Industrial research and development characteristics, 2016 (actual), 2017 (preliminary) and 2018 (intentions)
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Released: 2018-08-28
In-house industrial research and development actual and intention expenditures remain stable
In-house industrial research and development (R&D) spending was relatively unchanged in 2016 at $18.1 billion, compared with expenditures of $17.9 billion in 2015. Companies in Canada projected spending $17.6 billion on in-house industrial R&D in 2017 and $17.9 billion in 2018.
In-house R&D performance remained stable in the two largest R&D performing sectors, the services-producing industries and manufacturers. Companies in the services-producing sector accounted for over half of all in-house industrial R&D expenditures in 2016 at $10.3 billion. The other major industrial sector, manufacturing, performed just over one-third ($6.5 billion) of in-house industrial R&D in 2016.
Sectors related to agriculture, natural resources, utilities and construction all contributed to the rest of the spending on in-house industrial R&D. Among this group, R&D activities conducted by the oil and gas extraction industries were expected to continue falling, from $628 million in 2016, to $223 million in 2017, and then to $198 million in 2018. The reductions reflect the impact of lower oil prices that began in 2015, along with other challenges faced by the industry.
Current and capital in-house R&D spending unchanged
Current in-house R&D expenditures were $17.0 billion in 2016, and capital in-house R&D expenditures totalled $1.1 billion, both unchanged from 2015.
Wages and salaries continued to account for two-thirds ($11.3 billion) of current in-house R&D spending. Other current costs, such as R&D materials, services to support R&D and all other current costs, decreased from $5.9 billion in 2015 to $5.7 billion in 2016.
Chart 1
In-house research and development expenditures in Canadian industry
In-house R&D spending by telecommunications and data processing, hosting, and related services industries grows
Current in-house R&D expenditures on telecommunications and data processing, hosting and related services increased by 49.5% in 2016 to $1.1 billion. The majority of this increase came from expenditures on wages and salaries, which rose from $516 million in 2015 to $879 million in 2016.
Companies operating in the sector also increased their capital expenditures on in-house R&D, rising from $61 million in 2015 to $133 million in 2016. This industry group comprises companies primarily engaged in providing telecommunications and/or video entertainment services over their own networks, or over networks operated by others, as well as providing the infrastructure for data processing, hosting and related services.
The growth was offset by lower in-house R&D expenditures by firms operating in the finance, insurance and real estate and rental and leasing industries.
Foreign-controlled firms continue to account for more than one-third of in-house R&D spending
Foreign-controlled firms continued to account for more than one-third of in-house industrial R&D spending, with expenditures remaining constant from 2015 to 2016 at $6.7 billion.
In-house industrial R&D spending related to software increases
Overall, natural sciences and engineering represented 99.0% ($18.0 billion) of in-house R&D expenditures in 2016.
Meanwhile, software engineering and technology accounted for 27.7% of in-house R&D spending in 2016. In-house R&D expenditures by firms operating in these fields increased 15.2% to $5.0 billion in 2016, corresponding to growth in the telecommunications and data processing, hosting and related services industries.
Companies performing in-house R&D in other engineering and technologies reduced spending from $1.1 billion in 2015 to $883 million in 2016.
Medical and health sciences industrial in-house R&D spending remained relatively stable at $1.7 billion in 2016, representing 9.5% of total in-house R&D expenditures. Companies in sectors such as pharmaceuticals and pharmacy supplies merchant wholesalers; pharmaceutical and medicine manufacturing; and R&D in the social sciences and humanities are responsible for the majority of R&D spending in this field.
For a second consecutive year, in-house R&D spending in social sciences and humanities increased, rising from $30 million in 2015 to $44 million in 2016.
Spending on outsourced R&D activities continues to increase
Canadian companies continued to increase the amount of outsourced R&D spending, from $4.0 billion in 2015 to $4.4 billion in 2016. Private sector firms were the main recipients of this increased spending, with expenditures on outsourced R&D increasing to $3.8 billion in 2016. Additionally, the amount of outsourced R&D expenditures to universities increased 14.2% to $273 million in 2016. R&D outsourced to government organizations decreased from $58 million in 2015 to $25 million in 2016.
Canadian-controlled firms allocated over two-thirds ($2.2 billion) of their expenditures on outsourced R&D to organizations within Canada in 2016, while foreign-controlled firms outsourced 58.2% ($647 million) to companies operating in Canada.
Companies in Canada intend to continue their current level of outsourced R&D spending, as they planned to spend $4.2 billion in 2017 and $3.9 billion in 2018.
Chart 2
Total outsourced research and development expenditures in Canadian industry
Overall decline in R&D personnel
While in-house R&D spending on wages and salaries was relatively unchanged from 2015 to 2016, the total number of R&D personnel declined from 162,368 full-time equivalents (FTEs) in 2015 to 141,286 FTEs in 2016.
The number of R&D technicians and support staff decreased by over 20%, from 59,770 FTEs in 2015 to 46,804 FTEs in 2016. Scientists, social scientists, engineers and researchers also decreased in terms of FTEs, falling from 95,577 in 2015 to 87,883 in 2016.
Services-producing companies provided employment to 63.3% of R&D personnel in 2016, while manufacturers provided employment to 33.6%, similar to the proportions of in-house R&D expenditures in these sectors.
The number of on-site contractors working on R&D activities in Canadian industry decreased from 7,020 FTEs in 2015 to 6,600 FTEs in 2016. This decline corresponds to lower spending on services to support R&D (including spending on on-site personnel hired to perform specialized project-based R&D work under supervision and direction of the contracting organizations) also observed in 2016.
Note to readers
These data are subject to revision.
Research and development
Research and experimental development (R&D) comprise creative and systematic work undertaken in order to increase the stock of knowledge—including knowledge of humankind, culture and society—and to devise new applications of available knowledge.
In-house R&D expenditures
In-house R&D expenditures refers to expenditures within Canada for R&D performed within the company by employees (permanent, temporary or casual) and self-employed individuals who are working on-site on the company's R&D projects. The term can be used interchangeably with intramural expenditures.
R&D research activities
There are three types of R&D activities. Basic research is defined as experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. Applied research is original investigation undertaken to acquire new knowledge. It is, however, directed primarily towards a specific, practical aim or objective. Experimental development is systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge, which is directed to producing new products or processes or to improving existing products or processes.
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