Analysis
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Gross domestic expenditure on research and development
The 2014 publication release of gross domestic expenditure on research and development (GERD) in Canada represents national actual expenditure for 2012; preliminary data for 2013, intentions data for 2014; and, historical data from 2004. This publication also shows research and development (R&D) expenditure by province from 2008 to 2012.
Gross domestic expenditures on research and development (GERD) are often displayed as a matrix of performing and funding sectors. GERD is performance-based, meaning it is constructed by adding together the intramural expenditure on research and development (R&D) as reported by the performing sectors. The funding sectors are derived based on the sources of funds reported by the performing sectors. GERD in Canada has six performing sectors: business enterprise, private non-profit, higher education, federal government, provincial government and provincial research organizations. The funding sectors match the performing sectors with the addition of the foreign sector.
Canada’s anticipated GERD for 2014 is $30.6 billion, a 0.6% drop from 2013. Out of the six performing sectors, only the higher education and the private non-profit sectors are anticipating advances in GERD. Provincial research organizations expect their R&D spending to remain unchanged from the previous year, while the remaining sectors anticipate declines. GERD declined 1.8% between 2012 and 2013.
R&D expenditures by performing sectors
The business enterprise sector has historically been the largest contributing sector to gross domestic expenditures on research and development (GERD). This position is maintained in 2014 where business enterprise spending on R&D is expected to account for half of GERD with $15.4 billion in spending, down 0.9% from the previous year. In comparison, in 2004, business enterprises accounted for 57% of GERD.
The higher education sector’s R&D spending intentions are $12.4 billion and account for 40% of GERD expected spending in 2014, maintaining this sector as the second largest performing sector. In 2004, the higher education sector’s spending on R&D represented 34% of GERD.
The third largest performing sector, the federal government, anticipates R&D spending at $2.3 billion or 8% of GERD, down 6.9% from 2013. This sector’s share of GERD is virtually unchanged from that recorded in 2004.
Compared to 2013, only the higher education and the private non-profit sectors expect to increase their spending on R&D in 2014. Both sectors anticipate R&D expenditures to increase by 1.0% and 5.0%, respectively. The provincial research organizations sector is expected to remain stable while all other performing sectors anticipate decreases in R&D expenditures.
R&D expenditures by funding sector
The business enterprise sector is expected to finance 46% of GERD in 2014 with $14.1 billion. In 2004, the business enterprise sector financed 50% of GERD at $13.4 billion.
The next largest funding sectors are the federal government and higher education, each with about a 20% share of total anticipated 2014 GERD at $5.8 billion and $5.5 billion respectively. The share of funding for these sectors in 2004 was 17% and 16% respectively.
The provincial government sector (including provincial research organizations) is the fourth largest sector in terms of financing R&D with $2.1 billion, a 7% share of GERD 2014 intentions. The foreign sector’s 9% share of GERD in 2004 placed it as the fourth largest funding sector in that year.
Compared to 2013, only the federal government and business enterprise sectors anticipate decreases in funding for R&D in 2014. Both sectors expect R&D financing to drop by 1.9% and 1.1%, respectively. All other funding sectors anticipate increases in R&D expenditures.
R&D expenditures by field of science
Canada’s GERD is comprised of two fields of science: natural sciences and engineering, and social sciences and humanities. Over the last decade natural sciences and engineering has consistently accounted for over 90% of total national expenditure on R&D. It should be noted that all R&D expenditures for the business enterprise sector, the largest performing R&D sector, are undertaken in the natural sciences and engineering field. As a result, most R&D expenditures occur in natural sciences and engineering.
In 2014, R&D expenditure in natural sciences and engineering is expected to be $27.8 billion, down 0.6% compared to 2013. This is in contrast to the record high of $28.8 billion reported in 2011.
R&D spending in the social sciences and humanities are expected to attain a record high of $2.8 billion in 2014, up 0.1% compared to 2013. The majority (90%) of R&D expenditure in this field of science is performed in the higher education sector.
R&D expenditures by province and territory
Provincial and territorial expenditures are assigned to the province or territory in which the performing organization is located. Provincial and territorial funding sector expenditure represent R&D funding distributed in a province or territory. The funds do not necessarily originate from within the province. Data on the provincial distribution of GERD spending are available to 2012.
Ontario has historically the largest share of R&D expenditure. In 2012, this position was maintained with $14.2 billion spent on R&D activity in the province, comprising 45% of the national GERD. Despite this, R&D spending in Ontario was down 1% compared to 2011.
Quebec maintained the second largest share of R&D expenditures in 2012 at 26% of GERD with $8.1 billion in expenditures. Compared to 2011, Quebec’s total share decreased by 2.7 percentage points. The province with the third largest expenditure on R&D in 2012 was Alberta with $3.5 billion. This accounted for 11% of the GERD in 2012, up 5.3 percentage points compared to 2011.
In 2012, the business enterprise sector had the largest share of GERD in Quebec, Ontario, Alberta, British Columbia and the Territories. In Prince Edward Island the business enterprise and higher education sectors tied for the largest R&D expenditure. The largest performing sector for all other provinces was the higher education sector.
R&D spending by funding sector for 2012 shows that the business enterprise sector was the largest funder in Quebec, Ontario, Manitoba, Saskatchewan, Alberta, British Columbia and the Territories. In all other provinces the largest funding sector was higher education with the exception of Prince Edward Island where the federal government was the largest funder.
Canada and OECD countries
Internationally, a country’s gross domestic expenditure on research and development (GERD) as a percentage of its gross domestic product (GDP) is considered an indicator of the country’s degree of R&D intensity and is a commonly used summary statistic for international comparisons. This statistic is also compared with GERD and GDP per capita values as it is influenced by a nation’s economic and demographic structure, as well as its propensity to perform R&D in particular sectors.
The Organisation for Economic Co-operation and Development (OECD) publishes international statistics on R&D in its Main Science and Technology Indicators (MSTI). Their most recent publication contains comprehensive OECD country data for 2012. 1 In 2012, Korea had the largest ratio of GERD to GDP at 4.36, followed by Israel at 3.93 and Finland at 3.55.
In comparison, Canada’s investments in R&D as a percentage of GDP in 2012 was 1.71, 2 ranking lower than the United States’ reported 2.79 and the OECD average of 2.4. Among the G8 countries, Canada ranked sixth, as the United Kingdom reported its GERD to GDP ratio at 1.73 for 2012.
At 1.62, Canada’s 2013 GERD to GDP ratio was the lowest level attained over the past decade.. The lower value indicates that R&D investments in Canada diminished as a percentage of gross domestic product. From 2004 to 2013, GERD increased 15.2% whereas Canada’s GDP increased 42.9%.
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