Innovation Policy Advice: Time to get rid of SR&ED

Writing in today's Globe regarding the incoming government's approach to innovation, Sean Silcoff provides some good advice on shaping a better innovation policy. Silcoff posits out that the Trudeau innovation platform was light on new ideas, and was merely an attempt to "Throw money at a problem without defining the problem." I don't agree. Implicit in the Liberal innovation platform is the need to foster greater business investment in R&D. This is important to unpack as it relates to our overall productivity and innovation challenges. Of course the issue is complex, but weak industry productivity and innovation coupled with poor academic receptivity to industrial efforts is a significant part of the problem.

The Liberal government's innovation platform includes targeted investments in clean technology and other important economic sectors (it's worth repeating: read the interview with Bill Gates in the Atlantic). And the incipient platform outlines

...direct support to business incubators and accelerators, research facilities, financing, and other support for successful small companies wanting to grow and export. The objective is to create successful networks like the American and German partnerships between businesses, government, and university and college research. Working with provinces, post-secondary institutions, and industry, this funding will also help modernize and strengthen the technology transfer and commercialization functions at universities and colleges.

The reference to international comparators (such as Fraunhoffer) and a Small Business Innovation and Research Program, modelled on the US program, looks to directly prompt industry to increase investment in R&D. Thus the problem is tacitly identified; rendering this explicit will be the job of the incoming government. Ensuring there is a strong, complementary academic support structure in our colleges, polytechnics and universities will help industry to innovate (and get more academic discoveries to market). This is an embrace of the entire research through to innovation continuum.

And it is here that Silcoff approaches some sensible advice, specifically on the Scientific Research and Experimental Development (SR&ED) tax credit scheme, as this is needlessly complex and seemingly a vehicle for to much overhead to be spent on applying to the program. He should go further: SR&ED should be eliminated and the money moved upstream to support direct industry R&D, or hiring as Silcoff writes about. I have previously outlined some of the problems with SR&ED; it really is time to get rid of this program. 

The Small Business Innovation and Research Program, and the IRAP industry voucher program as initiated by the last federal government, are key ways to incentivize industry to engage in R&D, and to partner with the most appropriate academic centre to get this done.