Mr. Chair and members of the committee, thank you for the invitation.
You've already heard from the chair of the Council of Canadian Innovators and the CEO of the Innovation Asset Collective. These are organizations with which I'm affiliated, so I'll aim to make my comments additive.
It's worth framing our discussion by stating that we're at an important juncture for Canada's economy vis-à-vis the global economy. Canada's competitiveness has dwindled for multiple generations, while our cumulative public investments in “innovation” are among the highest in the OECD. It would be easy to chalk these results up to inferior researchers and entrepreneurs or to a culture of complacency, but these would be gross oversimplifications. I'm a firm believer that we must understand and evaluate the incentive structures if we're truly to tackle this matter, which is so important to maintaining Canada's standard of living.
Canada's innovation economic incentive structures, largely driven by our public investments, have not been focused on commercializing Canadian inventions by Canadian-headquartered companies to the benefit of all Canadians. Let's look at some of the largest innovation investments Canadian taxpayers make: our university research granting councils, the scientific research and experimental development tax credit, and the industrial research and development program. These multi-billion dollar annual investments are highly focused on discovery, research and development. We also have to count the subsidies to our universities and colleges since talent is so fundamental to the development of new technologies and growing innovative companies.
These investments and our other vast public innovation investments have led to incredible scientific discoveries and technologies. However, the widespread economic benefits to Canadians haven't resulted, and I ask why.
Again, I point to the structural considerations. Their program guidelines do not enable commercialization activities such as intellectual property strategies, demonstration pilots, clinical trials, and global sales and marketing activities. An innovation ecosystem that focuses so heavily on the upstream investments in R and D without back-end commercialization focus from Canada, and that has an economy open to foreign direct investment, is ripe to having those investments leak out to the benefit of foreign firms and jurisdictions. While I'm supportive of an open economy, I have to question the logic of our public sector using taxpayers' dollars to attract FDI in Canada's tech sector without ensuring those foreign investments will lead to commercialization activities from within Canada and contribute to our bottom line.
For Canadian firms that still choose to commercialize their inventions from within Canada, we also have to consider the structural barriers to scaling. I would especially highlight tax disincentives to scaling Canadian technology companies, such as the jump from small business taxes to corporate tax rates, personal tax rates and the taxation of stock options—an important, long-term incentive tool used by growth companies.
Beyond these general considerations, I would have you consider some of the subsector-specific challenges and opportunities.
In my sector, cybersecurity, leading jurisdictions realize that a growing domestic industry is not only a driver of prosperity but also integral to the security and sovereignty of their citizens and country. As such, they get to know their innovative firms intimately and in a structured fashion. They leverage non-tariff barriers such as national security considerations to ensure their domestic firms understand the acute threat landscape. They leverage their procurement regimes strategically to co-develop solutions with their vetted companies to address the challenges domestically that can subsequently be exported. They do this in a fashion that is compliant with their international trade obligations.
I believe we learned through the pandemic that domestic capacity—in both R and D and commercialization in strategic sectors like vaccines—drives security, sovereignty and prosperity concurrently. However, this takes foresight, meaningful public-private engagement and the leveraging of public resources in a strategic fashion. I believe Canada's cumulative public investments in innovation are sufficient to achieve this. The structures need to be aligned to incentivize Canadian companies investing heavily in R and D to start, scale and operate from within Canada.
I thank you for this opportunity and look forward to unpacking these remarks and drilling down into specific recommendations throughout our conversation today.
Thank you.