Newly-named Canada Innovation Corporation will see budget double to absorb IRAP

Further details on feds new innovation agency to follow governance body, new legislation.

The federal government has revealed more details of its long-awaited, new innovation agency.

The newly-dubbed Canada Innovation Corporation (CIC) will be a Crown corporation led by the private sector. While the CIC will operate independently from the government it will report to the minister of innovation, science, and industry.

The CIC is being touted as “a new focused approach to Canada’s innovation ecosystem.”

As part of a technical briefing with reporters, government staff said the federal government is committed to getting the CIC up and running in 2023. However, doing that will require identifying both a board of directors and CEO, as well as introducing enabling legislation; staffers at the technical briefing provided no timeline for these key milestones.

CIC’s budget has more than doubled to $2.6 billion over four years since the creation of the agency was first announced in Budget 2022. A blueprint document provided to BetaKit today attributed the budget increase to the government’s plans to move the Industrial Research Assistance Program (IRAP) under the CIC umbrella. IRAP has traditionally been part of the National Research Council.

The combination with IRAP is meant “to establish a large-scale platform of business R&D support” and minimize duplication of federal programs, per the document.

The document also touted the CIC as “a new focused approach to Canada’s innovation ecosystem.”

RELATED: Five months in, details on Canada’s new Innovation and Investment Agency remain sparse

While the document lays out some new details about the combination with IRAP and the amount of funding that might be available for projects, much of the contents regarding the CIC’s model had been publicly shared previously. And while the blueprint does reveal initial plans for the CIC’s governance and creation, it is light on when those things may occur.

What the document does explicitly state is that the CIC “will not be just another funding agency.” Rather, it says that the CIC will be “an outcome-driven organization” that not only focuses on high-tech companies but those in commodity-based and manufacturing industries.

The document also highlights a focus on programs for developing and protecting intellectual property, the global supply chain, and research and development (R&D)—all of which was expected or advocated for.

Academic Dan Breznitz, who consulted on the agency, called the CIC “the first time that the government admitted that we have a serious problem [with innovation].” He spoke specifically to the government realizing the need to invest in direct business knowledge of how to scale in Canada versus investing in universities and research programs.

Over the past year, Breznitz served as the Clifford Clark Visiting Economist of the Canadian Department of Finance, where he helped advise on the Canadian government’s approach to innovation. He has since completed his term as visiting economist.

In an interview with BetaKit, Breznitz highlighted positive aspects of CIC from its focus on more than just the tech industry to its being independent, but between government and the private sector. He called for both the government and private sector to make changes in order for the CIC’s mandate to succeed.

Legislation and governance

In a statement shared with BetaKit, Benjamin Bergen, president of tech advocacy group Council of Canadian Innovators (CCI), said he is pleased to see such focus on research commercialization and intellectual property.

“However, the real work will be in the details of this agency’s mandate,” he said, adding that “the leadership team will need to have a deep and sophisticated knowledge of freedom-to-operate issues, and how to successfully navigate IP issues within modern global value chains.”

Legislation will be required to officially establish the CIC, as well as its mandate and governance. The government stated that “enabling legislation … will be introduced in 2023.” It did not provide a detailed timeline for that introduction.

“This organization requires leadership with first-hand experience in the private sector.”

During the technical briefing, government staff stated that the legislation will be presented in the coming months. Work to transfer IRAP under the CIC, however, is targeted to occur within 18 to 24 months.

In terms of governance, the government has laid out a plan that includes the board of directors being appointed by Minister of Innovation, Science and Industry François-Philippe Champagne. The appointments will be done in consultation with the Minister of Finance Chrystia Freeland, and on the approval of the Governor in Council.

That board will then recommend a shortlist of candidates for the CEO role. That person will be decided and appointed by the ministers of innovation and finance.

As the CIC awaits its establishment legislation and governance, it is being established as a subsidiary of the Canada Development Investment Corporation, the Crown corporation responsible for managing investments and corporate interests held by the Government of Canada.

The government stated that “this approach will accelerate the launch of CIC programming.”

No timeline has been provided for when the board or CEO roles will be appointed. Though in the technical briefing, government staff said that work is already underway to identify board chair and CEO candidates. They described the ideal candidates as those that are familiar with both industry as well as how government operates.

“Technation questions whether allocating over a billion dollars over four years to yet another new agency / program will yield the desired outcome.”

“If the CEO and board members are pulled from the ecosystem of bloated innovation intermediaries, we fear that the CIC will ultimately fall back on the same failed approaches that have left Canada at the bottom of the OECD innovation ranks,” said Bergen. “This organization requires leadership with first-hand experience in the private sector to give this new agency the best possible shot at success.”

Technation, the national group representing members of the ICT industry, echoed a similar sentiment. Technation’s SVP of government relations and policy, Michele Lajeunesse, noted appreciation for the creation of CIC but called into question the process.

“Technation questions whether allocating over a billion dollars over four years to yet another new agency / program will yield the desired outcome it’s mandated to deliver. We are of the opinion that some of this money could be better spent, for example, putting broadband in the hands of every business, urban and rural, to drive innovation in this country.”

Program breakdown and relation to other federal agencies

The creation of the CIC is meant to “complement” other federal innovation programs, according to the blueprint document. It called the spin out of IRAP into the new agency similar to the creation of other such departments and agencies that originated as activities within the National Research Council and were created as distinct organizations “to scale their impact.” Examples include the Canadian Space Agency and the Natural Sciences and Engineering Research Council.

The document added that “the evolution of IRAP is happening alongside a broader modernization of the National Research Council.”

Laying out its suite of programs and organizations that span financing, tech adoption, as well as facility and equipment access, the blueprint stated that the goal is for businesses that access funding and support through the CIC to benefit from National Research Council laboratories, equipment, and expertise.

As was expected, CIC is based on existing innovation agencies in other countries. Though the blueprint noted that while it’s using best international practices, the CIC will take a uniquely Canadian approach.

The CIC is pulling on practices from the Israel Innovation Authority and Business Finland, formerly TEKES, which helped transform Finland’s established sectors, such as forestry, into high-technology, prosperous, and globally competitive industries.

Available funding is expected to range between $50,000 to $5 million per project.

Pulling from already successful international agencies had been recommended throughout the consultations for CIC. In both cases, the Israeli and Finnish agencies are arms-length, recruit people from the business sector, and are quick to provide funding and make adjustments to programs. Much like Canada is looking to do with CIC.

As noted in the blueprint, a component of the CIC is to create space for program experimentation. “The CIC will experiment with different approaches to improving Canadian business demand for novel ideas … It will deliver support in a more accessible way across the Canadian economy to drive innovation-based growth,” the document states.

The CIC will focus on three main activities: its experimentation through a strategy team that continually evaluates programs; the delivery of funding programs from applied research to experimental development and technological adaption; and advisory services that include the creation of a business development team.

Available funding is expected to range between $50,000 to $5 million per project, with the flexibility to support “a select number of larger-scale R&D projects” with a maximum contribution of $20 million per project.

The blueprint also denoted the importance of creating a Canadian innovation agency. “Canadian businesses do not invest in research and development (R&D) at the same level as their global peers,” it stated. Additionally, it noted that Canada is one of the only countries in the Organisation for Economic Co-operation and Development (OECD) “that has seen a decrease over the past two decades in the overall level of investment in R&D as a share of GDP.”

The report also noted that Canada’s productivity level relative to the United States has fallen from approximately 90 percent in 1980 to approximately 75 percent today. “As a result, for every dollar invested in labour and other inputs, Canadian businesses, on average, generate 75 percent of the output that U.S. businesses generate.”

The long-awaited agency

Previously referred to as the Canadian Innovation and Investment Agency, the new agency was first announced during Budget 2022 in April of last year. At the time the Liberals pledged $1 billion over five years to the agency.

Details of the agency have now been revealed 10 months later. In that interim, innovation sector stakeholders lamented the amount of time it took for the federal government to announce its plans.

“The best time to establish an agency like this would have been seven years ago.”
– Benjamin Bergen, CCI

“The best time to establish an agency like this would have been seven years ago, but the second-best time is right now,” Bergen said in his statement following the blueprint’s release. “Canadian innovators are navigating a challenging economic environment, and a fully operational innovation partner empowered by the government to support domestic growth could be meaningful, if done properly.”

For its part, the government undertook consultations regarding the agency both in Canada and internationally. As of August, Breznitz told BetaKit those consultations were still ongoing.

In its Fall Economic Statement in November, the government confirmed details on the agency that BetaKit first reported on in August. At the time, it stated that further details on the new agency would be released in a blueprint in the “coming weeks.” It took 15 weeks for that blueprint to be revealed.

The creation of the agency stems from a 2021 Liberal campaign promise to create a $2 billion Canadian equivalent to the Defense Advanced Research Projects Agency (DARPA) in the United States. At least one think tank, Ottawa’s Smart Prosperity, credits Breznitz with having swayed the government to abandon that plan in favour of the CIC model.

The need for the creation of the agency has been clear from the start. From Deputy Prime Minister Freeland on down, it’s clear that Canada lags behind the G7 countries, and many others, when it comes to innovation. In her 2022 budget address, Freeland (who is also the finance minister) talked about tackling the “achilles heel of the Canadian economy: productivity and innovation.”

Noting that Canada is falling behind in economic productivity, Freeland added the issue was a “well-known Canadian problem — and an insidious one.”

By and large, the response to the announcement of the innovation agency had been cautiously positive. CCI and Technation have both applauded the efforts to launch the agency. Though such stakeholders have also been cautious about what that agency would look like.

Technation called for the design of the new agency to be collaboratively done with tech industries of all sizes. While CCI, which represents more than 150 tech CEOs, said: “We will be disappointed if it does not include a clear mandate which treats data and IP as valuable strategic assets, and supports Canadian companies’ freedom to operate as they compete globally.”

While the federal government has made good on its promise to create the CIC, there is still much work to be done before it is up and running. There also remains the fact that the Liberals have not revealed plans for other innovation promises, such as the review of the SR&ED credit.

Meagan Simpson

Meagan Simpson

Meagan is the Senior Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.

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