From the 1997 Budget: Innovation, Economic Growth and Job Creation
This paper is about jobs - creating new and better jobs in the future and ensuring that the province keeps the jobs it now has. Successful private-sector companies are the engine of job creation in the Ontario economy. The Government's plan is to create a positive business climate to unleash the power of private-sector job creation - by cutting taxes, by investing taxpayers' money more wisely, and by removing barriers to private-sector growth.
The stakes are high. Innovative economies, like Ontario's, that provide fertile ground for knowledge-based companies to grow can look forward to good jobs and a high standard of living in the future. Those that are not up to the challenge will see high unemployment and a declining standard of living.
- The job creation payoffs from innovation and research and development are
substantial. During the last 10 years, two of every three new jobs in Ontario
were created in knowledge and technology-based industries.
Innovation is the key that unlocks the door to knowledge-based growth
and job creation. Just as it is necessary to invest in people and in physical
capital for the economy to grow and create jobs, so also is it necessary
to invest in innovation. Research and development - R&D - is an investment
in innovation, in economic growth and in job creation. In other words,
R&D is an investment in Ontario's future.
The Province's plan - cut taxes, invest wisely, and rely on the private sector
for job creation and economic growth - will work for R&D just as it is working
in other areas. Supporting R&D through tax cuts is one important way of
creating good, long-lasting jobs. Encouraging the province's leading companies,
large and small, to partner with Ontario's finest universities is another effective
way to build the knowledge that will enable our companies to compete on a world
scale and create jobs.
The Government will contribute $500 million to an R&D Challenge Fund that
will result in a total investment of $3 billion over 10 years. This investment
will promote greater partnership and collaboration between the private sector
and Ontario universities and support research excellence in our universities.
In addition, the Government is introducing seven new tax cuts to support private-sector
investment in R&D and innovation, including a new 20 per cent refundable
tax credit for business-sponsored R&D performed by universities and other
post-secondary educational institutions in Ontario. These new tax measures will
help support a further $3 billion in private-sector investments over the next
In total, these measures will help ensure that Ontario remains one of the most
competitive jurisdictions in the world in which to perform R&D. Their purpose
is to move the economic yardsticks ahead - to create jobs, increase productivity,
and raise incomes.
R&D and Innovation Key to Job Creation and Growth
In the 21st century, the ability to create and apply commercially valuable knowledge will separate the economic leaders from the rest of the pack. Companies throughout the world's advanced economies know this and are seeking ways to use knowledge to create competitive advantages.
R&D is an investment in innovation - the development and application of
new knowledge to produce new products and services and to find new, more productive
ways of doing things. Innovation is the cornerstone on which a high-income,
job-creating economy is built.
R&D influences job creation and economic growth in a variety of ways:
- High R&D economies have a better chance to be in on the ground floor
when new fast-growing industries that will be the job creation machines of
the future are born.
- Fast-growing, innovative companies, many of which invest heavily in R&D,
create a disproportionate share of new jobs.
- As new knowledge flows from one part of the economy to other parts, the
productivity of capital and labour both rise. A general-purpose technology
such as computing illustrates how new knowledge can ripple through the economy
with profound effects on both what is produced and how it is produced.
- Even knowledge that is protected by intellectual property rights can benefit
other companies through "demonstration effects" where companies learn by observing
the products and services offered by their competitors.
- The skills and knowledge acquired through R&D diffuse through the economy
as people change jobs and take their expertise with them.
- R&D capabilities make companies more proficient in adopting and commercializing
- Success breeds success. Clusters of high-technology companies and institutions
such as those in the Kitchener-Waterloo-Cambridge-Guelph Technology Triangle
or the Ottawa area attract new investment and generate new "spin-off" companies.
- R&D-intensive sectors generate approximately 22 per cent of the province's
merchandise exports. If autos are excluded, the export share of R&D-intensive
industries rises to close to 40 per cent.
All of this means that the economy-wide returns from R&D are much greater
than the returns to any individual firm that performs R&D. Estimates of
the total economic return to R&D typically range from 50 to more than 100