Finally, the generous treatment of small firms is sometimes justified as compensation for the difficulties small innovative firms have in accessing financing. [...] And the higher the subsidy the greater the reduction in the average quality of projects undertaken. [...] The small firm rate would be too high based on the spillover metric and the large firm rate would be too low. [...] The higher small firm credit rate could be justified as levelling the playing field with large firms given the greater compliance costs faced by small firms. [...] More on that in the next instalment of my response to the federal invitation to comment on SR&ED modernization and the suitability of creating a patent box regime.
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