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Acorn Partners

Submission — Acorn Partners

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Submitter(s): Kemball, Peter

Summary: Our appreciation of the SR & ED Program's contribution to commercialization of R&D is based upon two decades of experience providing more than $200,000,000 of capital to SME's, about a quarter of it being based upon SR & ED claims. Taxpayers are "gambling" that rewarding effort is a rational response in the face of great uncertainty about individual corporate outcomes. We are purchasing a collective assurance that we will have the capacity to generate employment by commercializing technology. The gamble being taken is twofold; effort will result in technical success, and with additional effort technical success can be parlayed into commercial success. Each gamble is a long shot. Combined, more failures than successes are inevitable: only twenty percent of firms survive a decade. In short it is a numbers game to cope with known knowns of which some may be wrong, known unknowns and unknown unknowns A vital side bet is that the refundable portion will produce new entrants to replace employment lost by those firms who exit the business world. Therefore evaluation of the SR & ED Program's contribution to Canada's capacity to profitably commercialize R&D should have as its point of departure that the Program's costs are payment for the option to keep and possibly expand our capacity to commercially exploit R&D. We advocate viewing the cost of SR & ED as an option payment because of the program's unique design features. First, SR & ED expenditures allow entrepreneurs to decide on the focus their technical efforts on the opportunities as they see them. In this the design of the Program is a brilliant response to the fog of uncertainty inherent to the process of technical success and its commercialization. Second, in sharp contrast with grants and loans subject to annual appropriations, the Program operates in a time frame keyed to entrepreneurial rhythms, or at least as close as government can responsibly come. In this it is akin to the CSBFP, a lending program delivered through the banks. Finally, the SR & ED cash refunds are a critical component of the capital markets for the ten percent of small, early stage, technically innovative, high aspiration entrepreneur led firms who have produced Open Text's, RIM's and thousands of other lesser lights and from whom the next Open Text's and RIM's will emerge to employ our children and grandchildren. So, the central question is, what are Canadians getting in terms of successful firms in exchange for buying the option on high aspiration entrepreneurs seeking to build firms able to provide a more productive means to meet our challenges?

Full submission: PDF Version