Industrial R&D expenditures projected to remain stagnant this year: StatsCan

Lingering impact of telecom meltdown

Industrial R&D spending inched up in both 2005 and 2006 with outlays totaling a projected $14.85 billion for 2006, a 1.3% increase over $14.65 billion in 2005. But when spending is measured in 1997 constant dollars, industry spending actually decreased in 2005 and will likely decline again in 2006. The latest data from Statistics Canada essentially put the nail in the coffin of the previous government's lofty goal of moving Canada from 15th to 5th in R&D spending by 2010 — a feat largely dependent upon dramatically increased industrial R&D expenditures.

Five years after the Liberal government announced its 15th to 5th target, Canada still remains between 12th and 14th place globally, depending on what data are used to calculate the ranking. The lackluster 2006 total reflects the ongoing effects of the dot com meltdown and more particularly the collapse of the communications equipment sector, which plummeted 20.8% from $1.995 billion in 2002 to a projected $1.58 billion in 2006. It also captures the impact of the government's failure to develop more effective incentive measures for stimulating business R&D spending as well as its failure to implement a commercialization strategy to exploit its massive investment in university-based research.

The share of industries that make up the manufacturing sector declined from 61% of the industrial R&D total in 2002 to 56% in 2006, while communications equipment alone has dropped from 15% to 11%. The information and communication technologies (ICT) sector also experienced a significant decline from 46% to 39% of the total.

In contrast, the share of the total taken by the services sector increased from 35% to 40% in the same period. The industries accounting for pharmaceutical and medicine research also show fairly strong growth over the StatsCan report's five-year window, increasing 19% from $1.65 billion in 2002 to $1.97 billion in 2006. The sector also increased its share of the industrial R&D total from 12.2% in 2002 to $13.3% in 2006.

ONTARIO SHARE SLIPS

Ontario and Quebec continue to be home to the majority of industrial R&D performed. In 2004 (the latest year for which geographic allocation is available), the two biggest provinces accounted for 81.4% of all industrial R&D. However, Ontario's share has dropped over the past 10 years from 54.1% in 1995 to 51.6% in 2004. Quebec increased in the same period from 28.5% of the total to 29.8%. British Columbia also increased its share from 7.5% in 1995 to 9% in 2004, while Alberta's share held steady at about 6.1%. The remaining six provinces account for 3.4% of all industrial R&D.

While Alberta's share of business R&D is largely unchanged in recent years, its reliance on mining and oil and gas extraction is reflected in the R&D data. It comprises 22.7% of the province's industrial R&D total, compared to 30.4% for manufacturing and 34.0% for services. In British Columbia, services accounts for 63% of the province's industrial R&D, while manufacturing accounts for 34.1%.

In Canada's industrial heartland, manufacturing R&D in Ontario accounts for 62.0% of the provincial total, followed by services at 36.9%. Quebec-based manufacturing accounts for 55.7% of the provincial R&D total, followed by services at 40.6%.

Intramural R&D makes up the largest share at $11.36 billion or 78.7% of the 2004 total. Foreign sources of funding account for 15.4%, while federal sources weigh in at just 1.8%.

R&D personnel increased roughly in proportion to increases in R&D spending between 2002 and 2004. In 2002, there were 118,278 people engaged in R&D, increasing to 120,220 in 2003 and 126,671 in 2004. In 2004, 76,281 were classified as professions and include 14,108 master's level employees and 5,747 with doctorate degrees. The share of doctorates increased from 2.9% in 2002 to 4.5% in 2004. Technicians account for 34,125 in 2004 while employees classified at "other" numbered 15,265.

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