Innovation Canada: A Call to Action
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Innovation Canada: A Call to Action

Innovation Canada: A Call to Action Innovation Canada: A Call to Action

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Innovation Canada: A Call to ActionBox 2.3 International Comparisons of R&D SpendingCanada is a middle-of-the-pack performer in the OECD with respect to gross domesticexpenditure on R&D (GERD) as a percentage of GDP, ranking 15th in 2008 out of the 31countries for which data are available. Total R&D can be broken down among three principalgroups of performer — business, higher education and government (see also Figure 2.5).In 2008, Canada ranked 18th among 31 OECD countries in respect of business expenditure onR&D (BERD) as a percentage of GDP. (In the figure to the right below, based on 20 comparablecountries in terms of size and degree of development, Canada’s BERD intensity was at thebottom of the third quartile.) At 1 percent of GDP, Canada’s BERD intensity was well below theOECD average of 1.6 percent and, moreover, has declined steadily since the peak of the “techboom” in 2001 (see the figure to the left below). In fact, business R&D spending, adjusted forinflation, has been declining every year since 2006 (Figure 1.1). This trend is both surprising andominous. By contrast, Canada’s higher education sector is a relatively strong R&D performer,ranking fourth in the OECD at 0.68 percent of GDP in 2008, although the trend of this ratio hasbeen fairly flat since 2003. (International rankings fluctuate from year to year and are sensitiveto inevitable inaccuracies in data. General positioning within comparable groups of countriesand trends over time are the more relevant indicators in international comparisons.)The amount of R&D performed by governments in Canada (not to be confused with theamount funded by governments) has been flat to slightly declining as a percentage of GDP formore than 10 years and, at 0.19 percent of GDP in 2008, was well below the OECD average of0.26 percent.BERD Intensity Trends, 1981–2008BERD Intensity of Selected OECDCountries, 20082.52USOECDCanada43.53% of GDP1.51% of GDP2.521.50.5101981 1984 1987 1990 1993 1996 1999 2002 2005 20080.50Source: OECD (2011).IsraelFinlandSwedenJapanKoreaSwitzerlandUnited StatesDenmarkAustriaGermanyAustraliaBelgiumFranceUnited KingdomCanadaIrelandNetherlandsNorwaySpainItaly2-6

The Context of the ReviewIn absolute terms, BERD in Canada is weightedtoward a relatively small number of large firmsin a limited number of sectors. About a third ofBERD is performed by only 25 firms and abouthalf by 75 firms (Statistics Canada 2011).However, while the vast majority of smallerbusinesses throughout the economy do notperform R&D, those that do so tend to be moreR&D intensive than larger firms — that is, theyspend more on R&D as a percentage ofcompany revenue. Statistics Canada’spreliminary data for 2008 indicate that R&Dexpenditure among the largest R&D-performingcompanies (those with revenues exceeding$400 million) represented about1 percent of their revenue, whereas for thesmallest R&D-performing companies (revenueof less than $1 million), the figure was almost40 percent (Statistics Canada 2011).BERD intensities (that is, business R&D as apercentage of GDP) vary widely across sectors,with the most intensive being within the broadmanufacturing sector — particularly computerand electronic products, pharmaceuticals andmedicine, and aerospace products and parts.From a regional perspective, there is alsosignificant variation in BERD intensity (Figure2.3). Ontario and Quebec account for roughly80 percent of Canada’s business R&D (StatisticsCanada 2010b), reflecting the relatively highproportion of R&D-intensive industries such asinformation and communication technologies(ICT), pharmaceuticals and aerospace in thosetwo provinces.Figure 2.3 Provincial BERD Intensities in Canada, 2008(business expenditure on R&D as a percentage of provincial GDP)OECDQuebecOntarioBritish ColumbiaAlbertaNew BrunswickNewfoundland and LabradorManitobaPrince Edward IslandNova ScotiaSaskatchewan0.000.50 1.00 1.50 2.00% of Provincial GDPSource: Statistics Canada (2010b) and OECD (2011).2-7

The Context of the ReviewIn absolute terms, BERD in <strong>Canada</strong> is weighted<strong>to</strong>ward a relatively small number of large firmsin a limited number of sec<strong>to</strong>rs. About a third ofBERD is performed by only 25 firms and abouthalf by 75 firms (Statistics <strong>Canada</strong> 2011).However, while the vast majority of smallerbusinesses throughout the economy do notperform R&D, those that do so tend <strong>to</strong> be moreR&D intensive than larger firms — that is, theyspend more on R&D as a percentage ofcompany revenue. Statistics <strong>Canada</strong>’spreliminary data for 2008 indicate that R&Dexpenditure among the largest R&D-performingcompanies (those with revenues exceeding$400 million) represented about1 percent of their revenue, whereas for thesmallest R&D-performing companies (revenueof less than $1 million), the figure was almost40 percent (Statistics <strong>Canada</strong> 2011).BERD intensities (that is, business R&D as apercentage of GDP) vary widely across sec<strong>to</strong>rs,with the most intensive being within the broadmanufacturing sec<strong>to</strong>r — particularly computerand electronic products, pharmaceuticals andmedicine, and aerospace products and parts.From a regional perspective, there is alsosignificant variation in BERD intensity (Figure2.3). Ontario and Quebec account for roughly80 percent of <strong>Canada</strong>’s business R&D (Statistics<strong>Canada</strong> 2010b), reflecting the relatively highproportion of R&D-intensive industries such asinformation and communication technologies(ICT), pharmaceuticals and aerospace in thosetwo provinces.Figure 2.3 Provincial BERD Intensities in <strong>Canada</strong>, 2008(business expenditure on R&D as a percentage of provincial GDP)OECDQuebecOntarioBritish ColumbiaAlbertaNew BrunswickNewfoundland and LabradorMani<strong>to</strong>baPrince Edward IslandNova ScotiaSaskatchewan0.000.50 1.00 1.50 2.00% of Provincial GDPSource: Statistics <strong>Canada</strong> (2010b) and OECD (2011).2-7

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