Investment drives innovation: CME

A new report released by Canadian Manufacturers & Exporters (CME) blames Canada’s lagging productivity on a lack of funding. The report, entitled Invest to Grow: Technology, Innovation and Canada’s Productivity Challenge, shows that innovation is ultimately an investment decision for business driven by cash flow and expected returns on investment.

"I’m tired of government lecturing business about the need to innovate and improve productivity," explained CME president and CEO, Jayson Myers, the author of the 43-page report. "It takes more than good intentions to innovate. It takes money."

The report illustrates the close relationship that exists between cash flow performance and investments in research and development (R&D) and in new technology. Its findings also support the recommendations CME has made to government to make the SR&ED tax credit refundable and extend the two-year write-off for investments in manufacturing and processing technologies – both leave more money in the hands of businesses that are investing to innovate and improve productivity.

"Innovation is key to productivity, to economic growth; but if policymakers want to encourage innovation, they have to leave more money in [the] hands of the companies that need to invest in productive assets," added Myers. "Today, business investment in innovation is weak because cash flow is also weak, and frankly, many businesses expect higher returns from investing to expand their business outside Canada."

According to Myers, government must focus its attention on what it can do to improve the investment environment in Canada.

"Ultimately,” said Myers, “we need to be encouraging investment in innovation, but we must ensure that innovation policies improve cash flow for companies that want to invest in Canada and that we have policies that aim to improve the rates of return on investment at home.”

A copy of the report is available for download at www.cme-mec.ca/download.php?file=gftlvey1.pdf.