Canadian R&D spending stagnating as business performance continues to decline

A key underpinning of Canadian innovation is continuing to slide with the latest data on gross expenditures on R&D (GERD) showing a 1.7% decline in 2015. Statistics Canada reports that GERD dropped $600 million to $33.9 billion from $34.5 billion in 2014 and its latest survey shows that weak performance was unlikely to change in 2016.

Most sectors are experiencing modest growth at best while the business sector accounts for nearly all of the 2014-15 slump — an ongoing problem that has concerned successive governments seeking to boost industry R&D, innovation and competitiveness. Along with highly qualified personnel, business R&D figures prominently in the federal government’s new Innovation & Skills Plan, with the centrepiece superclusters program designed in part to boost company R&D performance.

Since 2014 — the latest year for which actual data are available — R&D expenditures by business fell over the past two years by $801 million, from $18.53 billion to $17.72 billion. Business was also the single largest funder at $15.8 billion in 2014 or 46% of GERD. It was followed by the higher education sector ($16.4 billion/18.5%) and the federal government ($16.2 billion/17.8%).

Not-for-profits and foreign sources of R&D funding have been strong over the past three years, posting 2016 totals of $1.5 billion and $2.6 billion respectively.

R&D funded by the federal government has remained relatively stagnant over the past three years and stands at $6.18 billion in 2016. That contrasts with $6.33 billion in 2010. Federal R&D performance is also experiencing tepid performance, hovering at around $2.6 billion for the past four years but down from $2.9 billion in 2010.

Correspondingly, GERD stood at 1.74% in 2014 (before falling to 1.61% in 2015), compared to 1.98% in 2005. In comparison, the GERD average for OECD nations is 2.4% as of 2014 while the US achieved 2.76%. Global leaders are South Korea (4.29%), followed by Israel at 4.27% and Japan at 3.59%.

As expected, natural sciences and engineering (NSE) account for the vast majority of R&D outlays, with $31.1 billion in 2014 or 90% of the total — a 7% increase from the year before. Business R&D performed nearly 60% of NSE R&D. Social sciences and humanities R&D accounted for the remaining 10% with $3.4 billion in expenditures.

Provincially, Ontario is the single largest R&D performer with $15.2 billion or 44.1% in 2014, down from a 45.8% share in 2010. Quebec has remained constant over the same five-year period, with $9.1 billion in 2014 for a 26.3% share. Alberta has made the biggest gains over the same period with $3.2 billion in 2014 for an 11.1% share, compared to $3.0 billion and 9.8% in 2010.

Alberta has overtaken British Columbia for the #3 provincial performer. Although R&D performance has shown modest growth since 2010, BC’s 2014 tally — $3.3 billion — gives it a 9.7% share, compared to 9.9% in 2010.

Source: Statistics Canada

CANSIM table 358-0001

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