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Industrial R&D spending intentions

Spending on industrial research and development (R&D) is anticipated to be $15.6 billion in 2013, down 2.8% from $16.1 billion in 2012. Industrial R&D spending increased from 2010 to 2012 but remains below its pre-recession peak of $16.8 billion in 2007 and above the previous peak of $14.3 billion in 2001 during the “tech bubble” (table 1 and CANSIM 358-0024).

Industrial R&D spending has been slow to rebound from the 2008-2009 financial crisis. In particular, it has taken large firms with 1,000 or more employees performing R&D until 2011 to return to levels of R&D performance similar to 2007. R&D spending data by size measures such as employment (table 5-19), revenue (table 5-18) and R&D expenditure groups (table 5-14) are available to 2011, the survey reference year.

Medium-sized R&D performing firms, with 100 to 999 employees, had not regained their 2007 R&D peak by 2011. While R&D spending by large R&D performing firms contracted by $1 billion dollars or 13.4% between 2008 and 2009, the R&D spending by small R&D performing firms with less than 100 employees increased their R&D performance by 8.0% or $378 million.

Industrial distribution of R&D spending

Manufacturing remains the leading R&D-performing sector, accounting for 47% of the total in 2013, or $7.3 billion. However, manufacturing’s share of total industrial R&D has declined from 68% in 2000 to 50% in 2007, and since 2008 has accounted for less than 50% of industrial R&D (CANSIM 358-0024). Total R&D expenditures by the manufacturing sector peaked in 2001 at $9.2 billion.

Two manufacturing industries intend to spend more than $1 billion on R&D in 2013: communication equipment, $1.4 billion, and aerospace products and parts, also $1.4 billion. These two industries have long been significant R&D performers, but their relative share of R&D has shifted. In 2001, communications equipment accounted for 22% of total industrial R&D performed at $3.2 billion; aerospace products and parts at $949 million accounted for 7%.

The next largest R&D performing industry groups within the manufacturing sector are machinery manufacturing, with spending intentions of $618 million in 2013, and pharmaceutical and medicine manufacturing, $508 million (CANSIM 358-0024).

The service sector follows closely behind manufacturing, accounting for 45% of R&D expenditures, valued at $7.1 billion in 2013. Expenditures for R&D in the service sector increased rapidly from $2.9 billion in 1999 to $6.1 billion in 2004, peaking at $7.5 billion in 2008. The growth between 1999 and 2004 was primarily due to rapid increases in R&D expenditures in three industry groups: scientific research and development services, which increased from $264 million to $1.2 billion during that interval, information and cultural industries whose R&D expenditures increased from $257 million to $1.3 billion and computer systems design and related services, which increased from $593 million to $1.2 billion. The later peak in 2008 was due to an increase in R&D expenditures in wholesale trade, which increased from $976 million in 2007 to $1.4 billion in 2008 (CANSIM 358-0024).

In 2013, R&D performance in the service sector is concentrated in four industry groups. Scientific research and development services industry holds the largest share of anticipated R&D expenditures, $1.9 billion. Three other service industry groups each intend to spend more than $1 billion on R&D: computer systems design and related services, $1.3 billion; wholesale trade, $1.3 billion; and information and cultural industries, $1.2 billion. Those four industry groups account for 81% of R&D spending intentions by businesses in the service sector in 2013 (CANSIM 358-0024).

R&D expenditures for mining and oil and gas extraction accounted for 6% of total R&D spending each year from 2008 to 2012; in 2013, this sector is expected to account for 5%. For 2013, the agriculture, forestry, fishing and hunting, utilities and construction sectors account for the remaining 3% of industrial R&D expenditures.

The overall distribution of industrial R&D spending was stable from 2008 to 2012: only the mining and oil and gas extraction sector saw volatility in R&D spending (table 5-1 and CANSIM 358-0024). Since 2000, the share of industrial R&D performed by mining, oil and gas has tripled; the share for construction has doubled. In the service sector, the share of total industrial R&D has increased from 28% to 45%. The shares of industrial R&D spending by the remaining two sectors, agriculture, forestry, fishing and hunting and utilities have remained stable over this period.

Current and capital R&D expenditures

Total R&D expenditures are composed of two components: current and capital expenditures.

R&D capital expenditures can change from year to year. These expenditures comprise the purchase of land and buildings for R&D, as well as regular expenditures for machinery and equipment. R&D capital expenditures have declined as a share of total R&D expenditures in recent years, from a high of 11% in 2001 to 6% in 2013 (table 7 and CANSIM 358-0024).

Current intramural expenditures for R&D comprise wages and salaries and other current costs. In 2013, wages and salaries constitute the largest component of current intramural expenditures (64%), or 60% of total R&D expenditures (CANSIM 358-0024).

Other current costs for R&D can include non-capital purchases of materials required to support R&D activities; security costs; and the costs of on-site consultants, who were not employees of the firm but were performing R&D at the performing firm's facilities. Materials include reference materials, such as books, journals and subscriptions to libraries, scientific societies, costs of developing prototypes or models made outside the reporting firm, materials for laboratories as well as administrative and other overhead costs. Other current costs comprise the remaining 34% of total R&D expenditures in 2013.

In 2013, the share of the components of total R&D expenditures varies by sector. Wages and salaries are expected to comprise 56% of total R&D expenditures in the manufacturing sector but 69% in the service sector. In the mining and oil and gas extraction sector, wages and salaries are anticipated to account for 20% of total expenditures.

The share of other current costs — current intramural expenditures aside from wages and salaries — ranged from 49% in mining and oil and gas extraction to 17% in construction. Other current costs accounted for just over 40% for manufacturing and 25% in services, the two key sectors (CANSIM 358-0024).

Capital expenditures as share of total R&D varied significantly by industry sector. In the mining and oil and gas extraction sector, capital expenditures will account for 31% of total R&D expenditures. In manufacturing, the share will be 3%, the lowest of all sectors, and in the service sector, 5% (CANSIM 358-0024).

Concentration of R&D expenditures

Over the past 25 years, the share of total industrial R&D performed by the firms with the largest R&D expenditures has declined. The share of the top 25 R&D performers has declined from 48% in 1989 to 33% in 2013. The share of the top 100 has declined similarly, reflecting the changes seen with the top 25 R&D performers (table 4).

Among the provinces, Ontario accounted the greatest share of total intramural expenditures, 48% or $7.7 billion, in 2011, the most recent year for which provincial data are available. Businesses in Ontario also increased their R&D performance compared with 2010. Quebec had the second highest share of R&D performed, 29%, with almost no change in the dollar amounts, $4.7 billion in both 2010 and 2011. In 2011, the Atlantic provinces, except Prince Edward Island, had lower industrial R&D expenditures. In Western Canada, Manitoba and Saskatchewan posted small increases in industrial R&D spending while Alberta and British Columbia had small declines (table 5-2 and CANSIM 358-0161).

Since 2000, the share of R&D performed in Central Canada — Quebec and Ontario — has declined from 85% to 78%. The Atlantic and the Prairie provinces saw strong increases in their shares of R&D from 2005 to 2009. British Columbia’s share of industrial R&D increased from 2007 to 2010 (CANSIM 358-0161).

R&D personnel

The number of personnel performing R&D was 140,423 in 2011, an increase of 0.1% from 2010 (table 8-4 and CANSIM 358-0024).

R&D personnel are classified into three categories: professional, technicians and other. ’Professionals’ are researchers such as scientists and engineers or R&D administrators. ’Technicians’ includes technicians and technologists, trained personnel who assist scientists and engineers in R&D. ’Other’ R&D personnel consist of administrative support staff who are directly engaged in the R&D activities. Of the R&D personnel in 2011, 93,443 were classified as professionals, 37,912 as technicians and 9,067 as other R&D personnel.

The number of R&D personnel increased steadily from 104,707 in 2000 to a peak of 172,744 in 2008, dropping from 2008 to 2010 and then remaining nearly unchanged in 2011. Professionals (scientists, engineers and R&D administrators) have seen little change in their numbers. Technical support staff numbers declined from 52,075 in 2008 to 37,912 in 2011; other support staff numbers declined more than 50%, from 22,282 in 2008 to 9,067 in 2011 (table 8-4 and CANSIM 358-0024).

In 2011, 54% of total R&D personnel worked in the service sector. Manufacturing was the second largest employer of R&D personnel, with 41% of the total. Each of the remaining sectors (agriculture, forestry, fishing and hunting; mining and oil and gas extraction; utilities; and construction) represented 1% of all R&D personnel (table 8-1 and CANSIM 358-0024).

Within the service sector, the industry groups with the largest shares of R&D personnel were computer systems design and related services, 13%; and scientific research and development services, 11%. R&D personnel levels were highest in the following manufacturing industry groups: communications equipment, 6%; machinery, 5%; and aerospace products and parts, 4% (table 8-3 and CANSIM 358-0024).

The highest share of professional R&D personnel was found in communications equipment (91%) and petroleum and coal products (90%). Technicians made up the largest portion of R&D personnel in printing (50%) and mining (49%). Pharmaceutical and medicine manufacturing, at 22%, had the highest share of other support staff to total R&D personnel (table 8-3 and CANSIM 358-0024).

Since 2000, the number of R&D personnel has declined in the manufacturing sector, from 61,160 to 58,164 in 2011. Meanwhile, R&D employment has grown in the service sector, from 40,277 to 75,583 over the same period.

From 2000 to 2011, five manufacturing industry groups had declining shares of R&D personnel: communications equipment, from 15% in 2000 to 6% in 2011; aerospace products and parts, from 6% to 4%; semiconductors and electronic components as well as navigational, measuring, medical and control instruments, each from 5% to 3%; and pharmaceutical and medicine manufacturing, from 4% to 2%.

Shares of R&D personnel increased in the major R&D-performing industry groups in the service sector. Wholesale trade accounted for 4% of total personnel in 2000 and 7% in 2011; information and cultural industries, 4% in 2000 and 9% in 2011; scientific research and development services, 4% and 11%. The largest R&D performing industry group in terms of personnel, computer systems design and related services accounted for 13% in both 2000 and 2011.

Sources of funds for research and development (R&D) performance

Industrial R&D can be funded from a variety of sources, both public and private. Public sources comprise federal grants and contracts and provincial government sources. Private sources comprise the performing companies, related companies and research contracts for other companies or private non-profit organizations. Sources of funds such as bank loans or venture capital investment are included in the reporting company’s funds. Other Canadian sources include universities and individuals. As well, industrial R&D can be financed from foreign sources, both public and private.

The business enterprise sector (86%) provided the majority of industrial R&D funding in 2011 (table 5-15). For 2011, industrial R&D performers received 10% of their funding from foreign sources. Funds from the federal government accounted for 3% of R&D financing; provincial governments, 1%. The remainder came from ‘other’ sources (table 5-16).

While manufacturing (85%) and services (77%) self-financed the majority of their R&D performance in 2011, foreign sources are these sectors’ second most important source of funds (table 5-16).

Field of science or technology

Data on field of science and technology are now available for total R&D expenditures and personnel from 2009 to 2011.The four major fields of science or technology are natural and formal sciences; engineering and technology; medical and health sciences; and agricultural sciences. Data on detailed fields of science or technology within the major fields are also available. (Table 5-20 and CANSIM 358-0140)

The field of science or technology information is coded according to classifications provided in the Frascati Manual (Table 3.2) and following directions provided by the Canada Revenue Agency (CRA) in the Guide to Form T661 (Appendix 1), T4088 (E) Rev. 12. For full definitions, please refer to the CRA’s website

Respondents to the RDCI are asked to indicate in which field of science or technology they performed R&D. There is no restriction to the number of fields of science or technology for which respondents can provide R&D expenditures and personnel information. For the CRA purposes, only the main field of science or technology for each R&D project is assigned.

The engineering and technology major field of science or technology accounted for the largest share of R&D spending in 2011, at 76% (or $12.1 billion) of industrial R&D spending intentions. Within three detailed fields of science or technology more than $2 billion worth of R&D was performed: electrical engineering, electronic engineering and information technology, $3.2 billion; mechanical engineering, $2.7 billion; and software engineering, $2.5 billion. The other three major fields of science or technology comprised natural and formal sciences with R&D expenditures of $1.9 billion, medical and health sciences at $1.7 billion and agricultural sciences at $290 million.

The four detailed fields of biotechnology—medical biotechnology, environmental biotechnology, industrial biotechnology and agricultural biotechnology — performed $429 million worth of R&D in 2011. More than three-quarters of the biotechnology total, $335 million, was spent in medical biotechnology (table 5-20 and CANSIM 358-0140).

Field of science or technology by industry group

Some industry groups performed R&D in fields of science or technology that are closely associated with their industrial classification. For example, pharmaceutical and medicine manufacturing ($517 million) firms performed R&D that was mostly in medical and health sciences ($394 million), followed by biological sciences at $91 million. Similarly, the agriculture industry group performed $112 million worth of R&D that was largely related to agricultural sciences ($89 million) (CANSIM 358-0140).

However, the detailed fields of science or technology also illustrate the diversity of R&D activities performed within industry groups. For instance, in 2011, the oil and gas extraction industry group ($839 million) led with environmental engineering as its largest field of science or technology, at $403 million (CANSIM 358-0140).

The field of science or technology data enable a profile of the R&D activities within scientific research and development services. Within this industry group’s $2.0 billion R&D expenditures in 2011, $753 million were in electrical and electronic engineering and information technology; $195 million in software engineering; and $190 million in other engineering and technologies. This industry group also performed $514 million of R&D in the medical and health sciences major field in 2011.

Another of the leading R&D performing industry groups, wholesale trade ($1.4 billion) in 2011, directed $538 million to R&D in the medical and health sciences and $674 million engineering and technology major fields; in the latter, the largest shares were devoted to electrical, electronic engineering and information technology and mechanical engineering.

Energy R&D

Energy-related R&D rose 15.2% from 2010 to 2011, from $1.5 billion to $1.7 billion. Fossil fuels R&D continued as the largest share of energy-related R&D, $1.2 billion in 2011, up 17.5% from $995 million in 2010 (table 13 and CANSIM 358-0214).

Other technologies at 8% or $132 million surpassed renewable energy (6% or $106 million) as the second most significant area of energy-related R&D in 2011. Other energy-related technologies include R&D in carbon capture, energy systems analysis and other technologies. The amount spent on these energy-related R&D technologies was up 48.3% from 2010 (table 13 and CANSIM 358-0214).

R&D expenditures on energy efficiency also rose, from $58 million in 2010 to $85 million in 2011; renewable energy R&D declined from $117 million to $106 million. Nuclear fission and fusion R&D increased slightly from $62 million to $68 million. Hydrogen and fuel cells R&D decreased from $64 million to $35 million. Research on technologies related to electric power increased from $76 million to $91 million (table 13 and CANSIM 358-0214).

Technology payments

Research and development is an intellectual property product. Intellectual property is a form of creative endeavour that can be protected through a patent, trademark, copyright, industrial design or integrated circuit topography. Also included in technology payments are technical assistance, industrial processes and know-how. Intellectual property can be accessed by paying for permission from those who hold recognized claims, mostly patents, copyrights and trademarks. Expenditures for use of intellectual property totalled $751 million in 2011, of which expenditures for patents represented the largest share, $439 million. Most of the remaining expenditures were for technical assistance, industrial processes and know-how, $284 million (table 12 and CANSIM 358-0212).

Payments received were substantially greater than expenditures, amounting to $1.3 billion. Payments received for patents and technical assistance, industrial processes and know-how accounted for the vast majority of the total (table 12 and CANSIM 358-0212).

Technology expenditures and payments

The technology expenditures and payments estimates are taken only from firms that respond to the Research and Development in Canadian Industry survey. The statistics are not available from Scientific Research and Experimental Development tax incentive program data and estimates do not include imputation for administrative data.

Intellectual property rights related to previously performed R&D are included in these technology expenditures and payments. These statistics are not intended to represent all trade in intellectual property rights or informal technology assistance services. For instance, the Research and Development in Canadian Industry survey may not include all firms dedicated to the licensing, buying or selling of patents or firms deriving some of their revenues from these activities which have never previously performed or funded R&D

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