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The Black Hole

Notch 2 in the STIC: Federal R&D spending, Direct vs. Indirect Funding


One of the most obvious statistics that jumps out of the Science Technology and Innovation Council’s report is the method by which the Government of Canada elects to fund research and development.

Funding was broken apart into two categories: direct funding (grants, loans and procurement) and indirect funding (tax credits and incentives) and the analysis was pretty straightforward – Canada loves funding through tax credits and is relatively poor at devising strategies to directly fund R&D:

Indirect Funding of R&D

Direct Funding of R&D

Paul Wells at Macleans makes an insightful comment in his rant that appeared shortly after the report was published noting that “the point of supporting private-sector research is to produce more private-sector research, and not just to show up in a flattering place on a chart” – I couldn’t agree more with this sentiment in our age of ranking just about anything in relation to everything else.  Wells goes on to alert his readers that the important question of whether or not the current mix of funding is effective is being addressed by a government appointed panel in a Federal Review of Support to R&D due to report in October 2011.

It appears from a whole host of statistics, reports, etc – that Canada lags in innovation, but what is the government’s role in helping to nurture its advancement.  Is it simply to create fertile ground for “the market” to do its work?  or is it a more interventionist style of determining what sorts of projects the country needs and investing as such?  Perhaps it involves altering the way we train and inspire our young people?
A good read on innovation (vs. invention) can be found at Rob Annan’s blog where he discusses the various sources of innovation and predicts that encouraging academic researchers to be “more innovative” may well be doomed to fail with many academics lacking the necessary tools for taking an invention through to the market.

A final thought comes from looking across our border at the largest direct funder of R&D.  It appears that through a nationwide scheme of government investment, the USA has created an enviable array of national research facilities complemented by strong investment in basic research and clearly recognizes the role that government plays in this process.  In an excellent (and brief) report, energy and policy expert John Stewart expounds upon the differences between the Canadian and American policy conversations on innovation.  The conclusions from this analysis state:

The U.S. policy conversation consistently talks about the contributions of both business and government to a combined innovation ecosystem, while Canada’s policy conversation is largely confined to examining only the business side of that system…  our American neighbours know that a complete national conversation on innovation – let alone a complete national policy on innovation – can’t exclude the role of public infrastructure and actual government activity.

I don’t pretend to have the magical formula for the correct balance of funding in Canada, but it does seem odd that we have an almost completely opposite ratio  (~0.92) of indirect vs. direct funding compared to the USA (~0.23) and UK (~0.42).  This, combined with other leading innovators like Germany and Sweden which avoid indirect incentives completely makes a compelling case for a deeper look at the very least.  We’ll eagerly await the Federal Review of Support to R&D, but until then, stay tuned for future discussion on other notches in the STIC.

David Kent
Dr. David Kent is a principal investigator at the York Biomedical Research Institute at the University of York, York, UK. He trained at Western University and the University of British Columbia before spending 10 years at the University of Cambridge, UK where he ran his research group until 2019. His laboratory's research focuses on the fundamental biology of blood stem cells and how changes in their regulation lead to cancers. David has a long history of public engagement and outreach including the creation of The Black Hole in 2009.
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  1. E / July 23, 2011 at 14:46

    Hi there, the pictures appear to be broken. I’d love to see the graphs! 😉

  2. Dave / July 24, 2011 at 18:25

    Hi E,
    The pics show up on my browser still – maybe it’s simply an old version of firefox/safari/explorer?
    The graphs are all in the report listed above as well.

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