State of the Nation 2010

2. Tracking Progress in Canada's Innovative Performance — 2010 vs. 2008

The State of the Nation 2008 report underlined that all participants in the innovation system have a role to play in strengthening the system. In the last two years the profile of productivity and innovation issues has risen significantly in public discourse. The media have given innovation issues sustained attention. Major industry organizations like the Canadian Chamber of Commerce,1 the Canadian Manufacturers & Exporters,2 and the Canadian Council of Chief Executives and initiatives such as the Coalition for Action on Innovation in Canada3 have deepened consideration of innovation by business. Organizations such as the Public Policy Forum, the Conference Board of Canada, the Canadian Science Policy Centre, the Institute for Competitiveness and Prosperity, and the Federal Partners in Technology Transfer have engaged other players in the innovation system. Participants in the innovation system are mobilizing, building new paths to innovation and prosperity.

There have been some significant developments in key areas noted in the Science, Technology and Innovation Council's State of the Nation 2008 report, which include:

Talent — developing a highly qualified workforce attuned to innovation opportunities

Young Canadians continue to perform well in international rankings of reading, math and science skills. The latest results from the Organisation for Economic Co-operation and Development's (OECD) Programme for International Student Assessment (PISA) show either sustaining or slightly declining raw scores, but Canada remains in the top tier of performers (Section 6.3.1). More Canadian students are enrolling in undergraduate science, engineering and mathematics programs (Section 6.3.5). More Canadians are enrolling and graduating from science-based doctoral programs, but other countries remain higher in terms of doctoral-level graduates per million population (Section 6.3.8). Canada also has higher unemployment levels for science-based doctoral-level graduates than other OECD countries (Section 6.3.10).

Knowledge Development and Transfer

Since 2008, more was done to focus on research priorities and conduct research at international levels of excellence. The first recipients of the Canada Excellence Research Chairs were announced. The chairs reflect the STIC research and development sub-priority areas disseminated in 2008. The first Vanier (Canada Graduate) Scholarships Program doctoral students were named and the new Banting Postdoctoral Fellowships Program was launched (Section 6.3.13). Canada's granting councils — Canadian Institutes of Health Research, Natural Sciences and Engineering Research Council of Canada, Social Sciences and Humanities Research Council of Canada — have used the sub-priorities to inform a number of their own programs. Competitions for Networks of Centres of Excellence have utilized the sub-priorities as a key requirement.

Knowledge transfer to business was improved since 2008 by strengthening internship programs (Section The launch of the Government of Canada's Research and Development Review Expert Panel in October 2010 marked a commitment to examine knowledge transfer issues in a more comprehensive way. The panel is to report in autumn 2011.

Business Innovation

Total financial resources for research and development (R&D) in Canada as a percentage of GDP decreased from 2006 to 2008. Most of the world's innovating nations increased resources for R&D. A more detailed look at the performers of R&D shows that expenditures on R&D by government and the higher education sector increased from 2006 to 2009. R&D expenditures by business have decreased over the same time period (Section 5).

State of the Nation 2008 stated that low overall business R&D in Canada had been a constant feature for 40 years. Canada's business R&D intensity remains lower than the OECD average and is lower than that of China. R&D expenditure has differed by industry sectors over the years. The State of the Nation 2010 report provides a baseline for examining R&D on an industry sector basis (Section

Governments are pooling public funds with private funds to expand available venture capital. The Government of Canada improved the ability of Canadian businesses to attract foreign venture capital by narrowing the definition of taxable Canadian property, thereby freeing many foreign investors from the tax reporting requirements under section 116 of the Income Tax Act.

Measuring Innovation Performance

Canada's 2009 Survey of Innovation and Business Strategy (SIBS) was released in November 2010. Care needs to be taken in the future to ensure that questions in this survey align with international data on business collaboration with universities and companies obtained through the U.S. and European Union (EU) surveys.

Many industry-specific factors will have an impact on how industries in Canada innovate, and how well this innovation is measured. Research on innovation, including research by the National Endowment for Science, Technology and the Arts (NESTA) in the United Kingdom (U.K.), suggests that there is likely to be substantial hidden innovation and that the extent of hidden innovation may differ in different industries. Innovation, as defined by the OECD's Oslo Manual (2005), can be new to a company even if it is not new to the industry or to the world. Some innovation is user-driven and involves large scale field testing that is not defined or tracked as R&D. Other innovation involves copying best practices applied elsewhere. Until these investments are tracked separately they will remain unquantifiable and accounted for on an anecdotal basis. Data presented in this report enable better benchmarking by illuminating industry differences. Data points are, however, only tools for improving our understanding of innovation rather than the final word on Canadian industry practices.

Since 2008, both incremental and transformative actions have taken place. These have yet to raise our performance on key indicators of R&D in Canada. The following table itemizes changes in a short list of indicators tracked since the State of the Nation 2008 report.

State of the Nation: Summary Comparison of Selected Indicators, 2008 and 2010 Reports
Section of Report / Indicator 2008 Report 2010 Report Change on Final Year of Data from 2008 to 2010*

* Note: Direction of arrow indicates change from years cited.

Resources for Research and Development (R&D)
1. Gross domestic expenditure on R&D (GERD) as a percentage of Gross Domestic Product (GDP) 2006
2006 to 2008
2. GERD by performing sector
(constant 2002 dollars)
$0.28 billion
$14.19 billion
$8.53 billion
$2.21 billion
$0.30 billion
$13.22 billion
$8.53 billion
$2.15 billion
2007 to 2008
↑ by provincial governments
↓ by business
− by higher education
↓ by federal government
Business Innovation Indicators
3. Business expenditure on R&D (BERD) intensity, as a percentage of GDP 2006
15th place
18th place
2006 to 2008
↓ as a percentage of GDP
↓ ranking in available OECD countries
4. Direct and indirect government funding of business R&D, as a percentage
of GDP
2005 to 2008
↑ indirect government funding
↓ direct
government funding
5. Investment in machinery and
equipment as a share of GDP
2004 to 2007
6. Venture capital relative to GDP 2007
2007 to 2008
Knowledge Development and Transfer Indicators
7. Higher education performance of R&D, as a percentage of GDP 2006
2006 to 2008
8. Share of all business-financed R&D performed by higher education sector 2006
2006 to 2009
9. Intramural government R&D as a share of GDP in Canada 2006
2006 to 2008
Talent Indicators
10. Programme for International Student Assessment (PISA): 15 year-olds 2006
Science: 534
3rd place
Math: 527
7th place
Reading: 527
4th place
Science: 529
8th place
Math: 527
10th place
Reading: 524
6th place
2006 to 2009
↓ in science score
↓ in science ranking
− in math score
↓ in math ranking
↓ in reading score
↓ in reading ranking
11. Percentage of population with tertiary education: top 10 Organisation for Economic Co-operation and Development (OECD) countries 2006
1st place
1st place
2006 to 2008
↑ percentage of population with tertiary education
− ranking in top 10 OECD countries
12. PhD graduates per million
population: OECD countries
20th place
23rd place
2002 to 2008
↑ in graduates per million population
↓ in ranking of OECD countries

1 – Canadian Chamber of Commerce, Canadian Businesses Go Global for Growth, August 2010. Return to text

2 – Canadian Manufacturers & Exporters, Invest to Grow: Technology, Innovation and Canada's Productivity Challenge, October 2010. Return to text

3 – Coalition for Action on Innovation in Canada, An Action Plan for Prosperity, October 2010. Return to text