Federal budget diverts research funding to commercial innovation

The Conservative government has earmarked a sizeable amount of money in the federal budget for new technology research and development but is also shifting its focus to commercialization of existing tech companies.

The move finds favour among small businesses and economic observers but they want to see how the government will go about implementing the new budget.

“This is a very good budget especially for innovation and startups. We’ll have to give it an A for that,” said Victoria Lennox, co-founder and executive director of StartUp Canada, a newly formed entrepreneur-focused organization.

In general, she found favourable developments in the government’s stance towards supporting technology research and development and providing tax credit incentives to startups and small businesses.

Small biz hope budget doesn’t harm R&D funding

Lennox also welcomed the release of $400 million to help increase private sector investment in early-stage risk capital and support large-scale venture capital funds. “It’s very clear there is a shift to help entrepreneurs commercialize innovation.”

“I could see there was an attempt to get their heads around balancing funding R&D and the commercialization side of the story,” said Russ Roberts, senior vice-president for tax and finance for the Canadian Advanced Technology Alliance (CATA). “There are items we are happy about but some concerns remain.”

For instance, he said, CATA welcomes the increased funding for IRAP (Industrial Research Assistance Program). IRAP provides financial assistance to SMBs to help them develop competitive technologies. “They doubled the funding for IRAP and that’s definitely a step in the right direction.”

“They’re making the Canadian Innovation Commercialization Program permanent, that is definitely good,” said Roberts.

However, the SRED program (Scientific Research and Experimental Development) remains a sticking point. Roberts does not believe that enough is being done to streamline the tax credit program which the government vowed to revamp.

“They attempted to achieve some simplification with SRED but I can’t see where that figures in right now,” Roberts said. “We will have to see later on how they go about it. We’ll need to see the details.”</p

He said the government’s assurance that Canada Revenue Agency will be working closely with the business community regarding SRED will probably not sit well with many small businesses. The CATA had recommended that a special council look after the administration of SRED.

In a release last night the government said it is committed to the following:

  • $400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.
  • $100 million to the Business Development Bank of Canada to support its venture capital activities.
  • $110 million per year to the National Research Council to double support to companies through the Industrial Research Assistance Program.
  • $14 million over two years to double the Industrial Research and Development Internship program.
  • $12 million per year to make the business-led networks of centres of excellence program permanent.
  • $105 million over two years to support forestry innovation and market development.
  • $95 million over three years, starting in 2013–14, and $40 million per year thereafter to make the Canadian Innovation Commercialization Program permanent and to add a military procurement component.
  • $67 million in 2012–13 as the National Research Council refocuses on business-led, industry-relevant research.
  • Streamlining and improving the Scientific Research and Experimental Development tax incentive program.

The government’s Economic Action Plan 2012 also proposes:

  • $37 million annually starting in 2012–13 to the granting councils to enhance their support for industry-academic research partnerships.
  • $60 million for Genome Canada to launch a new applied research competition in the area of human health, and to sustain the Science and Technology Centres until 2014–15.
  • $6.5 million over three years for a research project at McMaster University to evaluate team-based approaches to health care delivery.
  • $17 million over two years to further advance the development of alternatives to existing isotope production technologies.
  • $10 million over two years to the Canadian Institute for Advanced Research to link Canadians to global research networks.
  • $500 million over five years, starting in 2014–15, to the Canada Foundation for Innovation to support advanced research infrastructure.
  • $40 million over two years to support CANARIE’s operation of Canada’s ultra-high speed research network.
  • $23 million over two years to Natural Resources Canada to enhance satellite data reception capacity.

“In broad strokes, I am basically happy with the budget,” said James Brander of the Sauder School of Business at the University of British Columbia.

“The featured items clearly support entrepreneurship which until recently has not been front page material,” he said.

“Not a lot of money is being put in but there are definite moves to put in greater transparency and efficiency in how entrepreneurs can access government programs,” he said. “There is a wide variety of programs out there and entrepreneurs don’t know which one to access and how. What they need is a one-stop-shop site.”

Nestor ArellanoNestor Arellano is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and join the IT Business Facebook Page.

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