1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Unleashing Business Innovation in Canada

This paper discusses how to improve Canada’s business innovation in order to boost labour productivity and output growth. Many general framework conditions are highly favourable to business risk-taking and innovation, including macro stability, openness, strong human capital, low corporate tax rates, low barriers to firm entry and flexible labour markets. However, they can be improved further by reduced external and interprovincial barriers in network and professional service sectors, more efficient capital markets, fewer capital tax distortions and improved patent protection. A second focus should be on ensuring that incentives arising from government subsidies are targeted on actual market failures. The very high level of support to business R&D via the federal Scientific Research and Experimental Development (SR&ED) tax credit and provincial top-ups may affect the incentives of small firms to grow and should be redesigned. A plethora of small, fragmented granting programmes, mainly geared to SMEs, should be streamlined for better government-business collaboration. The large public share in venture capital should be wound down, as it may crowd out more productive private finance. A final focus should be on boosting manager and worker skills that are intrinsic to all forms of innovation, by filling gaps in training, mentoring and education. This Working Paper relates to the 2012 OECD Economic Review of Canada (www.oecd.org/eco/surveys/Canada).

English

Keywords: R&D tax credits, competition, patents, productivity, academic research grants, research and development, intangibles, angel investing, multifactor productivity, entrepreneurship, business taxes, technology transfer, venture capital, subsidies, innovation, intellectual property rights, vouchers
JEL: O32: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Management of Technological Innovation and R&D; I23: Health, Education, and Welfare / Education and Research Institutions / Higher Education; Research Institutions; O31: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Innovation and Invention: Processes and Incentives; H25: Public Economics / Taxation, Subsidies, and Revenue / Business Taxes and Subsidies including sales and value-added (VAT); O34: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Intellectual Property and Intellectual Capital; O38: Economic Development, Innovation, Technological Change, and Growth / Innovation; Research and Development; Technological Change; Intellectual Property Rights / Technological Change: Government Policy
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