Growth in higher ed R&D performance accounts for bulk of increase in GERD

Business R&D remains a concern

Canada's gross expenditures on research and development (GERD) are expected to grow by 4.4% in 2006, with 86% of that increase due to yet another major surge in R&D performance by the higher education sector, according to the latest data from Statistics Canada. Increases in business R&D performance are projected to grow by just 1.3% to $14.85 billion, or just 52.4% of the 2006 total of $28.4 billion - a mediocre showing that is certain to sharpen debate on government efforts to improve Canadian productivity and innovation capacity.

There is near unanimous agreement that business expenditures on R&D (BERD) are critical to improving Canada's productivity. In most industrialized nations, BERD accounts for two-third to three-quarters of the total. And recent data suggest that the commercial opportunities arising from private sector R&D are far more plentiful than those derived from research performed by the higher education sector.

Within business R&D, however, some interesting geographical shifts are occurring. In 2004 (the last year for which provincial breakdowns are available), business R&D increased to $14.4 billion, up 5.6% from the previous year. And while nearly all provinces experienced increases in private sector R&D performance, the highest rates were registered in Manitoba (21.3%), British Columbia (16.2%) and Alberta (12.9%). In contrast, Quebec's share of business R&D increased 3.7% while Ontario inched up 3.0%.

When all sources of R&D are considered, Ontario and Quebec fared considerably better, with Ontario increasing 7.7% in 2004 to $11.7 billion, while Quebec increased by 3.8% to $7.2 billion. They are followed by British Columbia with $2.3 billion, Alberta with $2.1 billion and Manitoba with $519 million. The only jurisdiction where R&D declined was in the national capital region (NCR), dropping 3.9% in 2004 to $960 million.

While Canada's GERD continues to increase, the GDP is growing at an even faster pace, resulting in a drop in the key GERD-to-GDP indicator. After rising above 2% between 2001 and 2004, GERD/GDP dropped to 1.98% in 2005, even though R&D spending was up 4.5%. That is due to the increase in GDP which surged forward 6.2% between 2004 and 2005, from $1,290.8 billion to $1,371.4 billion.

The impact of greater GDP is reflected in the varying rates of GERD/Provincial GDP. Quebec's 2004 ratio is highest at 2.7%, followed by Ontario at 2.3% - levels that are more or less constant over the past five years. Alberta's GERD/PGDP has also remained constant at 1.1% between 2001 and 2004, despite a 27.8% increase in GERD over the same period. BC has seen a 29.0% jump in GERD over the same period, but due to a slower rate of increase in the PGDP, it's GERD/PGDP ratio has increased from 1.3% to 1.5%. Other 2004 GERD/PGDP rates are: Saskatchewan (1.6%), Nova Scotia (1.5%), Manitoba (1.3%) New Brunswick (1.0%) and Prince Edward Island (1.0%).

Higher education continues to be the big story in Canadian R&D, hitting nearly $11 billion in 2006 - triple the level of 1993. In the last year alone, higher education R&D increased 10%.

Other sectors have also shown significant increases. provincial sources of funding reached $1.6 billion in 2006, up 8.2% from a year earlier. Private non-profit organizations have also stepped up funding, increasing 9.7% to $877 million.

Foreign sources of R&D funding continue to account for a large but dwindling share of the Canadian total. In 2006, foreign sources accounted for $2.4 billion or 8.5% of the annual total. That's a far cry from 2000 and the height of the tech boom, when foreign sources poured $3.6 billion into Canadian R&D for 17.4% of that year's total.

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