The Disconnect Between Universities and Industry in Canadian SR&ED

A report on business investment in research and development acknowledged that there exists a ‘disconnect’ between the strongly funded research and development activities in Canadian universities and the comparatively weak investment in the industrial R&D sector.

The report dubbed The State of Industrial R&D in Canada was prepared by a panel of 14 experts, assembled by the Council of Canadian Academies. It stated that although Canada is involved in similar amounts of research and development as other countries, it has much less business-related R&D. To further illustrate this, a 2010 survey put the country in 7th place among OECD countries when it came to R&D spending in higher education. This position was even higher than the United States. However, when it came to business R&D, Canada ranked just 20th.

The situation simply implies that Canada needs better public policies that will encourage investment in business R&D. It is often believed that high levels of investment in science and technology at Canada’s publicly-funded research institutions leads to high levels of industrial R&D. However, it should be noted that the two do not have the same frameworks and goals. These two types of research are motivated by totally different objectives, with one focused on meeting market needs and the other focused on scientific discoveries, which may not be applicable in a commercial environment.

Some of the barriers to increasing business R&D include lower rates of growth in patents and licensing agreements at Canadian universities, despite increasing investment in university research. This suggests that the existing technology transfer process is not as effective as it could be. Low levels of education in the business community also have contributed to a lack of innovation. While 53 percent of managers in the United States possess a university degree, only 35 percent of Canadian business managers do.

Credits such as the SR&ED tax incentive encourage businesses to increase their investment in developing new products and processes. This credit is available to businesses of all sizes and industries. To find out whether this credit can help you, please contact Swanson Reed R&D Tax Advisors.