BlogAI & Innovation Innovation is not the same as R&D (and for Corfo, the difference matters)
In Chile we use “innovation” for almost everything: new software, an improved process, a different product. But the R&D Law doesn’t reward innovation in general. It rewards something more specific: research and experimental development. Confusing the two is the most common reason for rejection.
The difference in one sentence
Innovating means introducing something new or improved into your company or the market. Doing R&D means creating knowledge that didn’t exist to solve a problem whose solution is not known in advance.
A company can innovate a lot without doing any R&D: buying a new machine, rolling out an ERP or launching a product competitors already sell. All of that is valuable, but it isn’t R&D.
The key test: was there uncertainty?
The question to ask is: when we started, did we know whether this was technically possible and how to achieve it?
- If the answer is “yes, we just had to execute”, it’s innovation or implementation.
- If the answer is “no, we had to research, test hypotheses and learn along the way”, it’s probably R&D.
| Innovation (doesn’t qualify) | R&D (can qualify) |
|---|---|
| Installing a production line with existing technology | Developing a new process because none available meets the requirements |
| Implementing commercial software | Creating an algorithm for a problem with no known solution |
| Redesigning a product’s packaging | Developing a new material with properties not available on the market |
| Adapting a recipe to a new supplier | Researching how to preserve a food without additives that are currently indispensable |
What the law expressly excludes
Law 20,241 lists activities that are not R&D, even if they use technology:
- Routine, repetitive or minor improvements, adaptations and analyses.
- Cosmetic or minor modifications.
- Periodic or seasonal changes.
- Testing a prototype that is already a marketable product.
- Market studies and promotion.
According to a University of Chile study, 64% of certification rejections (2015 data) were projects Corfo considered “routine improvements”. In other words, most rejections aren’t about poor execution, but about a mistaken idea of innovation.
What about “incremental” innovation?
The same study distinguishes incremental innovation (gradual improvements to existing products and processes) from radical innovation (new products or processes). Incremental work isn’t excluded by definition: the law accepts the “substantial improvement” of existing processes or products. What matters is whether that improvement required resolving a scientific or technological uncertainty, not whether it is big or small.
A quick test before applying
- Can I explain what we didn’t know when we started?
- Did we review what exists and why it doesn’t solve our problem?
- Are there hypotheses and experiments, with a real chance of failure?
- Does the result create new knowledge, at least relative to the industry’s state of the art, not just for my company?
If you answer “yes” to all four, you have a good candidate for the R&D Law. If not, you’re probably looking at innovation, which may have other support programs. For software and AI projects, see Leveraging AI for innovation.
This article is for information only and is not tax advice. Sources: Law 20,241, Corfo’s FAQ and Weber (2022), University of Chile.