Does Canada have an innovation problem?
While The Great White North can proudly highlight its world-class universities and its second-place global ranking in PISA scores, this intellectual strength isn’t translating into the private sector—except for the country’s startup scene, which consistently ranks among the world’s most dynamic.
This point is up for debate, but it’s the perspective adopted by the creators of the Canadian Innovation Corporation (CIC).
This new, much-anticipated Crown agency will eventually take over the National Research Council’s (NRC) Industrial Research Assistance Program (IRAP). As we discussed recently, this approach follows the example of governments worldwide that use federal funding to accelerate innovation in their economies.
According to the team behind the latest CIC plans—including Dan Breznitz, co-director of the Innovation Policy Lab at the University of Toronto and a key architect of the CIC—there’s little motivation for Canadian businesses to pursue innovation in today’s market.
In a recent interview with Betakit, Breznitz explained that while the Canadian government has generously funded education over the past 30 years, investments aimed at bringing Canadian ideas to market (in other words, turning innovation into real products) have largely stalled since the North American Free Trade Agreement (NAFTA) came into effect in the mid-1990s—outside of the startup sector, that is.
There’s plenty of debate about how “innovation-friendly” the Canadian government is compared to other countries, but Breznitz’s argument is backed by data.
According to the Global Innovation Index, Canada currently ranks 15th worldwide, far behind the U.S. (#2) and the U.K. (#4). And even though Canada leads in joint ventures and strategic alliances per billion dollars of GDP, these numbers mostly show that investment in new Canadian innovations is coming from abroad. As a result, the benefits of these innovations (wages, taxable income) are also leaving the country.
Why bring IRAP under the CIC?
By shifting IRAP to a new Crown agency, the Canadian government hopes to achieve several goals at once.
First, by consolidating innovation funding like IRAP under the CIC, the government aims to reduce the overwhelming number of programs businesses must navigate to access funding (currently 180) and create a more streamlined system. This means expanding some programs, eliminating others, and building an approval and evaluation process that can move at the speed of business.
Speed is crucial here, according to Breznitz and others. The biggest frustration for Canadian entrepreneurs is not just qualifying for government funding, but actually receiving it when it matters most (we’ll explain how Boast can help later…). By building the CIC from scratch, speed can be built into the agency’s foundation as its structure takes shape.
The challenge—and a source of frustration for founders—is the uncertainty around what this new structure will ultimately look like.
How can government move at the speed of business?
Anyone who’s worked in both government and the private sector knows that government rarely moves quickly. And changing nearly 30 years of slow-moving habits in Ottawa isn’t something that can be done in 12 weeks, like finalizing a product roadmap for investors.
When the idea of a new Crown corporation focused on innovation first surfaced in 2021, many in Canada’s private sector expected it to follow the model of the U.S. Defense Advanced Research Projects Agency (DARPA). “CARPA” even became a rallying cry for those pushing for a new innovation agency. With the U.S. ranked #1 in global innovation, it seemed like the obvious model to follow.
But DARPA’s real strength isn’t speed. For example, the mRNA research that led to COVID-19 vaccines from Pfizer and Moderna—while DARPA did fund much of the early mRNA work—was the result of decades of investment.
In the U.S., mRNA research and development was driven by “Defense”—the government’s motivation for investing so heavily through DARPA was to maintain a competitive edge on the battlefield.
That’s a fundamentally different challenge than the one Canada faces with the CIC. Here, the issue isn’t national defense, but a lack of incentives for Canadian businesses to turn homegrown ideas into profitable, export-ready products.
Keeping Canadian ideas—and prosperity—at home
The CIC isn’t about keeping Canadian innovations from reaching the world. In fact, creating “exportable products” is central to its mission. The real goal is to make sure that when these ideas reach the innovation and commercialization stage, Canadians still benefit from the resulting prosperity.
Exactly how this will be encouraged is still being decided—and that’s intentional. Building a new organization that isn’t tied to old systems and can embrace trial and error is key. But it also means there’s still a lot of uncertainty (including who will lead the CIC) as the government works toward its self-imposed end-of-year launch date set back in February.
CIC and IRAP may include penalties
Breznitz shared in his interview that penalties are being considered, though these weren’t mentioned in the February announcement about the CIC and the planned absorption of IRAP. While the details are still being worked out, Breznitz noted that in almost every country with a similar innovation program, penalties exist for companies that move their business—and taxable income—out of Canada.
It’s too soon to say exactly what these penalties will look like, but Breznitz stressed they need to encourage businesses to think long-term when using IRAP. The idea is to discourage founders from cashing out quickly after receiving government support, or from seeking foreign investment and a quick exit from the start.
We can expect more details in the coming weeks and months as the CIC and the future of IRAP become clearer.
In the meantime…
Right now, innovative businesses already investing in R&D and contributing to Canada’s growth can access available tax credits—and even grants—by using QuickFund from Boast.
With QuickFund, founders can estimate their year-end SR&ED tax credit throughout the year and get early access to most of that capital whenever they need it. This gives founders a non-dilutive funding option to extend their runway during tough times or double down on innovation and reinvest in critical R&D.
Boast AI takes a hands-on, personalized approach with innovative founders to help them capture every federal funding opportunity and credit they qualify for—without draining their resources.
To learn more about what the CIC Blueprint means for Canadian businesses—and how your team can start maximizing returns—watch our #InnovatorsLive conversation with VP of Customer Delivery Matt Funk.
