Closing the [Canadian] innovation gap – by Carol Goar (Toronto Star – October 21, 2011)

The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

The role of the provinces would be to target subsidies
at emerging industries (Premier Dalton McGuinty’s green
energy program is an example) and regional clusters
(biotechnology and life sciences in Toronto, high-tech
development in Waterloo, mining technology in Sudbury).
(Carol Goar – Toronto Star Editorial Board)

For roughly 30 years, Ottawa has been pouring taxpayers’ dollars into Canada’s “innovation gap” — and achieving precious little.

The government spends roughly $5 billion a year to induce business to invest in research and product development. Cabinet ministers regularly exhort corporate leaders for their unwillingness to use their earnings to leap ahead of their global competitors. Conferences are held, reports written.

Yet according to the latest statistics from the Organization for Economic Growth and Development, Canada remains at the back of pack in terms of private spending on research and development (16th out of 27 industrial countries).

This record of failure calls for a “fundamental reordering of how innovation, research and development are funded in Canada,” says the Mowat Centre in a provocative new study.

Its author, Tijs Creutzberg, an Ottawa consultant who specializes in fostering industries of the future, says there are three basic problems.

 • The first is that Canada relies far too heavily on tax incentives. “Canada is an extreme outlier in weighting its investment in innovation so heavily toward tax incentives and away from direct support to sectors,” Creutzberg points out. The United States, for example, devotes just 22 per cent of its research funding to tax incentives. Neither Germany nor Sweden uses tax incentives at all. Canada delivers 80 per cent of its public support for research in tax credits and writeoffs. This may shield federal politicians from accusations of “picking winners and losers” and doling out “corporate welfare.” But it’s not very effective. Countries that provide direct grants to companies or sectors have been much more successful at creating a culture of innovation.

 • The second difficulty is Canada’s rigid federalist system. Under the current distribution of powers, Ottawa, which has the biggest purse, underwrites most the nation’s scientific and technical research. The provinces play a subordinate role directing funding to firms developing new products and services or poised to break into the front ranks.

For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/opinion/editorialopinion/article/1073531–goar-closing-the-innovation-gap

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