New StatsCan data estimates show modest gains in industrial R&D spending

Service industries increase overall share

Canadian industrial R&D spending is projected to increase 2.7% in 2007 to $15.8 billion spurred by respectable gains in communications equipment, scientific R&D services, aerospace products and parts and semiconductor and other electronic components. The modest estimated increases reflect cautious optimism across the vast majority of industrial sectors tracked by Statistics Canada and included in its latest industrial R&D survey.

Of the top 26 sectors, 23 project gains and only three are expected to decline while data for one category (electric power) are not available.

The encouraging data come after 2006 when industrial R&D was flat, although it had managed to struggle above the post telecom and dot com bubbles of several years ago. The 2007 upswing is due to increases in current expenditures, which are estimated to jump 3.4% to $14.8 billion. The prognosis for capital equipment spending related to R&D is not nearly as optimistic. It is projected to decline 7% to $927 million from $997 million a year earlier.

The services sector continues to increase its overall share and is projected to account for 42.2% of the total in 2007, up from 38.1% in 2003. In contrast, manufacturing R&D is stagnant and represents a declining share of the total. In 2007, it accounts for 52.7%, down from 58% in 2003.

On a provincial level, Newfoundland displayed explosive corporate R&D growth in 2005 (the last year for which provincial data are available), with spending of $86 million, up 196.6% from 2004. Industrial R&D also rose significantly in Saskatchewan, up 33.9% to $150 million.

Ontario experienced a modest increase in its overall portion to $8 billion in 2005 for a 52% share — up from 51.6% in 2004. That's in contrast to Quebec, where R&D spending is estimated to drop 2.7% to $4.2 billion in 2005 for a 27.2% share (down from 28.7% share a year earlier). Other provinces showing significant gains are: Alberta ($1.1 billion, up 4.2%), British Columbia ($1.4 billion, up 3.6%) and Manitoba ($196 million, up 10.1%).

In addition to boosting R&D spending, firms are also hiring significantly more R&D personnel. In 2005, there were 137,686 full-time equivalents, up 4.9% from 2004.

The greatest increase was experienced among professionals (up 8% to 81,955), including 5,817 with PhDs, 14,515 with Master's degrees and 61,623 with Bachelor's degrees. The number of technicians rose 2.6% to 38,491 while employees classified as ‘other' declined 1.7% to 16,240.

Enforcement of confidentiality rules

Unlike past surveys, the latest edition of industrial R&D contains several sectors for which no data are available (see chart). The suppression of data is due to a recent review of Statistics Canada's confidentiality procedures as they apply to S&T data. For any sectors in which one firm is dominant or in which there are few players, the data have been suppressed to protect their identities.

Review of the data will now be conducted on a regular basis, resulting in ongoing omissions unless more firms are included in currently suppressed categories, or methods can be devised to overcome future restrictions.

StatsCan officials are exploring possible changes to the presentation of R&D data to see whether publishing restrictions can be overcome in certain instances. Possible changes being examined include combining industry categories to allow for their publication without compromising confidentiality.

"These things are not static. Firms come and go, they merge, they go bankrupt," says Dr Fred Gault, director of StatsCan's science, innovation and electronic information division. He says that the combining of categories is "on the table" but adds that the disadvantage of such a change would be less precise R&D figures for specific industry sectors.

R$