Ontario Budget announces series of direct support measures for business innovation

Support for collaboration gets boost

The Ontario government's February 25th Budget introduces a suite of targeted science, technology and innovation (STI) spending as the province seeks a sustainable path out of deficit spending by 2017-18. Initiatives spanning fundamental research and clean tech to advanced manufacturing and industry vouchers for growth-oriented companies represent a modest shift towards more direct assistance with many of the initiatives funded by savings realized by a reduction in certain R&D tax credits.

Budget documents acknowledge the importance of capitalizing on what is termed "a growing tide of disruptive technological innovations that are quickly displacing established business models". The recently announced partnership between the Ontario Centre of Excellence and IBM Canada is referenced (see page 6) and new initiatives such as an advanced manufacturing consortium stress the importance the government is placing on government-academia-industry collaboration.

"Disruptive technologies are technologies that significantly alter the way businesses operate, transform the major functions of human life, enable the development of new business models, increase productivity and innovation, and expand access to global markets," says Andreas Kyprianou, senior media and communications advisor with the Ministry of Research & Innovation and Ministry of Economic Development, Employment and Infrastructure. "It is critical for Ontario businesses to innovate not only with respect to the products and services that they produce, but also innovate with respect to how they produce, market, and distribute their products and services. The Strategic Partnerships Stream of the Jobs and Prosperity Fund is focused on accelerating development and adoption of disruptive technologies."

Clean Tech

Clean and green tech received the largest single amounts of STI funding, with $74 million devoted to a new industrial Green Investment Fund to support the development, demonstration and adoption of technologies that reduce greenhouse gas pollution. The fund is currently in the design phase with consultations scheduled to get underway by this summer. And discussions are ongoing between the Ministry of Research and Innovation (MRI), Ministry of Environment and Climate Change and the Ontario Centres of Excellence (OCE).

The Budget also allocates $55 million for equity investments in clean tech firms. Details have yet to be finalized but Kyprianou says the government aims to make initial investments in conjunction with private venture capital firms either directly or indirectly through one or more clean tech venture funds.

Waterloo's Perimeter Institute for Theoretical Physics received another $50 million to support its activities through to 2020-21. The last federal cash infusion was made in 2011 when $50 million was awarded to support the institute until 2017 (R$, March 31/11).

The OCE is the recipient of $20 million in new funding for college applied R&D through the Colleges Ontario Network for Industry Innovation (CONII) which was folded into the OCE in 2013 (R$, February 5/13). CONII was established to connect Ontario firms with the applied R&D resident in the province's colleges.

"This $20-million fund builds upon the province's significant investments in Ontario's colleges including the Ontario Research Fund College-Industry Innovation Fund program," says Kyprianou.

Advanced Manufacturing Consortium

A new Advanced Manufacturing Consortium will receive $35 million over five years to move the province forward in the areas of additive manufacturing, digital components and devices. The consortium will include industry, which is expected to contribute $15 million, as well as three academic partners —McMaster Univ, Univ of Waterloo and Western Univ.

A second consortium devoted to urban transit received $10 million. The Canadian Urban Transit Research and Innovation Consortium is a partnership with the federal and Quebec governments. It will support R&D and the commercialization of technologies such as autonomous software and lightweighting.

Ontario's bioindustrial sector receives a $3-million boost over four years. The funding goes to Sarnia-based Bioindustrial Innovation Canada, a not-for-profit advocacy group formed after a former Centres of Excellence for Commercialization and Research network — the Bioindustrial Innovation Centre— failed to receive further funding.

The Budget's STI initiatives are correctly focusing on many of the elements of innovation that require assistance, says Dr Margaret Dalziel, who chaired a Business Support Programs Review Panel that produced a (never released) report for the province in 2013.

"They're getting it. The Budget includes new programs and is reducing some R&D tax credits and working with innovation intermediaries," says Dalziel, associate professor of research, technology and entrepreneurship at the Univ of Waterloo. "I particularly like the advanced manufacturing consortium … the IBM-OCE partnership and vouchers for leading high-growth firms. We should be focusing on young, high-impact companies."

High-growth firms are the focus of a voucher program targeting companies with the "highest potential to scale into larger employers". The vouchers are for innovation-related activities and may be used for market research, proof-of-concept testing and securing new export customers.

The Budget also allocated $20 million towards a pilot government procurement program matching government needs with new technologies from emerging companies. MRI's Kyprianou says the pilot is still in the early stages of development but will be modelled on the UK's Small Business Research Initiative and the Small Business Innovation Research program in the US.

"Ontario's program will support innovative small firms who, despite being at the forefront of new ideas, often face difficulties bringing those new ideas to market, thus limiting their growth," says Kyprianou. " "By helping firms develop and test their technologies, government can provide early demonstration and validation of new technologies and strengthen their entry to the market. Government benefits by leveraging the scientific and engineering ingenuity of the small firm to address a public need, while also acting as a key reference customer."

Reduction in tax credits

The Budget also signalled a move that the Ontario is continuing its to shift to a more balanced mix of indirect and direct business support measures for STI.

Two of three key R&D tax credits are being reduced with savings of a projected $165 million over three years directed towards the Advanced Manufacturing Consortium, the OCE applied R&D college fund and $50 million for the Perimeter Institute.

The Ontario Innovation Tax Credit is being reduced from 10% to 8% while the non-refundable Ontario Research and Development Tax Credit is being reduced from 4.5% to 3.5%. The changes apply to spending incurred after June 1/16.

The refundable Ontario Business-Research Institute tax credit remains unchanged at 20%.

"R&D remains a key priority for the government, which is why (it) will reinvest savings from the proposed tax credit changes into targeted investments across key sectors of Ontario's economy," says Kyprianou. "Despite total Ontario R&D support of approximately $400 million delivered annually through the tax system, in addition to federal programs, business spending on R&D in Ontario has declined over the last decade and continues to lag the United States as a share of the economy."

The Budget strengthens the Ontario's investment attraction strategy with a new Strategic Investments Office and plans for an on-line portal to assist firms in navigating the province's programs.

A new centre of excellence will also be established with a network of experts aimed at strengthening the province's knowledge and research base on modern regulatory practices.

R$