Reports in Canada suggest it is losing the global innovation race because companies aren’t investing enough in research and development: Statscan say Canadian businesses will spend less on R&D for a third straight year in 2010.
Canadian companies intend to spend $14.8-billion this year, 2.6 per cent less than in 2009. The same companies spent $16.6-billion before the recession hit in 2007. Spending has fallen every year since, including drops of 5.1 per cent in 2008, and 4 per cent in 2009.
The blame fell squarely with the “start of the global financial crisis” in 2008 and the subsequent recession.
“For most companies, the first priority is survival and meeting payroll,” pointed out Canadian Manufacturers and Exporters president Jay Myers. “A lot of companies tell us they would like to make investments, but can’t because of cash flow considerations.”
The question remains, how important is R&D spending to business? In a tough economic climate, is it right to spend lots on R&D when profits and cash flow are hard to come by?
History is littered with examples of companies that neglected R&D in search of profit margins and were subsequently overtaken by the competition. But can companies justify large expenditure on R&D in these times? Is there another way?
The Treasury released its long-awaited consultation document entitled “The Taxation of Innovation and Intellectual Property”, announced in the June Budget, which may provide some relief to business. The document looks at two aspects of taxation related to Innovation and IP – the design of a preferential regime for patent income known as a Patent Box, and a review of the existing R&D tax relief schemes, including the recommendations from James Dyson’s review published earlier this year.
The Government has been astute in using Crowdsourcing to gather opinion on correct measures from industry. This may eventually lead to a more positive attitude towards R&D from industry when the findings are passed as law later in 2011.
Crowdsourcing should also not be overlooked as a means of R&D for businesses. Plenty of software developers use Crowdsourcing to get public opinion on pre release versions of their latest software and even to help fix bugs. In a tough climate it’s up to innovators to get creative with things like Crowdsourcing to give them the best balance between spending on development and cashflow for their business.
Recession must not stop business moving forward.
