fail to close gap with previous high

The darker flip side to the state of Canadian S&T is contained in new data showing continued tepid performance by industrial R&D performers. Coming on the heels of a new expert panel assessment of Canadian S&T that shows world class strength in several key research fields (see page 1), Statistics Canada reports that company spending on R&D remains well below the high-water mark of 2007, registering only modest projected gains in 2012.

Corporate R&D was up $135 million or 0.9% in 2012 to $15.5 billion, following a 1.6% increase in 2011 (downgraded from StatsCan' s projection last year of a 5% hike that year, primarily due to better-than-expected spending in 2010). Industrial R&D peaked in 2007 at $16.8 billion and fell off slightly in 2008 before plunging more than $1 billion or 6.5% in 2009.

Weakness in the manufacturing sector, which drove down corporate R&D outlays during the economic crisis, has yet to fully recover, although it did increase 3.1% in 2012 to $7.6 billion. In contrast, services-related R&D (the second largest category after manufacturing) slipped slightly by 0.2% to $6.8 billion.

manufacturing rebounds

The modest rebound in manufacturing R&D boosts its share of total industrial spending to 49%, up somewhat from its all-time low of 46% in 2008 but well below its commanding 68% share in 2000. Six industrial groupings exceeded the $1-billion threshold in 2012: scientific research and experimental development services ($1.7 billion), communications equipment ($1.5 billion), aerospace products ($1.3 billion), computer system design ($1.3 billion), wholesale trade ($1.3 billion) and information and cultural industries ($1.3 billion). Taken together they account for 54.2% of total projected industrial spending.

A further three industrial categories achieved R&D outlays of $500 million or more: oil and gas extraction ($646 million, down 10.9% from 2011), pharmaceutical and medicine manufacturing ($643 million) and machinery manufacturing ($591 million).

Perhaps the most telling indicator of the troubled fortunes of industrial R&D is personnel. In 2008 nearly 173,000 people engaged in corporate R&D. By 2010 (the most recent year for which data are available), the number of dropped 36,541 or 21.2% to 136,203.

The historical decline in manufacturing R&D has also taken its toll on the share of spending in Canada's two largest provinces. Ontario and Quebec's share fell from 85% in 2000 to 76% in 2010, with the greatest gains occurring in the Prairie provinces (6% to 12%). British Columbia's spending increased from 8% to 11% in the same period while Atlantic Canada doubled its share from 1% to 2%.

Energy-related R&D continues its impressive upward trajectory, reflecting the growing importance of oil and gas extraction and related activities. Spending jumped 11.3% between 2009 and 2010 to $1.5 billion, while fossil fuels technologies were up 7.2% to $928 million.

R$