COVID-19 ‘exacerbating’ Canadian startups’ ability to innovate: report

Experts urge government to push new incentives and encourage startups to expand globally

Photo: Chung Chow, BIV

As the COVID-19 crisis applies further pressure on Canadian startups, a new report warns the nation’s innovation sector risks permanent middling status behind other countries.

An October 15 report from the Information and Communications Technology Council (ICTC) is urging governments on all levels to step up with incentives that would boost research and commercialization of technology and other innovations from small and medium-sized enterprises (SMEs).

One such possibility floated by the not-for-profit national centre of expertise is a tool familiar to some B.C. businesses: a patent box.

It functions as a tax policy allowing regional corporations to receive reduced effective tax rates on income from qualifying intellectual property (IP), such as patents and software copyrights.

B.C. was the only province to have such a tool before it was scrapped in 2017 after 11 years.

“COVID-19 is exacerbating the barriers and challenges faced by SMEs seeking to create new IP and obtain formal IP protections,” the council stated in the report written in partnership with Ontario-based ventureLAB.

“COVID-19 has created a situation where SMEs have to refocus their priorities—often toward basic elements of survivability such as maintaining staffing and customer bases. This incurs external costs, such as those associated with IP protections, which may be viewed as superfluous.”

The council found that Canada is already routinely underperforming compared with other countries in terms of IP.

Canada ranked 17 overall out of 129 nations on the World Intellectual Property Organization’s 2019 Global Innovation Index (No. 9 in innovation input and No. 22 in output).

“Canada’s challenge of IP commercialization is not new — it is a problem that has plagued us as a nation for years,” the council stated.

The ICTC is also calling for companies to prioritize more diverse founding teams in terms of expertise to avoid pitfalls facing founders who are both “overconfident about their idea” and naïve about the roadblocks to commercialization.

More diverse teams will also be that much more appealing to venture capitalists that can fund these startups, the report stated.

The council wants more efforts made in expanding products to new markets, leveraging the relatively new trade agreement with the European Union: the Comprehensive Economic Trade Agreement (CETA).

“With evidence suggesting that businesses who hold formal IP are four times more likely to expand internationally than those that do not, Canada cannot afford to focus only on the downstream revenue seeking activities and needs to cultivate internally competitive scale-ups, and boost innovation output,” the report stated.