Canada’s R&D spending will stagnate this year, likely remain weak in 2010
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RSS FeedFirms across Canada are planning to maintain their research and development (R&D) spending in 2009 at levels essentially unchanged compared to the past two years, according to the most recent survey of business spending on R&D.
Given that R&D spending is discretionary, however, and since this survey of spending is based partly on information collected before Canada felt the full impact of the global financial crisis, it appears likely that firms will be forced to revise their R&D spending plans lower than they previously projected, particularly in hard hit industries like manufacturing,
Having said this, it is worth noting that the share of industrial R&D carried out by manufacturers has also retreated, keeping in line with the general shrinkage in overall manufacturing activity over the past nine years.
Whereas manufacturing accounted for 68.4% of total R&D spending in 2000, its share in 2009 is projected to be just over 50%.
According to Statistics Canada, information and cultural industries have become the most important industrial group carrying out R&D, due to increased spending by software developers on computer game development and Internet access, and on motion picture and sound recording.
From a regional perspective, while the share of R&D in Ontario has shrunk somewhat over the past five years, it continues to account for the lion’s share (48%) of the country’s total R&D spending.
In Québec, the share of total spending on R&D increased from 26% in 2002 to almost 30% in 2007.
British Columbia’s share of R&D spending has jumped from 7% to 10.9%, the sharpest increase of any of the 10 provinces.
In Alberta, relatively strong growth of R&D spending by firms in the oil and gas extraction, manufacturing, and services industries has caused that province’s share of the national total to increase from 5.1% in 2002 to 7.2% in 2007.
Compared to other major industrial countries, Canada is definitely well below average in terms of the percentage of its gross domestic product that it spends on R&D.
Barring a major shift in government policy to stimulate business R&D spending, it will probably remain so over the medium term.
Percent of Gross Domestic Product
Chart: Reed Construction Data - CanaData.
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Canada’s R&D;problem begins with our under performing businesses. The best and brightest will always pursue the best opportunities available to them. That’s partly what it means to be smart. When the cultural differences between Canada and the US diminish, such as under the reign of Obama, then Canada can’t compete unless willing to spend quite a bit more money per capita. Our businesses are typically no more efficient than US, usually less so. The only option is government financed R&D;. This means tax dollars. But there are less tax dollars available because of less efficient businesses. So, this means higher per capita taxes to keep the brains we paid more to educate in the first place. I think, it will take more than cash advances to help R&D;. I hope that it will be reolved