Study sees stall in Canada’s industrial R&D activity

Toronto, ON – A study of Canadian industrial R&D performance over a 7-year period shows static base of industrial R&D, despite a growth in funds spent on research activity.

Performed by consulting firm Impact Group, the study showed that while the amount of money devoted to R&D in Canada nearly doubled from 1994 to 2000, the total number of companies performing research remained essentially the same. In total, there were 11,132 companies performing R&D in Canada in 1994 and 11,437 in 2000. During a period of unprecedented economic growth, 9 out 10 provinces showed a decline in the number of industrial R&D performers. Only Qubec showed a net gain, increasing the number of companies performing R&D in that province by 34%. Looking at a regional picture, Western Canada lost 26% of its performers, Atlantic Canada was down 37%, and Ontario lost 14%.

Across 46 industry sectors, only 16 increased the number of companies performing R&D, while 30 showed a decline. The 16 posting an increase are both from the high-tech as well as more traditional sectors: computer and related services, scientific and professional equipment, textiles, other services, aircraft parts, electronic parts and components, motor vehicle parts and accessories, rubber products, other utilities, pharmaceutical and medicine, machinery, agriculture, other transportation equipment, electrical power, logging and forestry, primary metals (non-ferrous).

Not all companies perform R&D on a consistent basis. From 1994 to 2000 a total of 25,161 companies performed research. Of that group only 9.4% of companies did research all 7 years, while 34% engaged in R&D activities for only one out of the 7 years. These figures indicate that R&D is an on-going activity in relatively few firms.

The majority of companies performing R&D are small firms (less than 100 employees). In 1994, 87% of all R&D performers were small companies and by 2000 it was 85.8%. Medium-sized firms (100-499 employees) accounted for 8.6% in 1994 and 10.2% in 2000. The large companies (500 or more employees) decreased from 4.4% in 1994 to 4% in 2000. This small drop is significant as large firms spend the lion’s share of R&D dollars. Gaining or losing one large R&D performer has a much greater impact on overall trends and can mask underlying dynamics.

“During the 1990s the policy and business communities delighted in the growth of R&D spending, but failed to notice a pernicious erosion of the base of R&D performers”, says Ron Freedman, author of the study. “A healthy economy needs increasing innovation in all sectors. Our data suggests that two thirds are in decline. To reverse this slide we need to reexamine our current federal and provincial innovation policies and programs.”

The study was funded by a consortium of federal and provincial government departments and agencies concerned with innovation and research. It is a quantitative analysis of trends in industrial research performance based largely on data from Statistics Canada.