities in the country, explains Munro. But they didn’t harvest the effort until the 1990’s when there was a huge spike in Israel’s R&D spending.

Although Munro notes that Israel’s economy is not without its faults, globally, the country is leading in R&D spending.

Unlike Israel, Canadian governments support business R&D indirectly, offering incentives such as tax credits and grants instead. 

Munro says that Canada’s innovation strategy could be improved. He says countries that offer generous tax credits for research, like Canada, are not leaders in business research and development.

“That’s a real clue that something should be looked at and we should think about this mix between direct and indirect support for business R&D,” says Munro.

Although Munro says the government could explore shifting from indirect to direct support, he adds Canadian innovation would be far worse without the “generous tax regime.”

Ken Kobly, president and CEO of the Alberta Chamber of Commerce, says that while government policy leans towards indirect support, he says it could be effective depending how it is used.

A tax credit for investors has proved successful in other provinces, and Alberta is in the final stages of creating its own.

An investor tax credit would “allow people to pick and choose where they think bright young minds are and invest in them,” says Kobly.

As for pursuing direct support, Kobly notes that the Canadian government doesn’t have the best track record when it comes to getting involved with business research and development.

“Some of the things that the government got into like MagCan and Nortel…were huge debacles,” says Kobly.

Alberta bringing more backing for research

Alberta legislators are trying to spur innovation with new measures during the downturn. Photo courtesy of Alberta Advanced Education, Creative CommonsIn addition to the investor tax credit, the Alberta government recently announced that it would be investing $5 million dollars in additional funding to the Enhanced Innovation Voucher and the Small and Medium-sized Enterprises Support programs, which are run by Alberta Innovates – Technology Futures.

These vouchers provide funding that assists businesses in areas such as marketing, advisory roles, prototyping and product development.

In a press release, Deron Bilous, the Minister of Economic Development and Trade, says the funding will “build a more diverse and resilient economy.”

Created in 2010, AITF is an organization dedicated to assisting Alberta’s technology industries in research and innovation, offering support that ranges from guidance to investment.

As part of that mandate, last year, the AITF created an online platform called Connectica that anyone or any group, whether it is a researcher or a university, can use to find the right powers to match their needs.

Michael Kerr, a technology development advisor for the AITF, believes that the government is greatly improving Alberta’s business research and development sector through their support.

“They’re putting a lot of effort in terms of not just research for the sake of research, but research that is going to have a commercialization outcome that is going to grow the GDP, sales, jobs, and revenue,” says Kerr.

“We will see a different Alberta as the result of it,” Kerr says, adding that it has been busier than ever, citing the downturn as the reason why.

Kerr says that it’s simply better for businesses to be more innovative, and the downturn seems to be an eye-opener in that regards.

“You can’t stay still, especially in the global economy. And we’re seeing this now in the oil and gas industry, the amount of innovation really wasn’t the level it should have been says Kerr. “So the downturn has actually helped us in that realm to stimulate innovation.”

Kerr believes that the economic downturn will contribute to a “cultural shift” in the mindset of Alberta businesses, solidifying Alberta’s recent surge of research and development into something that is part of our identity.

“In the future we will be constantly innovating, not just innovating when we’re forced to,” says Kerr.

Thumbnail courtesy of Creativity103, Creative Commons

pmcaleer@cjournal.ca

The editor responsible for this article is Daniel Leon Rodriguez, drodriguez@cjournal.ca