Canada’s total R&D effort boosted by increases in higher education spending

Other sectors remain flat

Total R&D spending in Canada is estimated to increase 5.1% this year to $24.5 billion in 2004, due mostly to increased federal support for the higher education sector. Statistics Canada says the modest increases projected for 2003 and 2004 “indicate a recovery” after gross expenditures on R&D (GERD) decreased in 2002 for the first time since the department started tracking R&D.

Higher education institutions improved their collective R&D performance by $1 billion over 2003 to $9.3 billion, the fifth year in a row they have registered impressive gains. The increases are largely a result of policy decisions to enhance the basic science pipeline, whereas the key indicators of business R&D and foreign funded R&D are primarily influenced by business conditions. In these areas, there’s precious little to cheer about. Business R&D performance is up just 1.5% in 2004 after remaining virtually stagnant in 2002 and 2003, while foreign funding of R&D has finally bottomed out after declining steadily since the downturn in the telecom sector and dot com implosion (see chart).

Federal R&D performance is also anemic, gradually increasing from 2.1 billion, in 2000 to $2.2 billion in 2004. In the national capital region, however, federal expenditures continue to climb, up 9.6% to $1 billion between 2001 and 2002, the last year for which data are available. That total includes $18 million from business sources and $3 million from provincial governments.

The lackluster performance of Canadian R&D has taken its toll on the national research intensity, as measured by GERD as a percentage of gross domestic product (GDP). After reaching an historic high of 2.05 in 2001, GERD-to-GDP fell to 1.93 in 2002 and fell again to 1.91 in 2003. Quebec remains the province with the highest research intensity at 2.6% in 2002 (the last year for which a provincial breakdown is available), followed by Ontario (2.0%), Nova Scotia (1.4%), British Columbia (1.3%), Manitoba and Saskatchewan (1.2%) and Alberta (1.1%). National GERD-to-GDP for 2002 was 1.9%.

1998 TO 2004

The impact of federal policies and programs on the higher education sector has been remarkable. Higher education institutions more than doubled their R&D performance between 1998 and 2004, from $4.4 billion to $9.3 billion. In that same period, federal funding has jumped from $2.8 billion to $4.7 billion, while the provinces have increased even more dramatically from just $639 million to $1.4 billion. The rate of increase in funding by the higher education sector is not as substantial, moving from $2.3 billion in 1998 to $4.3 billion in 2004.

The same seven-year period saw an impressive increase in funding by private, non-profit organizations from $372 million to $787 million. Business funding of R&D grew more slowly, from $7.4 billion to $11.3 billion. The only funding sector to decline is foreign-funded R&D, which dropped from an historic 1998 high of $2.6 billion to $1.9 billion in 2004.

Business R&D funding remains the largest single funding sector with 46.2% of the total. And while the double digit increases of 2000 and 2001 are but a distant memory, the 2.2% increase projected for 2004 offers some hope that the stagnation of business R&D funding may be coming to an end.

Ontario and Quebec are home to 72.7% of all R&D expenditures, a share that has not changed for the past five years. Ontario, however, appears to have lost some ground to Quebec in the same timeframe.

R$