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Industrial research and development, 2004 to 2008

In 2008, research and development (R&D) expenditures are expected to show a slight growth of $157 million to reach $16.3^E billion, in current dollars (table 1-1).

The six leading industries performing R&D in 2008 are expected to remain unchanged from 2007. Together, information and cultural industries ($1.7^E billion), communications equipment ($1.6^E billion), scientific research and development services ($1.4 billion), computer system design and related services ($1.1^E billion), pharmaceutical and medicine ($1.1 billion), and aerospace products and parts ($0.9 billion) will represent almost half (48.2%) of all industrial R&D to be performed in 2008 (table 1-1).

The manufacturing sector will continue to account for over half (53%) of all industrial R&D performance in 2008, although its share will be down from 2004 (55%) (table 1-1).

R&D spending intentions for 2008 indicate that industrial R&D performed by the health sector ($1.6 billion) is expected to represent 10% of total industrial R&D in 2008 down from 12% in 2004 (table 1-2). The pharmaceutical and medicine industry will account for two-thirds (67%) of the industrial R&D spending in the health sector in 2008 (table 1-2).

R&D expenditures by the information communication technology sector, comprised of a number of industries, are expected to reach $6.2^E billion in 2008 or 38% of total industrial R&D spending intentions (table 2).

The largest enterprises have historically performed the greatest share of industrial R&D in Canada. When size is measured by the revenues of the firm, the share of industrial R&D performed by those firms with $400 million or more in revenues is expected to increase from 42% in 2004 to 45% in 2008 (table 1-12). When size is measured by the number of employees the picture is similar. Firms with 2,000 or more employees accounted for 33% of all industrial R&D performed in 2004 and are anticipated to account for 35% in 2008 (table 1-13).

Estimates for industrial R&D spending distributed by province are now available to 2006.

Industrial R&D spending in 2006 was highest in Ontario, where it amounted to $8.0 billion, or 50% of the total, and in Quebec spending hit $4.6 billion, or 28% (table 1-3).

Newfoundland and Labrador has experienced rapid growth in industrial R&D performance between 2002 and 2006, from $22 million to $88 million in constant dollars. Industrial R&D expenditures in Prince Edward Island have also experienced rapid growth moving $4 million in 2002 to $12 million in 2006, in constant dollars (table 1-3).

For New Brunswick, industrial R&D expenditures in constant dollars went from $62 million in 2002 to $90 million in 2006. For the same period in real terms, Alberta saw its industrial R&D expenditures move from $782 million to $1.1 billion, while Saskatchewan went from $112 million to $148 million and British Columbia and Territories increased from $1.1 billion to $1.4 billion. Industrial R&D expenditures in constant dollars for Manitoba went from $155 million in 2002 to $163 in 2006 whereas in Nova Scotia, R&D spending in 2002 stood at $93 million in 2002 and was almost unchanged at $94 million in 2006 (table 1-3).

Provinces varied considerably with respect to the types of industries performing R&D. These variations can be attributed to the differences in their respective economies overall.

British Columbia was unique in that 63% of its industrial R&D was performed by firms in the service sector – the only province to report a majority performed by this sector (table 1-11).

Ontario and Manitoba reported similar distributions of R&D in 2006, with manufacturing accounting for just over 60% and services just over 35%, and the other sectors making up the remainder. The difference between these two provinces lies in the changes in these distributions since 2002. In Ontario, manufacturing firms dropped from 69% of all industrial R&D performed in 2002, while in Manitoba its share rose from 56% (tables 1-7 and 1-8).

The distribution of industrial R&D in Quebec and Atlantic was similar to Ontario and Manitoba, but the share performed by manufacturing was somewhat lower and correspondingly, the share performed by firms in service industries was somewhat higher than in Ontario and Manitoba. For Quebec and Atlantic Canada the share performed by manufacturing firms was 53% and 55% respectively, and for services industries firms it was 42% and 39% respectively (tables 1-5 and 1-6).

Source of funds information for industrial R&D spending estimates are now available for 2006.

Funding for R&D performed by businesses can come from a variety of sources: from within the company, from the federal government, from foreign sources (which includes intra-corporate transfer by multi-national corporations) and “other” which includes funds from provincial governments, higher education organizations and private non-profit organizations.

Overall, 78% of all funding for industrial R&D came from within Canadian businesses. Industrial R&D performers received 15% of their funding from foreign sources. Funds from the federal government account for less than 2% and the remaining funds come from “other” sources (table 3).

There are different levels of reliance on sources of funding for R&D by firms in various sectors. The two largest sectors, manufacturing and services, report similar but not identical funding profiles.Manufacturing relies on internal Canadian sources for 82% of funding, while the corresponding figure for the service sector firms is 73%. The remainder in both cases is composed primarily of foreign sources of funds (table 3).

Industrial R&D personnel information is now available for 2006.

Firms performing R&D in Canada in 2006 employed the equivalent of 148,813 full-time personnel. This represents an increase of 25.7% over 2002 (table 4).

Of the 148,813 full-time equivalent employees engaged in R&D in 2006, 87,577 had a university degree. This was a 19.6% increase in degree-holding researchers from the 73,202 in 2002. The number of R&D support personnel, while lower in number, increased more rapidly with a 35.6% change between 2002 and 2006 (table 4).

The category of research employee that changed the most was degree-holding researchers with a Master’s degree, with a 53.4% increase between 2002 and 2006 (table 4).

The nature of research and development activities for 2006 are now available.

Research and development, as defined by the Frascati Manual, comes in three main varieties: basic research, applied research and experimental development. Basic research is focussed on discoveries of new knowledge of underlying phenomena, without consideration of how this knowledge could be used in practice. Applied research, as the name implies, is research that is more focussed on a specific practical purpose or application. Experimental development is typically “closest to the market”, that is, work that is focussed on adapting scientific discoveries to a very particular application, typically a new or significantly improved product or process.

Emphasis on the type of R&D typically varies by reporting sector with universities and non-profit laboratories most focussed on basic and applied research. Businesses, by contrast, tend to do more experimental development work. The proportion of R&D performed by Canadian business that was experimental development has remained stable from 2002 to 2006 at 83% (table 5).

About half of all experimental development R&D focussed on the development of new products and another quarter focussed on the improvement of existing products (table 5).

The proportion of activity which is basic research in 2006 was 5%, while activities in applied research were 13% (table 5).

The counts of R&D performers are available to 2005.

The number of firms performing R&D in Canada continues to show signs of growth, reaching 19,087 in 2005.

R&D firms can perform their R&D in multiple locations and therefore can be counted in more than one province. For 2005, the count of R&D performers including those making expenditures in more than one province was 19,435. Based on the location of the R&D performance, the majority of R&D performers are located in the two central provinces, Quebec 7,739 (40%) and Ontario 7,484 (39%). There were 637 (3%) of R&D performers in Atlantic Canada, 403 (2%) in Manitoba, 224 (1%) in Saskatchewan, 1,167 (6%) in Alberta and 1,781 (9%) in British Columbia and the Territories.