Résoudre les problèmes de R&D au Québec : vers des politiques plus ambitieuses

Here is a concerning economic indicator: despite significant government support, research and development investments by Quebec companies represent only 1.3% of GDP, which is well below the average of OECD countries, the European Union, and the G7.

In fact, R&D investments by companies have declined substantially over the past 20 years in Quebec. Quebec companies should spend an additional $2 billion per year just to return to the level of 20 years ago. To reach Sweden's ratio, Quebec companies would need to spend an additional $4.5 billion annually!

Quebec's productivity problems are not new, but the report "Towards an Innovative Quebec" by the Quebec Innovation Council (QIC) provides a valuable portrait of the state of affairs in 2024.

We can certainly question the effectiveness of financial R&D incentives as well as Quebec's regulatory and tax environment, and its ability to generate R&D investments. We can also question why a province that has several world-class universities and a highly qualified workforce is not able to produce more innovative companies. One thing is certain, Quebec has all the tools to be a global leader in innovation.

SMEs that invest in innovation improve their long-term economic performance, both in terms of their growth and their revenues and profitability. We know all this. And several studies have demonstrated it. So, what can we do to move the needle?

An ambitious vision for Quebec

"Towards an Innovative Quebec" is an excellent study. As far as we at CCI are concerned, if the government adopts this report and obtains buy-in from the private sector, we believe that the vision behind it is likely to energize the new technology sector and stimulate innovation in Quebec.

If it were up to us, the vast majority of the content of this report would be implemented. The proposed measures to encourage companies to invest more in R&D, to accelerate the commercialization of innovations, improve transparency & accountability, and to simplify administrative processes are all excellent ideas likely to energize Quebec's innovation ecosystem.

The section of the report entitled "protecting investments made by the state and companies" catches our attention, however, particularly recommendation 9 (implement new tools to increase the government's capacity to support the innovation investment cycle in Quebec). It proposes considering the implementation of royalty-based grants, loans on favorable terms, forgivable loans, etc.

These measures present  several similarities with proven models elsewhere in the world in research and development — notably those of Israel and Finland. Two countries with populations of less than 10 million inhabitants, with a strong common language and culture... does that remind you of something?

What makes the Israeli and Finnish models successful?

Israel's innovation model favors a "bottom-up" approach, which does not prioritize any particular sector. Rather than focusing on certain specific problems and trying to innovate around them, Israel  openly encourages innovation in all sectors. By creating infrastructure and offering rigorous support to innovators, risk-taking is minimized and innovators can focus on what they do best: innovate.

This model is unique and above all a resounding success. Israel leads all OECD countries, with R&D investments representing 5.1% of GDP (this ratio was 3.9% in 2000). Israel's innovation department has existed in one form or another for about 60 years and has been constantly adjusted to maximize investments in the private sector. Companies that invest in new technology startups can be reimbursed up to 40% of their losses through certain programs. When we talk about stimulating risk-taking and supporting those who go down this path, this is an excellent example.

The Finnish model is somewhat different, in that it focuses around major technology flagships like Nokia. These companies play a catalyst role in the country's innovation ecosystem and, in partnership with the Finnish government, support and finance R&D in various sectors. This model is reminiscent of the importance of supporting our flagships and keeping head offices at home — the benefits for the economy are undeniable and above all irreplicable in another form.

These examples demonstrate that it is not necessary to imitate what is done in the United States to innovate. You can be a small country and be a world leader in innovation. Quebec is a unique case in North America. The language issue is an important differentiating factor, but the welfare state as well as Quebec's social fabric place Quebec in a truly unique category. And this uniqueness means that Quebec is probably the North American jurisdiction most likely to successfully implement a model similar to those of Israel and Finland.

Conclusion

It is unfortunate that even before the report was released, the government required that "any recommended revision of R&D incentives for companies must be done at zero cost."

While we understand the current economic context and the need to maximize efficiency in the management of public funds, the fact remains that this prerequisite is likely to limit potential solution paths and our ability to consider new ways of doing things.

What if we made innovation a societal project in Quebec? All the ingredients are there. Now we just need to put the right mechanisms in place and above all, be patient. Texas pitmasters know that to achieve the best possible brisket, you have to wait a very long time... but that this wait is worth it!

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