StatsCan survey finds tax credits most preferred assistance for business innovation

Government tax credits became more important to innovative businesses between 2007-09 and 2010-12 while the importance of government grants fell during the same period. The new data from Statistics Canada expose an apparent disconnect between the types of government support companies value the most and the government's current rebalancing of assistance programs to include more direct support.

A recently released survey of Innovation and Business Strategy 2012 is the second time the ad hoc survey has been conducted; the first being in 2009. The two surveys allow for a valuable comparison of how business views and undertakes innovation and what forms of government assistance it values the most.

It found that tax credits were favoured nationally by 50.7% of respondents, up from 34.9% in the previous three-year period. Ontario companies stated that tax credits were the most critical type of support (56.5%) while just 35.4% of companies in Atlantic Canada shared the same view.

On the other hand, government grants were preferred by just 17.1% nation-wide, down from 32.3%. They were most popular in Atlantic Canada (28.0%) and least popular in the rest of Canada — just 9.9% in British Columbia, Saskatchewan and the territories.

The report — the first of three to be released from the survey — says the percentage of companies introducing at least one type of innovation slumped from 66.8% to 63.5%. In fact, innovation declined in companies of all sizes with the largest decrease experienced in mid-sized firms. The percentage of innovative mid-sized companies dropped from 76.3% to 60.1%. Large innovative firms declined from 74.7% to 70.8% while small companies dropped marginally from 64.9% to 63.5%

The survey found distinct differences between the four types of innovation undertaken by companies. Organizational innovation increased during the same three-year periods from 34.6% to 37.9%, while process innovation declined from 33.5% to 29.0%, a shift the survey says "may reflect enterprises choosing to reduce their costs by optimizing current operations through reorganization rather than by introducing new logistics, distribution or production methods".

Product innovation increased slightly from 34.8% to 35.1% while marketing innovation dropped from 35.4% to 33.3%.

Large enterprises are most likely to use at least one type of advanced technology (48.7%) followed by mid-sized firms (43.6%) and small companies (34.7%), The most important advanced technologies used are communication, computerized design and engineering and information integration and control.

Industry sectors with the highest rates of innovation are professional, scientific and technical services (77.1%), manufacturing (74.8%) and finance and insurance (73.6%). The lowest rates are found in transportation and warehousing (55.9%), mining, quarrying and oil and gas extraction (56.3%) and wholesale trade (56.7%).

The survey is a joint undertaking of StatsCan, Industry Canada, Department of Foreign Affairs, Trade and Development, Atlantic Canada Opportunities Agency and relevant ministries in Ontario, Quebec and Alberta.

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