Data Check: Canadian business lags behind in R&D investment

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The Conference Board of Canada recently reported on this country’s innovation record, with Canada ranking thirteenth of the sixteen countries considered. While Canada got a grade of “B” for public spending on research and development (R&D), Canadian business got a “D” for its efforts and ranked second from last.
The report observes that Canadian business expenditures on (R&D) as a proportion of gross domestic product fell from 1.29 per cent in 2001 to 0.89 per cent in 2011. The decline over this period appears more dramatic, as 2001 was the peak year of business investment relative to GDP. It was more “normal” for the rate of expenditure in the first half of the decade to be around 1.15 per cent, until 2006.
Since then, the rate of business investment in research and development has fallen by over 20 per cent. That decline has occurred despite an increase in the government support to business R&D in the form of direct funds and tax breaks. After taking into account direct funding and federal tax expenditures through the Scientific Research and Experimental Development Investment Tax Credit, the decline in “net” business expenditures on R&D fell by almost 30 per cent between 2006 and 2011.
So who carries the R&D load in Canada? Publicly funded universities produce the majority of new knowledge and innovation in the country. Without robust university research output funded through public investment, Canadian innovation will stall.
Sources: Conference Board of Canada, How Canada Performs
Finance Canada, Government of Canada Tax Expenditures (2011 and prior)
Statistics Canada, Spending on research and development, 2012

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