Technological Uncertainty
Understanding Technological Uncertainty in Innovation:
When companies set out to create groundbreaking products or improve existing processes, they often encounter technological uncertainty—that is, a knowledge gap making it unclear whether a desired outcome can be achieved with the technology and expertise currently at hand. This uncertainty typically springs from complexities such as:
Inapplicable existing design methods
Unique technical specifications that fall outside recognized standards
Insufficient data or evolving problem parameters
In Canada’s SR&ED (Scientific Research & Experimental Development) program, technological uncertainty is a key factor in determining whether experimental work qualifies for tax incentives. Specifically, when a problem arises that cannot be solved through established techniques or readily available knowledge, any systematic investigation or experimentation to resolve that gap may be eligible under SR&ED.
Criteria and Guidelines
According to the SR&ED Eligibility Guidelines, to determine whether work meets the criteria, you must consider both the “Why” and “How” requirements Technological Uncertain…:
The “Why” Requirement (Purpose of the Work)
The work must be conducted for the purpose of achieving technological advancement—the generation of new knowledge to overcome uncertainty.
The desired outcome may be a new or improved product, process, or technology. Even if the attempt is unsuccessful, work that systematically seeks new knowledge could still qualify.
The “How” Requirement (Systematic Investigation or Search)
The approach must involve formulating a hypothesis, testing and analyzing it, then drawing logical conclusions.
Evidence of each step (e.g., records, test results, data) should be kept to demonstrate a clear, methodical process.
Work Excluded from SR&ED
Routine testing, market research, and certain other activities do not qualify. Only the portion of your project specifically addressing scientific or technological uncertainties with a systematic approach is potentially eligible.
By aligning R&D endeavors with these SR&ED criteria, organizations not only push innovation forward but also unlock potential tax credits to support future development. Documenting hypotheses, test approaches, and outcomes is crucial to demonstrating that the ultimate goal was to advance technical understanding rather than simply apply known solutions.