Ron Freedman contemplates reform of the Scientific Research and Experimental Development program, which hands out $4 billion in tax credits annually to companies undertaking R&D.
In the research and development community of Canada, Ron Freedman is known as the numbers guru. In 1999 Freedman and a partner began tracking research and development in the corporate sector, adding universities in 2000, hospitals in 2010 and colleges in 2012. Now, as sole CEO of Research Infosource Inc., Freedman oversees a stable of annual publications that chart the top spenders in each of those fields.
With an educational background that includes graduate education in environment studies, adult education and science policy, Freedman has been working in the area of science and technology for more than 35 years. From 2006 to 2015 he was co-publisher of Re$earch Money, a newsletter of record about science policy in Canada that was published 20 times a year. The 67-year-old Freedman also co-founded The Impact Group, a consulting company that specialized in science and technology research, policy, communications and marketing.
As well, Toronto-based Freedman is CEO of Innovation Atlas Inc., a web-based service designed to show who is doing what and where in research and innovation in Canada. Lately Freedman has taken particular interest in ways to reform the much-criticized federal Scientific Research and Experimental Development (SR&ED) tax credit program. It is the largest single government support program for research and development, providing $4 billion in investment tax credits to companies for R&D that meet its criteria.
How would you describe the health of science in Canada today and why do you say that?
Overall the state of science is quite healthy. People in the business would always like more money to be splashed around but given our difficult circumstances I think we’re doing pretty well both in quality and quantity of research. In the corporate sector we’ve seen a flattening of investment in R&D but the reasons for that are still quite vague.
Why don’t we know more about what’s happening in the business sector? What’s wrong with our information gathering?
In Canada we rely so much on data from the Scientific Research and Experimental Development (SR&ED) program to figure out how much companies are spending, the analytical community has not really looked under the hood to see what the components of that are. We know, for example, that the number of companies doing research peaked at about 25,000 several years ago. Now it’s down to around 23,500 but we don’t know if that drop in the last couple of years is the result of real absence of spending or absence of participation in research by companies or whether it’s simply the result of administrative decisions by the SR&ED program.
But you say that the SR&ED program is linked to an academic model of hypothesis-driven research, which companies don’t follow now, if they ever did. So what goal should SR&ED have?
What should ordinary Canadians be investing their tax money in, vis-à-vis industrial research and development? My belief is that we should be investing in capabilities developments within companies. That is, it is legitimate for the taxpayers to help companies develop technological capabilities as opposed to doing science or — at the other end of the spectrum — developing products. I’d adopt a new paradigm for the SR&ED program called the Technology Readiness Level (TRL) model, which is in common use in the aerospace and military sectors. You divide the level of technology development into nine sectors, from basic research to completed technologies, and the public sector should consider funding the six early stages.
Your company also looks at the research income in the university sector. How healthy is that?|
Over the last 10 to 15 years there has been an enormous growth of money going into university, college and hospital research. The rate of increase turned around in 2014 for the first time in about 15 years, a decline of 1.6 percent.
Simply, two-thirds of the money comes from governments and — guess what — governments are out of money. There are other priorities, less money and all Canadians know that. The 2000s were the golden age of university and hospital research when funding went up over 250 percent from the late 1990s.
Why have there been loud complaints from the university research sector when there’s been annual growth until 2014?
It’s disappointment of expectation of continual growth. When you fund increasing levels of activity for 15 years and then you slow down, people come to expect large rates in growth. From a public policy standpoint, at some point you get to the problem of declining marginal returns. If we’re already funding the best research and researchers, then by definition additional funding goes to the next best and the next best and the next best.
I’m getting the impression that it’s somewhat silly to talk about a research strategy for Canada.
I’ve always said that governments don’t have strategies. They have programs and the strategy equals the sum of the programs. In Canada we’ve been enamoured with the gap-filling approach to program development. We identify gaps in whatever system we’re looking at and then we create new programs to fill those gaps. It’s like putting a patch on an inner tube. Eventually the inner tube contains so many patches that it’s really not a functioning inner tube anymore but just a system of patches.
I’m going to make you Canada’s science czar. Whatever levers exist within the federal government, you have them at your disposal. What is the very first thing that you do?
It’s to take a zero-based approach to everything and develop a process whereby we reinvent the system. We say, look here’s how much money we’re spending in government, in universities, in hospitals, colleges and corporations. With this much money to play with, let us reinvent the system, assuming nothing is in place. I have a very simple way for determining the relevance of any organization or activity. You just ask yourself the question, “if we didn’t have that organization or activity today, would we create it?” So, for example, if we didn’t have the National Research Council of Canada today, would we go to the government and say, “for only $1 billion a year you can have a National Research Council.” Asking the question doesn’t mean you’re going to eliminate everything you’ve got. But you’re going to validate that what you’ve got is still relevant. If we’re going to have a chief scientific officer shouldn’t this be his or her first job?
This interview has been condensed and edited.