SUPPORTING A HOMEGROWN AND ENTREPRENEURIAL DIGITAL ECONOMY IN BC (2024)

Issue 

British Columbia has an established and thriving digital tech start-up ecosystem. However, many of BC’s tech companies are relatively small and still face challenges in scaling up. There is a risk that if companies are not able to scale up and fail to grow, the province will lose out on important opportunities for economic growth, such as the creation of well-paying resilient jobs and attracting investment capital and companies that solve new problems, encourage investment in research and development (R&D) and drive economic prosperity.

Background 

The rise of the intangibles economy (what has been described as “capitalism without capital”) is, and indeed already has, transformed the foundations of the global economy. However, Canada and BC’s current policy toolkits are centred on a world of tangible assets. The growing trend towards intangible assets is described in detail by Speer & Asselin (2019)[1], where they note the importance of data, brands and IP, and the fundamental shifts required in policies and programs to support the new economy. 

The global economy is experiencing major shifts, which are being advanced by digital technologies such as artificial intelligence and nanotechnology. These technologies, and many others, have the potential to suddenly upend sectors, firms, and workers unless they are equipped with the skills and talent to adapt to rapid technological advances.

While BC has a growing number of mid-sized companies, it continues to trail more mature tech sectors in Ontario and Quebec. Many companies in BC’s tech sector face challenges with scaling up, often remaining small or selling at an earlier stage than they would in other jurisdictions. The province’s tech sector includes nearly 11,000 companies; however, the vast majority (80%) employ less than ten people. In fact, only 229 BC tech businesses have over 100 employees, of which only 27 employ 500 employees or more.[2]

Canada’s Digital Technology Supercluster[3] was launched in November 2018 with $153M in funding from the Ministry of Innovation, Science and Economic Development and funding commitments of over $200M from its initial cohort of members. The Supercluster leverages BC’s strengths by bringing together private and public sector organizations to address challenges facing Canada's economic sectors, which include healthcare, natural resources, manufacturing, and transportation. Through its investments, the Supercluster helps position Canada as a global hub for digital technology innovation, and contributes to the generation of new jobs, growing GDP and increasing Canada's global competitiveness.[4]

Noteworthy progress has recently been made in bolstering BC's digital economy development ecosystem. The province has introduced the Future Ready Action Plan, emphasizing skill development in digital economy-related areas while committed to increasing underrepresented groups’ participation in the technology sector and digital economy.[5] The province has also launched an Intellectual Property (IP) Strategy to promote innovation across various sectors.[6] The provincial IP strategy includes notable elements, including a plan to create a central virtual hub for IP to make it easier for businesses to access IP-related information and apply the "IP Smart" lens, ensuring that IP is considered in the development and implementation of provincially sponsored programs. This strategy indicates a notable and proactive step by the BC government, emphasizing the crucial role that IP will play in shaping the BC's future economic path.

Provincial tax credits, including the regional tax credit, distant location regional tax credit and the Digital Animation, Visual Effects, and Post-Production (DAVE) tax credit, are critical tools in supporting the growth of jobs and businesses related to digital creation by lowering costs for homegrown creators and firms. It is worth noting that Budget 2024 introduced changes to the Regional and Distant Location Tax credits, excluding animation productions from eligibility. This change could leave local companies, which would otherwise qualify, unable to access these important credits. Continued support from the province will be key to retaining local businesses and jobs within the creative sector in BC.

At the national level, Canada's Digital Ambition, presented by the Government of Canada, highlights the yearly advancements and prospects for digital government transformation. In the 2023 report, the government outlined actions, including improving flexibility to engage startup/scale-up enterprises. There is an untapped opportunity to encourage the utilization of local technologies developed in BC within the government through means such as procurement.

Scaling and keeping homegrown and entrepreneurial businesses in BC will help with the creation of well-paying resilient jobs, attract investment capital, and create spin-offs that will solve new problems, encourage investment in R&D, and drive economic prosperity.

Considering significant in-province investments already being made to foster an innovation ecosystem, the BC government is in a strategic position to support these efforts, anchor emerging solutions, technologies and businesses in BC, and realize the associated economic growth.

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Continue to invest in cultivating and scaling local companies, growing the technology ecosystem, and commercializing data and IP in BC through roadmaps such as the IP strategy, increase ties between post-secondary institutions and the private sector to leverage the research funding in the province to support the commercialization of new technologies and retain IP in BC
2. Support innovation inside the government through the utilization of local technologies.
3. Continue investing in the Future Ready Action Plan to support local companies’ growth in the digital economy.
4. Continue using tax policy to support and incentivize local businesses within the digital economy throughout the province.

That the Federal Government:

5. Use tax policy not only to support and encourage the undertaking of certain innovative activities in Canada, but also to incentivize the retention of IP in the country.
6. Support innovation inside the government through the utilization of local technologies.