The Organization for Economic Cooperation and Development (OECD) measures the generosity of each country’s credit yearly. In the recent 2019 report, it shows that the United States ranks 26 among the 36 OECD countries.
While the rank varied from high in early 2000, it gradually reduced as the years passed, that is, it was ranked 10th, 18th, and 25th in the years 2000, 2008, and 2016 respectively. The rank only kept decreasing over the years.
It clearly shows that conducting research and development in the US is not very attractive even though it ranks higher in the most promising tech markets in the world.
Several factors such as cost of living, high business taxes, corporate culture, and other business practices are making the businesses move their R&D centers to other countries other than Silicon Valley. And Canada is one of them. The tax systems of the US or other countries are not as generous as that of Canada, hence making Canada the new R&D hub for budding start-ups and other businesses.
In 2007, the United States passed comprehensive tax reform. While the reform lowered the corporate tax rate, the incentives to carry out innovation, unfortunately, were not increased. But the after-tax cost was increased. Due to this, its generosity of the tax incentives reduced, making the US rank way below in the OECD list for years constantly. Meanwhile, other countries became more considerate when it came to tax incentives surrounding Research and Development.
So, the principle problem to conduct research and development in the United States is that the R&D tax incentives are not as generous as other nations. The result is the businesses are exploring their options in other countries.