Analysis

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Businesses performing industrial research and development (R&D) anticipated spending $14.8 billion (in current dollars) in 2010 down slightly from 2008, which marks the generally-accepted date of the start of the global financial crisis.

The 2008 downturn of the global financial markets is echoed in the industrial R&D spending, which saw a decrease of $852 million, or a 5.1% decline, from 2007.

Current intramural expenditures for industrial R&D include wages and salaries and other current expenditures. On average, wages and salaries continue to represent about 60% of current intramural R&D expenditures.

In 2008, the most recent year for which counts of R&D personnel are available, R&D activities provided employment to 158,926 full-time equivalent (FTE) positions, an increase of 15% in research effort from five years previously (138,213 FTE positions).

Industry Classification of Research and Development (R&D) Enterprises

In 2010 five industries are anticipated to exceed $1 billion dollars in R&D expenditures. The scientific research and development services industry estimates investing $1.6 billion, followed by the communications equipment industry at $1.3 billion, the wholesale trade industry at $1.2 billion, the computer system design and related services industry at $1.1 billion, and information and cultural industries at $1.1 billion. Together these industries are expected to represent 43% of total industrial R&D spending.

The industrial classification of firms performing R&D is annually updated based upon the North American Industry Classification System (NAICS) code indicated on Statistics Canada's Business Register, the master frame for business sector surveys. About 100,000 businesses are reviewed annually for NAICS updating – and if their industry classifications change then the industrial distribution of R&D also changes.

The Research and Development in Canadian Industry (RDCI) surveys enterprises. An enterprise is defined as a business unit that directs and controls the allocation of resources relating to its operations, and for which consolidated financial and balance sheet accounts are maintained. The activity with the most economic weight or importance determines the NAICS code that Statistics Canada assigns to the enterprise.

The economic importance of activities undertaken by enterprises can vary year to year due to changes in market conditions, including commodity price changes that may affect the value of an enterprise's revenues or exchange rate changes that may affect the value of an enterprise's import costs or export revenues.

Industries illustrating movements between NAICS codes due to changes in the influence of activities include pharmaceuticals. From year to year, the most important economic activity of these enterprises can move among pharmaceutical and pharmacy supplies wholesaler-distributors (NAICS 414510), pharmaceutical and medicine manufacturing (NAICS 325410) and scientific research and development services in the physical, engineering and life sciences (NAICS 541710).

Enterprises with economic activities related to fossil fuels, specifically oil and gas and their refined products also often show movement between NAICS codes. For example, enterprises performing R&D can move between oil and gas extraction (NAICS 2111) and petroleum and coal product manufacturing (NAICS 3241).

Sources of Funds for Industrial Research and Development (R&D)

Funding for industrial R&D comes from a variety of sources: from within the company; from the federal government; from foreign sources (which include intra-corporate transfer by multi-national corporations); and "other" sources (which include funds from provincial governments, higher education institutions and private non-profit organizations).

Overall, the same pattern of financing of industrial R&D continued for 2008 with the majority (79% or $12.5 billion) of funding coming from within the performing firms themselves. Industrial R&D performers received 13% or $2.0 billion from foreign sources, with the federal government funding 2% or $292 million and the remainder of funds coming from other sources.

Provincial Distribution of Industrial Research and Development (R&D)

In 2008 industrial R&D spending continued to be highest in Ontario, where it amounted to $7.6 billion, or 48% of the national total, and in Quebec, at $4.6 billion or 29% of the total. Remaining provincial R&D expenditures in descending order follow: British Columbia (which includes the three Territories) at $1.5 billion (9.8%); Alberta $1.5 billion (9.4%); Manitoba $160 million (1.0%); Saskatchewan $132 million (0.8%). Together the four Atlantic provinces made up the remainder of $317 million (2.0%).

Provinces varied with respect to the industrial sectors performing R&D. In British Columbia and the Territories, R&D in the services sector exceeded R&D performed in the manufacturing sector. This was also the case for the first time in 2008 for Quebec.

In Manitoba, Ontario and the Atlantic provinces, manufacturing remained the leading sector for R&D performance, although the share for the services sector continued to be a close second to manufacturing.

Alberta alone reported the largest share of its industrial R&D in the resource sector.

Counts of Industrial Research and Development (R&D) Performers

The counts of industrial R&D performers are available to 2007. The number of firms performing R&D in Canada continues to grow, reaching 22,314 in 2007.

R&D firms can perform their R&D in multiple locations and therefore can be counted in more than one province. For 2007, the count of R&D performers including those making R&D expenditures in more than one province was 23,429. Based on location of the R&D performance, the majority of R&D performers are located in the two central provinces, Quebec 8,899 (38%) and Ontario 9,372 (40%). There were 824 (3.5%) R&D performers in the Atlantic provinces; 423 (1.8%) in Manitoba; 267 (1.1%) in Saskatchewan; 1,372 (5.9%) in Alberta; and 2,272 (9.7%) in British Columbia and the Territories.