Good afternoon, Madam Chair and members of the committee.
Thank you for the invitation. I'm grateful for the opportunity to discuss business R and D investment in Canada with you today.
My name is Benjamin Bergen. I'm the president of the Council of Canadian Innovators. We're a national business council representing over 175 of Canada's leading technology companies. All of CCI's members are headquartered here in Canada, with more than 52,000 employees across the country. They are market leaders in sectors as diverse as health care, financial services, agriculture and, of course, AI.
CCI was founded a decade ago on a simple but powerful idea: Canada's prosperity depends on the success of Canadian-headquartered companies. From day one, the council has championed unapologetically a domestic economic strategy, one that treats innovation and ownership as cornerstones of national sovereignty.
In the past year, it feels like the national conversation has finally caught up with us. It was good to hear Prime Minister Mark Carney recently say:
The scale and speed of these developments are not a smooth transition, they’re a rupture.
They mean our economic strategy needs to change dramatically. And that your future will not be the same as my past.
Against that backdrop, the committee's study today is valuable work for Canada. We have been laggards in terms of productivity growth and corporate R and D investment. Why is that? It's not that we lack subsidies. The government spends around $4 billion annually on the scientific research and experimental development tax credit, or SR and ED. This is support that technology companies from across the country very much appreciate.
The root of the problem is that Canadian companies look at their balance sheets, and every day they decide it's not worth it for them to invest. The CEOs I know are sharp and highly competitive individuals. If they're not spending on R and D, we should assume they have their reasons.
Moving the needle on business R and D means making investments worthwhile for firms. To do this, the government has to create the conditions that enable firms to scale and reap the profits from the R and D. Fundamentally, that means Canadian companies need to own and commercialize the ideas they generate through research and development activities. In short, Canadian companies need to own and defend their intellectual property, and the federal government has an important role to play in achieving that goal.
Too much of our economic policy is rooted in outdated ideas about how value is created, ideas that don't reflect today's reality. In a globalized intangible economy driven by software and technology services, productivity gains are derived from generating and owning valuable IP, such as patents, trade secrets, copyrights and data.
What's worse, so much of the economic value created from $7 billion in annual existing federal R and D support is left undefended, because we don't prioritize the intellectual property protection and strategy for owning Canada's intangible assets. This approach is out of step with today's economy, where 90% of the value of the S&P 500 companies comes from intangible assets.
Owning IP also gives firms freedom to operate. It allows them the ability to grow and compete without infringing on someone else's rights or paying steep licensing fees. Without ownership, there is no freedom to operate, and without that freedom, companies can't earn a return on innovation, so they don't invest.
The rate of return on intangible assets appears to only be accelerating over time. Markets are increasingly dominated by winner-take-most dynamics or winner-take-all dynamics. Canadian firms need a savvy government that can lead with clear IP and freedom to operate strategies.
We have heard rhetoric from Prime Minister Mark Carney and his ministers that suggests they understand the seriousness of this moment. We are pleased with some of the reforms we're hearing about for SR and ED in the upcoming budget. The government's buy Canadian directive is a watershed moment for federal procurement and long overdue. This is the kind of support through government purchasing that can be a huge accelerant for the growth of innovation and innovation companies in Canada.
However, the missing piece in all of this is still the intellectual property and other intangible assets. A sharp IP strategy should be effusive on its ability to look at innovation funding programs. It should be a facet of government procurement. Intellectual property should be a lens for every aspect of government economic policy in the 21st century, because these intangible assets are the lifeblood of the innovation economy.
The CCI has proposed that Canada should establish an innovation asset bank—a public institution with a mandate to generate, assert and defend Canadian IP—to catch up with countries where IP has been the cornerstone of their economic strategy for decades.