Data quality, concepts and methodology: Survey methodology

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The 2015 industrial R&D intentions survey

The 2013 Research and Development in Canadian Industry (RDCI) survey collected data for four years to provide estimates of final research and development (R&D) expenditures for 2012, actual R&D expenditures for 2013, planned R&D expenditures for 2014 and R&D spending intentions for 2015. The 2013 RDCI questionnaire was sent in September 2014 and collection scheduled to be closed in January 2015. It was actually closed in February 2015. The RDCI survey mail-out included the supplement survey, Energy Research and Development Expenditures by Area of Technology, 2013.

Population and sample

The survey population comprised:

•all firms that had reported R&D expenditures in 2010, 2011, or 2012 reference year surveys;

•firms with an approved claim for a federal R&D income tax incentive for 2010, 2011, 2012 or 2013;

•firms that were identified by respondents in surveys of government science and technology activities as R&D contractors or grantees for 2013 to 2014;

•firms that were reported by other firms as funding or performing R&D in the prior collection cycle; and

•firms identified as funding or performing R&D in 2013 or 2014 through newspaper, journal articles or publicly available directories.

The population of R&D performers and funders comprising 17,235 enterprises in 2013 was then stratified into a frame composed of 55 industry groups that covered the entire business sector. Industrial non-profit associations and business joint ventures are included in the business enterprise sector. Entities in the household, government, higher education and private non-profit sectors are excluded.

Text table 1

RDCI frame and sample

For reference year 2013, thresholds of R&D spending were applied to reduce the numbers of firms reporting R&D only in prior years, but not the reference year. This was done to reduce the number of respondents surveyed who no longer perform or fund R&D (i.e. out of scope).

Sample for reference year 2013

A sample of 1,947 enterprises, which was converted into 2,008 responding units, was selected from the frame consisting of the following groups:

  1. A "must take" stratum consisting of special entities such as industrial non-profit organizations, technology purchasers or vendors, and known R&D performers that do not file Scientific Research and Experimental Development (SR&ED) tax incentive applications. These special entities were all selected to be included in the sample because there are no other sources of data available for them. Industrial non-profit organizations are not eligible for tax incentives while some commercial firms opt not to make a claim.
  2. The "take all" stratum comprises the largest R&D performers in each of the industrial groups. These large R&D performers represented about two-thirds of R&D expenditures in each of the specified industry groups for the previous reference year. All units in this stratum were included in the sample.
  3. The "take some" stratum is composed of mid-size R&D performers in each of the specified industry group. A sample of units from this stratum was included in the sample.
  4. A coverage study stratum containing 50 firms, which reported having R&D expenditures in a cross-economy pre-contact survey, but which were not otherwise part of the current RDCI frame, was added to the sample. The firms selected comprised 15 small firms in the manufacturing sector, 10 large firms in the manufacturing sector, 15 small firms from outside the manufacturing sector and 10 large firms from outside the manufacturing sector. The size of the firms was determined by their revenues. First, firms with less than $100,000 in revenues were excluded. Then the 75th percentile of revenue was calculated for both the manufacturing sector and for all firms outside the manufacturing sector. Businesses with revenues under the 75th percentile were “small” and those with revenues over the 75th percentile were “large”. Units that were in-scope contributed to the estimates and will be included in the survey frame for future collection cycles.
  5. A "take none" stratum comprised of the smallest R&D performers, those firms whose total R&D expenditures comprised the bottom 5% of all R&D expenditures in each industrial group, was created to reduce response burden. Firms in the "take none" stratum were excluded from the sample.

Of the 1,947 units sampled, there were 49 industrial non-profit organizations.


Collection in reference year 2013 continued the use of two features introduced in 2010. Firstly, a failed-edit follow-up platform enabled follow-up for records that had missing or inconsistent data. Secondly, respondents were given the option of completing internet-based electronic questionnaires. These questionnaires contained some interactive edits, but all of these records received the same treatment as the data received through paper questionnaires.

Survey response

For reference year 2013 RDCI the survey response rate was 75%, (respondents / (total survey population – out-of-scope respondents)). These units accounted for 70% of the overall estimate. For the industrial non-profit component of the sample the response rate was 96% with the responding units accounting for 99% of the overall estimate.

Following data collection, survey responses are processed for tabulation and data analysis.


The RDCI database is comprised of two sources of data: questionnaire data and administrative data from Canada Revenue Agency (CRA). These administrative data consist of approved Scientific Research and Experimental Development (SR&ED) tax claims, which are also known as "T661" or "Schedule 32" claims. The SR&ED tax data are received for unique Business Numbers (BNs). The questionnaires are also collected at the same level. The Business Register, a list of all known active businesses in Canada, provides a link between these BNs and the establishments, companies and enterprises to which they relate.

Where data are available from both questionnaires and SR&ED tax records for a given company (BN) the questionnaire data are used. This is because firms need not disclose all R&D expenditures in their T661 application. They may choose to report only selected R&D projects. There are also certain capital expenditures (land and buildings for R&D) which are included in the survey questionnaire, but are excluded from the SR&ED tax incentive program. Generally, the values reported through the survey response should be greater than or equal to the SR&ED tax data. Conceptually, there should be no cases where the reverse occurs.

Data from the RDCI questionnaires, the SR&ED tax data and the Energy R&D questionnaires were reviewed for consistency and completeness. The data editing process is presented according to sequence of activities followed.

Pre-grooming of data

In the pre-grooming stage of processing, edit checks are performed to identify missing and invalid entries that would point to data records that are in error. Extreme errors resulting from processing were identified in the tax and questionnaire data. An example of an error in the tax data is an extremely high R&D expenditure value that could be the result of data capture error. Very few such errors were identified. Any record identified was corrected manually.

Missing classification information (completeness)

For the 2013 survey cycle, over one hundred SR&ED approved tax records were not classified to a North American Industry Classification System (NAICS) group. These records were manually assigned a NAICS code.

All RDCI and Energy R&D records were verified to ensure they had a postal code in order to assign them to a province.

Data editing

Editing is a process to ensure that survey data are acceptable, complete, consistent and correct. There are three main categories of edits: validity, consistency and distribution edits. Validity and consistency edits are done one record or questionnaire at a time. However, distribution edits are performed by looking at data across questionnaires.

Validity edits

Validity edits identify incoherence in the data. Examples of validity edits include:

•Respondents reporting intramural R&D performance with no R&D personnel;

•Wages and salaries for R&D which are greater than the firms total wages and salaries;

•Units of measure issues (U.S. vs. Canadian dollars, dollars vs. thousands of dollars)

Consistency edits

Consistency edits verify the relationships between questions. Consistency edits may also be applied to the logical flow of the questionnaire, or may involve the use of administrative data or historical data. These types of edits typically verify relationship between questions.

For the RDCI, some examples of consistency edits are:

•Wages and salaries and other current costs on R&D performed should equal total current costs;

•Total current costs at Canada level should equal the total current expenditures reported for provinces and territories;

•The total R&D expenditures reported for Canada should equal the total sources of funds for R&D performed;

•Total R&D expenditures should match the total for all fields of science;

•Total R&D personnel should likewise be the same across all questions.

Distribution edits

A question on the RDCI allows for the distribution of values for expenditures and personnel across provinces, while another new question allocates expenditures and personnel across science types. Expenditures are also allocated across sources of funding. These distribution questions are edited to identify outliers which are then validated.

Imputation methods employed in RDCI survey

It is not usually possible to resolve all records in error during the pre-grooming stage. Imputation replaces items that fail the edit rules to fix partial non-response or total non-response.

Imputation for RDCI uses the following data sequence:

•Actual respondent estimates from the prior year for planned expenditures;

•SR&ED tax data;

•Random ratio donors anchored to historical data.

Deterministic imputation

Deterministic imputation is done as part of the editing process. It is generally specified as action items to be performed using logic decision tables. In deterministic imputation only one value is deemed possible. Deterministic imputation is generally of the form A+B=C. An example would be 'total professionals + total technical and administrative staff = total R&D personnel.

Imputation by substitution

Imputation by substitution involves the use of an external data source. An auxiliary data source such as historical data or administrative data is used for missing data. For the RDCI, COA4 (explained below) and PD7 (explained below) files were used to impute revenues and employment data. The T661 (Scientific Research and Experimental Development) tax credit applications were used as an alternate data source that was treated as respondent data.

For SR&ED tax filers, revenue figures were adjusted to reflect corporate income tax data for the corresponding filer. The tax data are from T2 corporate income tax files which are mapped to the Statistics Canada’s Chart of Accounts (COA) classification by firm. The variable COA4 relating to (Total) Revenues of a firm was used to improve data quality for missing or inconsistent total revenues.

The Payroll Deductions total employment data (PD7) file was also used to improve the quality of missing or inconsistent total employment data. Payroll Deduction data are monthly data, and therefore, an annual average was calculated from the Canada Revenue Agency (CRA) monthly Payroll Deduction file for all firms that reported having one or more employees in at least one of the twelve months of the tax year.

Imputation method based on estimators

Imputation method based on estimators generally refers to the use of ratios based on historical data or other variables on the questionnaire. To estimate R&D expenditures two years past the base year, editing rules were applied using donor ratios and a response was imputed based on the response of a similar firm in the same industry group. Data are modeled using mathematical formulae.

Donor records for imputation were determined by imputation class, which were defined by population subgroups, NAICS group and size. Size was determined by total R&D expenditure (total intramural and extramural expenditures) which was used to group enterprises. For the suite of RDCI surveys, the following imputation methods were employed: deterministic imputation, substitution, and use of estimators.

For example, a firm reported $1 million for total intramural R&D expenditures for the reference year (RY) and did not report expenditures for RY+1 and RY+2. To impute for RY+1 and RY+2 periods, a donor is found within the industry group and size category. If the donor reported a 5% increase in the first year and no change from that estimate in the second year, the missing record would be imputed the following values:

1,000,000 anchor
1,050,000 imputed value
1,000,000 imputed value

Limits on the expenditure ratio from the donor are applied such that the maximum shift between RY and RY +1 and RY and RY +2 does not exceed 20%.

Also, during the data processing stage, there is a need to create projected records to account for tax data which have not been received to date. Under the current tax regulations, firms must file their application to the SR&ED program within 18 months of expenditure. Once claims are submitted, they are processed, approved and the final approved claims are forwarded to Statistics Canada. As a result, data may not arrive for up to two years after the expenditures were incurred and occasionally longer. To address the situation, the imputation system projects existing records forward in time. As the actual administrative data arrive, these imputed records are removed from the database and replaced with the actual tax data. This imputation system confirms the firm is active using Statistics Canada's Business Register, and then applies an imputation based on industry trends. Since the imputation does not seriously influence overall trends, the R&D data are published as soon as possible after the survey is conducted, and are subject to minor revisions in subsequent publications.

The SR&ED tax data records do not have all of the detail that is found on the questionnaire. For certain portions of the questionnaire, the detail for the tax records is imputed. This is principally in the regard to planned and forecast expenditures, the level of education of the R&D personnel and the provincial distribution of R&D expenditures. For the expenditures and personnel imputation, ratios from respondents are applied to anchor variables that are available from the SR&ED tax data to impute detail. For provincial distribution, information about the structure of the enterprise is obtained from the Business Register. For simple records, the expenditures are assigned to the province from which the claim was filed. For more complex enterprises, the current R&D expenditures and personnel are allocated based on the ratios of revenues by province within the enterprise’s establishments across Canada. Capital R&D expenditures are allocated to the province with the largest amount of current expenditures.

Data verification

Following the completion of the edit and imputation process, data are verified and are compared against previous years' estimates.

A general verification of components to totals and totals across the RDCI questionnaire is conducted as a first step after imputation. Values are confirmed to add up correctly and to confirm that the classification variables (NAICS, employment and revenue) exist for each record and are found reasonable, a review of the R&D micro data follows.

For the Reference Year (RY), an industry by province table is compared to the results with the published data from the previous years. Extra scrutiny is paid to the largest contributors.

For RY+1 and RY+2, patterns in the imputation of the SR&ED tax records and incomplete questionnaires are reviewed.

At this stage, verification of data is to examine and understand the underlying data and to be able to account for changes. Records are again verified for the main R&D variables by industry group and by province. The largest records for each province and industry group are reviewed to understand what underlies changes to the estimates.

Sources of errors


Coverage errors consist of omissions, erroneous inclusions, and duplication in the frame used to conduct the survey. Survey questionnaires were sent to all known large R&D performing and/or funding firms i.e., those believed to have the largest R&D expenditures within their industry group. If a firm has never responded to the survey and does not apply for T661 tax credits, it can only be identified for the survey by mention in the media or through reporting as a recipient or source of funds from an R&D survey for other sectors (examples: government, private non-profit). Firms are added to the frame based on such a review of other sources.

Administrative data are used for the remaining R&D performing or funding firms which are not included in the questionnaire coverage. Firms have up to 18 months after their fiscal year end to file a Scientific Research& Experimental Development tax incentive program claim for their R&D expenditures.

Errors in classification, notably industrial and geographical, are also possible and would have coverage impacts within their specified categories.


Non-response errors occur when there is no response to one or all of the survey questions. Non-response leads to an increase in variance as a result of a reduction in the actual size of the sample. Imputing for non-response may produce a bias if the non-respondents have characteristics of interest that are different from those of the respondents.

Non-response is a concern in a couple of areas. One is the estimate of R&D expenditures two years past the base year (planned and forecast R&D expenditures). Non-response is an issue for this question as some firms are hesitant to estimate likely expenditures. If no response is provided, editing rules are applied and a response is imputed based on the response of a similar firm in the same industry group. Mitigation of non-response for this question consists of specific training of data collection staff to understand the importance of these data and to be able to explain their importance to respondents.

The second issue involves the use of SR&ED tax data for the remaining R&D performers. These data represent approximately one-third of all R&D performed by businesses by value. The SR&ED tax records do not contain as much information as those from the questionnaire. The data not contained on the tax form are imputed based the respondent data from questionnaires, based on the imputation criteria specified previously.

Non-response is generally addressed through imputation. Automatic imputations are made for the SR&ED tax data population as well as for non-response and invalid response within the questionnaire portion of the sampled population.

Response errors

Response errors occur when the response provided differs from the real value; such errors may be attributable to the respondent, the interviewer, the questionnaire, the collection method or the respondent's record-keeping system.

Processing and data capture

Processing errors occur at subsequent stages of the process, when checking, coding, entering, imputing, and tabulating data.

Processing errors are monitored and controlled using quality control techniques. Detailed examination is performed on numerous tables and listings as part of data validation and analysis before publication tables are created.


Sampling errors occur when the sample is not representative of the population. As the RDCI is a census there are no sampling errors.

Comparisons with other data sources

Discrepancies between federal government reporting of funds to industry (the business enterprise sector) for R&D and industry's reporting of such funds may exist as a result of different interpretations of the character of R&D. For example, a federal government department may regard a contract to industry for the building of a prototype (e.g., communications satellite) as R&D. The contractors and subcontractors, however, may only use a portion of the R&D contract. It may even be reported in a different fiscal period. This activity may not be reported at all because the contract is considered as part of the firm's "routine" contract work. Differences may also arise for contracts awarded to industry for services or equipment required for a government in-house project which are reported by the federal sponsor as industrial R&D contracts. Therefore, the totals for R&D grants and contracts from the federal government to industry shown in this publication may not agree with those reported in Federal Science Activities, 2013/2014, (Catalogue no. 88-204-X).

Industrial Classification

The RDCI survey is designed to reflect respondents as they are classified on the Business Register and the structure of the firm as it reports its R&D activities (including reporting R&D expenditures for the SR&ED tax incentive program). As a result, a firm can only be assigned to one industry although that firm may be engaged in activities in several industries. The assignment is based on the activity from which the firm derived the greatest portion of its value added.

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 unit of measure for most economic production surveys is the establishment. In the case of the RDCI, the unit of measure is the enterprise, which may include a number of establishments. Differences in the unit of measure, therefore, may make comparison between the RDCI and economic production surveys difficult.

The economic importance of activities undertaken by enterprises can vary from year to year due to changes in market conditions, for instance, in the relative importance of wholesaling, manufacturing and scientific research and development services undertaken by the enterprise. 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 can shift between natural resources and manufacturing industries.

Those 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).

Industrial R&D personnel estimates

There are two sources of data for the industrial R&D personnel estimates: questionnaire estimates for firms covered by the Research and Development in Canadian Industry (RDCI) survey; and administrative data taken from final approved Scientific Research and Experimental Development (SR&ED) tax incentive program claims. Where data are available from both sources, respondent data from the questionnaire are used.

Users are advised that there are differences in the data collected from the two sources of industrial R&D personnel data. The two most important differences are outlined below.

First, the SR&ED tax incentive program claims for R&D personnel are not revised through the review cycle of the claims. Therefore, the final approved claims, which may have had projects denied, will contain the estimated number of R&D personnel from the original claim. Statistics Canada performs data coherence exercises on the supplied SR&ED R&D personnel data using relationships between wages and salaries to estimated number of R&D personnel, reviewing other current costs combined with wages and salaries to estimated number of R&D personnel and relationship of number of R&D personnel to total employment of the claimant.

Second, the SR&ED tax incentive program claims do not collect R&D personnel by level of education. Therefore, for the total universe data are imputed based upon response to the RDCI survey. The data quality for imputation of industrial R&D personnel by level of education for all industries is acceptable. Users are cautioned that industrial R&D personnel data by level of education, by industrial detail, and/or by provincial distribution are subject to suppression for quality reasons.


Quality indicators are provided based on the impact of imputation on the estimate. These indicators are as follows:

Text table 2

Quality indicators

Confidentiality programs are also applied to ensure that the release of data conforms to Statistics Canada policy on confidentiality.

Technical notes

Data availability

Data for the reference year 2013 are available for all tables with the exception of counts of firms.

In the even years prior to 1982 and for 1992 and 1994, the estimation procedures did not permit the preparation of tables based on revenue size, employment size, sources of funds and country of control of firms.

Regional data on research and development (R&D) expenditures and personnel are only available for 1977, 1979 and 1981 to 2013.


The following terminology is used within the publication:

Performing company: is the organization which carried out the R&D. In the case of a consolidated return, performing company could include several companies. It also includes divisions of an enterprise which send separate returns or organizations such as industrial non-profit organizations.

Related companies: Includes parent, subsidiary and other affiliated companies. In the case where a consolidated return is submitted, "related companies" would exclude companies included in the consolidation.

R&D contracts for other companies: R&D contract work performed by the reporting company for other companies.

Federal grants: Federal R&D grants and the R&D portion of any other federal grants; it excludes funds or tax credits from R&D tax incentives.

Federal contracts: Federal R&D contracts and the R&D portion of any other federal contracts.

Provincial sources: Provincial R&D grants and contracts, and the R&D portion of any provincial grants and contracts; it excludes funds or tax credits from R&D tax incentives.

Other Canadian sources: Includes funds from universities and from levels of government other than federal and provincial.

Intramural expenditures: Expenditures for R&D work performed within the reporting company, including work financed by others.

Current intramural expenditures: Labour costs, fringe benefits and other current costs for R&D, including non-capital purchases of materials, supplies and equipment but excluding capital depreciation. Current intramural expenditures also include contracts for services required to carry out R&D (e.g. contracts awarded for drilling needed for heavy oil R&D).

Capital expenditures: Expenditures on fixed assets used in the R&D program, classified into land, buildings, and equipment.

Revenues: Revenues resulting from the sale of products and services (after deducting sales and excise taxes), and other revenues such as those generated from investment and rentals.

Non-commercial firms: R&D performers without a directly affiliated Canadian commercial base. Included are industrial non-profit organizations and trade associations, R&D performed by consortia, and R&D performed by non-residents without associated commercial enterprises and funded principally from abroad.

Country of control: In most cases of foreign control, the country of control is the country of residence of the ultimate foreign controlling parent corporation, family, trust, estate or related group. Each subsidiary within the global enterprise is assigned the same country of control as its parent. A corporation whose voting rights are equally owned by Canadian-controlled and foreign- controlled corporations is Canadian-controlled. If two foreign-controlled corporations jointly own an equal amount of the voting rights of a Canadian resident corporation, the country of control is assigned according to an order of precedence based on their aggregate level of foreign control in Canada. For example, United States takes precedence over all other foreign countries because it has the highest level of aggregate foreign control in Canada.

R&D personnel: Calculated in full-time equivalent (FTE). R&D may be carried out by persons who work solely on R&D projects or by persons who devote only part of their time to R&D, and the balance to other activities such as testing, quality control and production engineering. To arrive at the total effort devoted to R&D in terms of person-years, it is necessary to estimate the full-time equivalent of these persons working only part-time in R&D.

Professional personnel: are researchers or R&D managers. They can be either scientists or engineers. Researchers are professionals engaged in the conception or creation of new knowledge, products, processes, methods and systems and also in the management of the projects concerned. Managers and administrators engaged in the planning and management of the scientific and technical aspects of a researcher's work also fall into this category.

Scientists and engineers: Are professionally trained to conduct investigations or enquiries to acquire a theoretical, abstract or practical knowledge of physical and natural phenomena, improve or develop concepts, theories and operational methods, or apply scientific and technological knowledge relating to fields such as physics, astronomy, meteorology, chemistry, geophysics, geology, mathematics, statistics, computing, architecture, engineering and technology.

Senior administrators and managers: Managers and administrators engaged in the planning and management of the scientific and technical aspects of a researcher's work also fall into this category.

Technical and administrative support personnel: Technicians and equivalent staff are persons whose main tasks require technical knowledge and experience in one or more fields of engineering, physical and life sciences. Other supporting staff includes skilled and unskilled craftsmen, secretarial and clerical staff participating in R&D projects or directly associated with such projects. Both technical and administrative support personnel work to directly support the activities of researchers.

Technicians and technologists: Technically trained personnel who assist scientists and engineers in R&D, e.g. chemical technicians, draftspersons. They may be certified by either provincial educational authorities or by provincial or national scientific or engineering associations.

Other administrative support: Personnel directly engaged in the R&D program, e.g. machinists and electricians in construction of prototypes, or clerks, typists, accountants and storekeepers engaged in the administration or clerical support of R&D firms.

Full-time equivalent (FTE) = number of persons who work solely on R&D projects + estimate of time of persons working only part of their time on R&D.

Example calculation:

If out of four scientists engaged in R&D work, one works solely on R&D projects and the remaining three devote only one quarter of their working time to R&D, then: FTE = 1 + 1/4 + 1/4 + 1/4 = 1.75 scientists.

Federal government funds for industrial R&D: Federal support consists of grants and contracts for R&D to be performed by business enterprises. Taxes foregone as a result of income tax incentives for R&D are not considered direct government support and are not attributed to the federal government.

Industrial classification

North American Industry Classification System (NAICS) is the standard industrial classification system used for presenting R&D expenditures data for the business enterprise sector. There are limitations to its use. One important limitation is due to firms with activities in more than one industry (e.g., firms which both refine petroleum and extract oil). Another is caused by the concentration of the R&D activity among a few firms. In order to prevent disclosure of individual respondents NAICS codes may be combined to provide sufficient observations for publication.

A third problem is that the classification, chosen to represent general industrial activity, may not be entirely suitable for identifying firms chosen only for their involvement in R&D.

There are some restrictions on the application of the NAICS, for example, large R&D performing firms that are classified as "holding companies" are assigned to the principle industrial activity of the firm.

The R&D activities of other sectors such as the federal government, provincial governments, higher education, and private non-profit organizations are covered in other reports.


Research and development

For the purpose of this survey, research and development (R&D) is systematic investigation carried out in the natural and engineering sciences by means of experiment or analysis to achieve a scientific or technological advance.

Research is original investigation undertaken on a systematic basis to gain new knowledge.

Experimental development is systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed to producing new materials, products or devices, to installing new processes, systems and services, or to improving substantially those already produced or installed.


The investigation of electrical conduction in crystals was research. The application of this knowledge to the creation of a new amplifying device - the transistor - was development. The application of the device to the construction of new electrical circuits for television receivers was development. The formulation of new plastic cases for a television receiver is design, not development.

Research and development may be carried out either by a permanent R&D unit (e.g., R&D division) or by a unit generally engaged in any non-R&D activity such as engineering or production. In the first case, the R&D unit may spend part of its time on routine testing or trouble shooting or on some other activities which should not be included in R&D. In the second, only the R&D portion of such units' total activity should be considered.

Research and development should be considered to be "scientific research and experimental development" as defined in Section 37, Regulation 2900 of the Income Tax Act; this section specifically excludes the following:

  1. market research, sales promotion,
  2. quality control or routine analysis and testing of materials, devices or products,
  3. research in the social sciences or the humanities,
  4. prospecting, exploring or drilling for or producing minerals, petroleum or natural gas,
  5. the commercial production of a new or improved material, device or product or the commercial use of a new or improved process,
  6. style changes, or routine data collection


Although the definition of "scientific research and experimental development" is considered to be the same as R&D, certain expenditures for scientific research cannot be claimed for income tax purposes (e.g., land, building). All expenditures attributable to R&D are included in this report.

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