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Scientific research and development services: Profile of a young and dynamic industry
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by Julio Miguel Rosa, SIEID, Statistics Canada
The scientific research and development services (SRDS) industry is arousing growing interest among analysts and researchers.1 This interest is due in part to the industry's major contribution to total industrial expenditures on research and development (R&D) in Canada.
About this article
Background
Findings
Summary
About the author
About this article
This article uses data from the Research and Development in Canadian Industry (RDCI) Survey. More information about this survey is available here.
For more results about firms in the scientific research and development services industry, see the forthcoming /cgi-bin/IPS/display?cat_num=88F0006X&CHROPG=1.
Background
In 2003, the scientific research and development services industry generated more than $922 million in R&D expenditures, the fourth highest in Canadian industry. The R&D expenditures of this industry accounted for almost 7% of total R&D expenditures in Canadian industry.
Many research activities and leading-edge technologies are related to the scientific research and development services industry. Enterprises whose principal activity consists of performing research and development in the physical sciences, genetics, biotechnologies, mathematics, life sciences, demography, etc. are classified under the North American Industry Classification System (NAICS) 5417:
NAICS definitions
5417 – Scientific Research and Development Services
This industry group comprises establishments primarily engaged in conducting original investigation, undertaken on a systematic basis to gain new knowledge (research), and in the application of research findings or other scientific knowledge for the creation of new or significantly improved products or processes (experimental development).
541710 – Research and Development in the Physical, Engineering and Life Sciences
Includes:
Laboratories conducting research in biotechnology, entomology, genetics,
engineering, mathematics, medicine, life sciences, physical sciences,
bacteriology.
541720 – Research and Development in the Social Sciences and Humanities
Includes:
Research and development services in behaviour, demography, cognitive development, education, economic
studies, humanities, social sciences, archaeological sites, excavations, sociology.
Exclusions
Research and development activities performed by establishments belonging to enterprises whose primary activity is classified under another NAICS code, such as aerospace. Also excluded are laboratories performing clinical, medical and diagnostic analysis tests or veterinary tests.
Findings
An industry whose R&D expenditures have grown substantially since 1997
It is not surprising that since 1997, the scientific research and development services industry has experienced a significant and rapid increase in the number of performers and R&D expenditures. Between 1997 and 2003, the number of enterprises performing R&D in the industry nearly tripled, going from 264 in 1997 to 675 in 2003, an average annual growth rate of 14%. Over the same period, R&D expenditures went from $211 million in 1997 to $922 million in 2003, an advance of annual growth rate of 34%.
Chart 1
Research and development (R&D) expenditures and number of enterprises in the Scientific R&D Services industry, 1997 to 2003
A young and dynamic industry
The number of new enterprises in the scientific research and development services industry becoming active from one year to the next more than offset the number of enterprises ceasing their research activities. In part, these new enterprises explain the growth of expenditures in the industry. In 2003, 188 enterprises performed R&D that were not active in 2002. Not much more than half that number (122 enterprises), were performing, but were no longer active in 2003 (Table 1).
Table 1 Number of enterprises entering and exiting the scientific R&D services industry, 1998 to 2003
Start-up enterprises2 accounted for a major share of the industry's activities. In 2003, 44% of enterprises in the scientific R&D services industry had revenues lower than their R&D expenditures. Even so, these enterprises accounted for 57% of total R&D expenditures in the industry (Table 2).
Table 2 Contribution of start-up enterprises to total for the scientific R&D services industry, 1997 to 2003
The share of start-up enterprises grew from 36% in 1997 to 44% in 2003.
Summary
The scientific R&D services industry has seen rapid growth in its expenditures and the number of R&D performers since 1997. This industry is dynamic, as seen not only by the increase in new R&D performers but also by the major contribution of start-up enterprises in terms of R&D expenditures and jobs devoted to R&D.
About the author
Julio Miguel Rosa is with the Science, Innovation and Electronic Information Division (SIEID) at Statistics Canada. For more information about this article, please contact sieidinfo@statcan.gc.ca.
Notes
- Statistics Canada is currently conducting an exploratory project including several studies on understanding the classification system and the characteristics of activities in the scientific research and development industry.
- A start-up enterprise is defined as an enterprise whose revenues are less than or equal to its total R&D expenditures. Such an enterprise has probably not yet reached a sufficient production scale to generate a profit on the investment in R&D. It therefore appears reasonable to consider such a firm as a young or start-up enterprise.
