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Canada’s innovation gap remains, new report finds

Investment in R&D as a share of GDP has steadily declined since 2001, mainly due to low business R&D expenditures, says expert panel.

By BRIAN OWENS | APR 12 2018

Canada has maintained its strong performance in research and education but is falling ever further behind in industrial R&D, innovation and wealth creation, according to a new report on the state of science and technology in the country by an expert panel for the Council of Canadian Academies.

“Canada’s trajectory is all wrong compared with peer nations,” said Max Blouw, the former president of Wilfrid Laurier University and chairman of the expert panel that wrote the report. “Canada simply isn’t investing at the same level, or shifting its investment as quickly, as other countries.”

According to the report, investment in R&D as a share of GDP has steadily declined since 2001, mainly due to low and declining business R&D expenditures, and lags well behind the OECD average. Canada would need to more than double expenditures to reach an R&D intensity on a par with leading countries.

Scientific research remains a strength in Canada. The population has the highest level of educational attainment in the OECD, though the number of PhD graduates per capita remains lower than some peer nations. Between 2009 and 2014, the country produced 3.8 percent of the world’s research publications – ranking ninth in the world, down from seventh in the 2012 edition of the report after being leap-frogged by India and Italy. However, if you measure publications by population, Canada does slightly better, ranking fifth in the world (see graph below). And, Canada has maintained its international standing in measures of research impact. Both its average relative citation ranking and place on a research reputation survey remained unchanged, at sixth and fourth place respectively.

Hover over the graph to see the numbers in more detail.

Source: Council of Canadian Academies. “Competing in a Global Innovation Economy: The Current State of R&D in Canada.” Appendix data.

Canada has several areas of strength, including clinical medicine and public health, environmental science, and the humanities and social sciences – in particular, psychology and philosophy. But research output is lower than expected in the natural sciences and engineering, which produce the “enabling and strategic technologies” that drive the modern economy, said the report. Even in areas where Canadian researchers played a major role in early research, such as artificial intelligence and regenerative medicine, Canada has lost ground to other countries.

“Our research strengths are not as aligned with the modern economic activity and promise as we would like,” said Dr. Blouw. “We haven’t pivoted as much as some other countries.”

However, Catherine Beaudry, a member of the expert panel and holder of the Canada Research Chair in the Creation, Development and Commercialization of Innovation at Polytechnique Montréal, argues that our strength in the social sciences is a real plus for the country. “The new fields we’re developing – like AI and regenerative medicine – need to have their social impacts measured,” she said.

As with fundamental science, Canada’s industrial strengths tend to lie in less R&D-intensive areas. “Our industrial fabric has lots of low- and medium-tech companies,” said Dr. Beaudry. Roughly half of the country’s industrial R&D spending is in high-tech sectors such as aerospace or pharmaceuticals, compared with the G7 average of 80 percent.

And even the lower-tech, resource-based sectors that have traditionally made up much of Canada’s industrial R&D base are declining. The oil and gas sector “has declined so dramatically we no longer list it as a strength,” said Dr. Blouw.

But the main problem is not that Canadians, or Canadian companies, are not innovative. There are strong links between academia and business, the educational system is producing lots of highly skilled graduates in STEM subjects, venture capital is readily available, and start up companies are flourishing in many regions across the country. “Earlier reports suggested that Canada was not good at innovation,” said Dr. Blouw. “But we are. We have lots of good ideas and start ups. What we’re not good at is wealth creation.”

The reasons for this are complex, said Dr. Blouw, but a lack of managerial skills and experience in growing firms, and R&D tax credits that are aimed more at smaller firms than large ones, are significant contributors. A high rate of foreign acquisitions of small Canadian companies means that the wealth created from Canadian inventions is often amassed overseas. Canada is a better place to start a technology company than to grow one, the report concludes.

This year’s federal budget, which included a large increase for basic science, was good news, said Dr. Blouw, but is not likely to fix the issues causing Canada’s innovation deficit. “We’re doing well in terms of people and infrastructure,” he said. “The underinvestment in the business sector is really what we need to look at.”

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