Strategic Innovation Fund producing “significant benefits” for Canadians, ISED says

Research Money asked Innovation, Science and Economic Development Canada (ISED) to respond to four questions about criticisms of the Strategic Innovation Fund program raised in our story, “Federal Strategic Innovation Fund failing to improve Canada’s innovation performance and productivity, experts say.” Yara El Helou, ISED media relations advisor, provided the following responses on behalf of the department.

1. What metrics does ISED use (other than “jobs created and maintained”) to track and measure whether SIF funding is in fact producing desired outcomes, such as increased productivity, number of Canadian-filed patents, and innovative products/services for domestic consumption and export?

The Strategic Innovation Fund (SIF) program assesses all projects on their ability to deliver economic, innovation and public benefits for Canadians. Not only do the projects that SIF funds help advance these goals, but as part of their contribution agreements with the program, companies make commitments to generating long-term benefits for Canada even after the completion of the project.

SIF has already secured significant benefits for Canadians through company commitments to create and maintain nearly 73,000 jobs, create nearly 11,000 co-op placements and conduct nearly $11 billion in R&D in Canada in coming years. SIF’s investments have further leveraged total project investment of $47 billion in Canada.

In addition to these commitments for jobs, R&D expenditures, capital expenditures (machinery and equipment) and co-op opportunities, SIF tracks a number of metrics on project benefits including IP generation, ecosystem collaborations, the development and commercialization of new products, processes and services, and the ability to access new markets, and others.

[SIF was] launched in 2017; preliminary data suggests that SIF projects are already having significant impact:

• On average, SIF-funded companies grew their employment base by over 11 percent per year (average compound annual growth rate [CAGR] across companies from project start).
• This growth is helping to create and maintain high-quality jobs in Canada: some 58 percent of all on-project jobs are in well-paid STEM occupations.
• In addition, SIF-funded companies are investing in innovation and new technologies. On average, SIF companies increased their R&D expenditures by 26 percent per year (CAGR) from the start of their projects, and a quarter of SIF clients’ on-project capital expenditures are for advanced technology (information and communication technologies and software).
• Further, some 40 percent of direct funding recipients (in Streams 1-3) reported undertaking collaborations to advance their SIF-funded project, reporting an average of four collaborations each to help advance projects. The majority (59 percent) of these were with private sector firms, while a smaller portion (41 percent) were with universities, colleges and non-profits. Collaborations with both private sector and public sector partners are helping to build and maintain Canadian innovation networks and ecosystems.

2. What is ISED’s rationale for providing two-thirds of SIF funding during the last three years to just two provinces: Ontario and Quebec?

Since its inception, SIF has focused on investing in projects with the greatest anticipated benefits, targeting large-scale, transformative investments. The program has received over 1,300 applications from every province across Canada, of which two-thirds have been from Ontario and Québec. Currently, funded projects by province are roughly proportional to the applications that SIF has received.

With that said, SIF is continually making efforts to engage different sectors of the economy to raise awareness and broaden its reach. The new Net Zero Accelerator Initiative is one example where the government is making efforts to reach out to a wide variety of partners to identify potential projects in regions of the country traditionally less represented in SIF applications.

Furthermore, there are many federal programs which support innovation — each with their own targeted sectors and objectives.

3. What is the rationale for providing about 40 percent of SIF funding to companies/joint ventures whose parent companies are based in other countries?

When firms and economies are connected to global supply chains, this increases economic growth, technology transfer and partnerships, and helps improve productivity and wages. Firms that have the capacity to undertake projects on the scale supported by the SIF program are often part of a larger corporate structure with a global presence.

For example, a Canadian-headquartered company — such as CAE [which received $150 million from SIF in 2018] — is heavily linked internationally with subsidiaries around the world. This international presence is a key factor for knowledge transfer, access to leading edge technology and to global capital flows as well as creating access points for small and medium sized businesses to enter into global supply chains.

SIF’s project with Innovation ENCQOR [which received $66.7 million in 2018] illustrates how SIF projects with international linkages support Canada’s innovation and technology objectives. ENCQOR is a group led by five global digital companies (Ericsson, Ciena Canada, Thales Canada, IBM Canada and CGI). This project will enable governments, small and medium-sized businesses, and academics to collaborate on 5G technology development through linked research facilities and laboratories located in Ontario and Québec.

This network will provide Canadian SMEs with access to cutting-edge technologies such as programmable broadband networks, the Internet of Things, silicon photonics, big-data analysis and cloud computing. These investments position Canada to be on the technological frontier in key and fast-growing global industries.

4. Has SIF funding been used sometimes to support well-established struggling “traditional,” commodity-based industries (i.e., oil and gas, automotive manufacturing, mines and metals-aluminum manufacturing) rather than going to support new, scaling Canadian companies with innovative products and services?

With all SIF-supported projects, every investment is assessed in its ability to deliver innovation, economic and public benefits to Canadians.

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