The Canadian Innovation Corporation is delayed, yet again

Not only is the decision to delay formation of the CIC disappointing, it raises serious concerns that this government does not understand the problems the CIC could solve

The announcement by Minister Champagne that the formation of the CIC will be delayed another two years is deeply disappointing. His statement that innovation is still a priority rings hollow, and his justifications for the delay suggest that this government does not understand the problems that CIC could solve

The Logic hits the nail on the head in their recent article on the subject.

In his statement, Champagne points to existing innovation support structures such as NRC IRAP and the Canadian Digital Adoption Program (CDAP) as evidence of continued commitment to innovation, and calls on the private sector to do their part in driving it. All of this misses the essential point of the desired reform.

IRAP is the very thing that the CIC aims to replace; its ineffectiveness as a driver of innovation and long-term economic benefit from Canadian intellectual property is among the main reasons for the calls for reform. If IRAP worked in its current form, there would be no need for the CIC in the first place. My thoughts on where IRAP goes wrong can be found here.

The Canadian Digital Adoption Program (CDAP) is gated by a $500,000 revenue requirement and is worth only $15,000. The simple reality is that if a company is sufficiently well-established to qualify for this program, it probably doesn’t need it, or will get at best a marginal benefit from using it. This revenue gate means that it is not available where it is actually needed: supporting deep tech companies trying to carry valuable Canadian IP across the valley of death. Such companies are often not expected to have revenues at all in the first few years of operation, since they are instead focused on IP development. This problem is far from unique to the CDAP.

The call for business to do its share in promoting innovation also misses the key point. Canadian businesses that invest in innovative new technologies are few and far between, but this does not represent a lack of willingness. Rather, this is a reflection of a misalignment of incentives. In the early stages, novel technology portfolios that require R&D tend to leave Canada to do it, in response to a lack of innovation support for the early stages of building. As I discussed in a previous article, the USA has more Canadian-founded unicorns than does Canada. In the later stages, it is simpler to fund the R&D directly as a means to acquire the IP than it is to incubate commercial development of that same technology after the fact. This latter point is a key element of what CIC could begin to change, given that it is modeled after the Israeli Innovation Authority that very effectively motivates healthy industrial investment in innovative technology development. This is something on which I will elaborate in a future post.

I’ve written more than once that policy and culture are a feedback loop. If Canada wants the private sector to invest in innovation, the government needs to lead with policy initiatives that support and incentivize that outcome. This delay is a step in entirely the wrong direction.