Thank you for the invitation to appear before this committee.
I am Paul Johnston, as was mentioned, the president of Precarn. It's a private, not-for-profit company that has helped companies for more than 18 years to do research and development to create, develop, and use advanced technologies. I've been with Precarn since 1990 in various roles, managing both university and industrial research programs, before assuming the role of president last year.
Today I want to concentrate on one sentence in the federal 2006 budget: “Looking forward, the Government will develop a broad-based agenda to promote a more competitive, productive Canada.” Even more specifically, I want to concentrate on the need to encourage industrial research and development as part of that agenda.
What do I mean by improving competitiveness and increasing productivity? Being competitive means doing things better than others. It means making better products or making your products in better ways. Being more productive as an economy means moving to a higher value-added economy. We must create and maintain an economy that creates, sells, and uses innovative, value-added goods, products, and services based on our traditional strengths.
This is where increased industry-led, market-driven research comes in. To create globally competitive, innovative products and services, we must develop both the technologies and the people to implement them. Just as important, companies and people must use and adopt these technologies to become more productive.
As an example, a famous Canadian company, Research In Motion, is based on research and development--a highly competitive, world-class company--and it makes the users of its product more productive. I think there are some users in this room.
What, then, might be some of the components of a broad-based agenda to get companies to do more research and development? In our view, the first principle is to continue to do those things that we do well and continue to invest in the models that increase research and development. Pick the ones that have the greatest impact on the ultimate commercial success of those technologies.
For example, Canada's SR&ED tax credit system is among the top three in the world. Similarly, our investments in university research are among the top three in the world. Let's continue to hold those places, if we can't improve them.
On the other hand, our industrial investment in R and D is not quite as strong. So we need to develop and continue organizations that we refer to as “fourth pillar” organizations, which help companies to do more research, commercialize more products, and become world-class participants in the global economy. Fourth-pillar organizations bring together universities, government laboratories, and these companies, to promote research, development, and the adoption of new technologies.
Here is where the concept called the “valley of death” in our paper comes in. A diagram is on page 3, if you have the paper. It relates to the gap between the generation of ideas and the development and adoption of those new products and services based on those ideas.
On the one side is research, which is to discover new technologies in our universities and government labs. This is generally publicly supported. On the other side of the valley is product development. Once the product is proven and the potential revenue stream is well known, internal funding, venture capital, and bank lending are available to support the commercial activity. Public funding is neither necessary nor desirable as a matter of policy at that stage.
It's the valley of death, the transition phase between public and private sector financing, the phase in which pre-commercial research and development takes place, where leveraged public support needs to be made available. Mechanisms such as fourth-pillar organizations, which I referred to previously, can help bridge that valley.
Fourth-pillar organizations also add value in other ways, not only in funding. They reduce the technological and market risks, they share the costs across the valley, and they reduce the time to market for these new products, services, and technologies. Mostly the model is successful in providing links between the companies on one side of the valley and the universities and government laboratories on the other side of the valley.
We support the development of a broad-based agenda to improve the competitiveness and productivity of Canadian firms. To do this, the government must develop and maintain a range of policies and activities that encourage Canadian firms to invest in the research and development of advanced technologies.
Thank you.