State of the Nation 2012

Chapter 1: Introduction—Canada’s Performance in Perspective


Success in the 21st century is driven by excellence in science, technology and innovation (STI)—by pushing the boundaries of knowledge and by applying discoveries to produce new or improved products and processes. Science, technology and innovation underpin and animate virtually every aspect of modern life. The most competitive economies are built on the recognition that STI drives growth, prosperity and high quality of life.

Canadians understand that, if we want to create jobs and opportunity in a competitive world and address the key challenges that confront us in the 21st century, STI must be an integral part of the national agenda. Success requires a private sector that embraces innovation as a competitiveness strategy; education and research institutions that attract and nurture world-class talent; researchers who expand the frontiers of knowledge; and governments that provide the environment and the support to enable discovery and commercialization to thrive.


 

Science, technology and innovation drive growth, prosperity and high quality of life.

Despite some persistent challenges, such as increasing household debt and sluggish employment growth, Canada has weathered the economic storm better than most. In the face of a challenging global environment, Canada has managed to maintain its modest economic growth, its relatively healthy fiscal position, and a financial system that is a model for the world. In its June 2012 Economic Survey of Canada, the Organisation for Economic Co-operation and Development (OECD) highlighted that “Canada has weathered the global economic crisis well, mainly reflecting sustained growth in domestic spending, and the economy is continuing to grow despite the persistence of international turbulence.”1 As well, the World Economic Forum (WEF) noted in its Global Competitiveness Report 2012-2013 that Canada features “among the most competitive economies worldwide,” pointing to strengths such as Canada’s highly efficient goods, labour and financial markets (especially the soundness of Canada’s banks), high-quality human capital, excellent infrastructure, and strong, well-functioning and transparent institutions.2

Canada’s relatively strong economic position provides us with an opportunity that we must seize—the opportunity to get out ahead of our competitors by building on and taking better advantage of those STI areas where we are strong and enhancing our performance in those areas where we are weak. In realizing our full STI potential, we will reap greater economic and societal benefits for Canadians and contribute meaningfully to addressing key challenges shared by the global community. To realize our full STI potential, Canada must not only invest more, but invest more strategically and coherently, building on our current strengths, and capitalizing on emerging opportunities.

Role of the Report

The Science, Technology and Innovation Council (STIC) has been mandated by the Government of Canada to produce a biennial report assessing this country’s STI performance, highlighting, where data availability allows, comparisons to other advanced and emerging economies. This enables us to benchmark our STI strengths and weaknesses against international standards of excellence.

Our inaugural report, State of the Nation 2008, provided the baseline from which Canada’s STI performance could be measured. State of the Nation 2010 built on that foundation by tracking Canada’s performance over the intervening two-year period. Now, another two years later, State of the Nation 2012 distinguishes trends to track where Canada is making progress, and to identify areas where Canada must devote greater effort towards enhancing performance. Understanding this picture contributes to advancing the national dialogue on science, technology and innovation, identifying avenues for action, and generating the will to work together towards common goals.

Recognizing the critical importance of world-class science, technology and innovation to Canada’s success, STIC believes that Canada must strive not only for excellence but for global leadership. Thus, in State of the Nation 2012, for each indicator where we report internationally comparable data we identify those countries that are the top five global performers. At the same time, we identify the threshold that Canada would have to attain to break into their ranks and thus achieve global leadership in each of those areas.

What We Measure

As in previous State of the Nation (SON) reports, 2012 takes an in-depth look at Canada’s performance in three key pillars underpinning the STI ecosystem: business innovation, knowledge development and transfer, and talent development and deployment.

Chapter 4 reviews Canada’s performance on the inputs to business innovation, including investment in: research and development (R&D); machinery and equipment, especially productivity-enhancing information and communications technologies (ICT); and intangible assets. This chapter also considers recent firm performance in attracting risk capital, and the diffusion of new ideas and technologies through global linkages. Wherever data availability allows, we continue the effort initiated in SON 2010 to refine the analysis by examining performance by industrial sector.

Chapter 5 looks at knowledge development and transfer, using bibliometric indicators and global university ranking systems to reflect Canada’s performance in producing and refining scientific knowledge. We then turn to indicators related to collaboration, contract research, licensing, and spinoffs to assess Canada’s performance in translating knowledge into practical applications.

Chapter 6 provides information on talent development and deployment. It begins by looking at Canada’s performance in secondary, college, and university (including doctoral) education, as the foundation for developing the skills necessary for scientific discovery and innovation. In addition, we examine the education system’s performance in preparing young talent to contribute fully to an innovative, productive and competitive economy, through work-integrated learning and business education. Given the greater internationalization of the STI enterprise, and the increasing mobility of talent, we also investigate Canada’s experience in attracting international students and highly qualified immigrants. We then turn our attention to Canada’s performance in deploying our talent to use it to full advantage. On this front, we look in particular at the country’s performance in absorbing human resources in science and technology, particularly researchers, into the labour force.


Methodology

The indicators utilized in this report are based on the most readily and publicly available statistics of science, technology and innovation activities. They draw from a number of official statistical sources, notably Statistics Canada and the OECD. Where data from these official sources were not available, private and non-profit sector sources were used. As there is typically a two-year time lag in data from official sources, much of the data reported throughout this report are for 2009 and 2010.

The methodologies underpinning the collection of official statistics are based on internationally accepted statistical conventions as described by Statistics Canada, which are based upon the latest (2002) Frascati Manual: Proposed Standard Practice for Surveys on Research and Experimental Development and the 3rd edition of the Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data.

Consistent with statistical conventions, data reported in the 2008 and 2010 editions of State of the Nation have been updated in cases where final data have been released to replace original estimates.

A number of indicators used in this report (e.g., business enterprise expenditures on research and development, or BERD) are expressed as a percentage of the size of each country’s economy—that is, gross domestic product (GDP). This approach is a commonly used and accepted international convention, and allows the comparison of STI indicators across countries of different economic sizes. As with many measures, such ratios are to be interpreted with some care, as they could be influenced by changes either in the indicator under examination (e.g., BERD) or in the relative size of each economy (i.e., GDP) in the comparator group. Nevertheless, all other things being equal, such considerations do not materially affect Canada’s international rankings on the indicators cited herein.

In international comparisons, when statistics were not available for a particular country for the most recent year(s) used in the figure depicted, the most recent data available for that country were used instead, rather than omitting the country from the comparison.

All data are in current dollars, unless otherwise noted. All data are in Canadian dollars, unless otherwise noted

As a preface to this in-depth examination of Canada’s performance in the three key pillars, Chapter 2 considers: the importance of science, technology and innovation to Canada’s economic and societal well-being; the key players in Canada’s STI ecosystem; and the key trends that characterize STI in the modern world. This serves as the foundation for the ensuing discussion of Canada’s performance. Chapter 3 examines Canadian funding for R&D in an international context. Particular attention is devoted to government support—not only federal support but, new to State of the Nation 2012, provincial support, too. The addition of provincial data helps provide a more integrated, whole-of-Canada picture of resources for R&D.

The Performance Story

Looking at the three key pillars, the findings in State of the Nation 2012 reinforce much of what was learned in State of the Nation 2010. The findings demonstrate that, while Canada has much to celebrate in terms of our knowledge and talent base, we still have much work to do before we can truly “run with the best” and realize Canada’s full STI potential.

Canada continues to benefit from a strong foundation built on dual advantages of knowledge and talent. Canada’s substantial investments in research in the higher education sector have reaped significant rewards, as the production and refinement of scientific knowledge (reflected in key bibliometric indicators) continues to be characterized by vitality and high-quality. In 2010, as in 2008, Canada (with a 0.5 percent share of global population) accounted for an impressive 4.4 percent of the world’s natural sciences and engineering publications.

On the talent front, as reported in State of the Nation 2010, half of Canada’s adult population has a university or college education, one of the highest levels worldwide. From 2006 to 2010, there was an impressive 31.8 percent increase in the number of undergraduate science and engineering degrees granted and a 7.3 percent increase in the number of engineering degrees granted. At the doctoral level, Canada continues to produce fewer advanced research graduates than many OECD comparator countries; however, the growth rate in the number of science and engineering doctoral graduates is encouraging, surpassing many comparator countries.

Canada cannot afford to be complacent even in these areas of relative strength. Other countries, especially emerging economies, are making significant investments in their education and research systems, some of which are beginning to bear fruit in improving performance, especially with respect to the quantity of research outputs. This improving performance in other jurisdictions is affecting Canada’s relative position on a number of knowledge and talent development indicators, and Canada risks erosion of its competitive advantage in these areas. Maintaining and expanding our competitive advantage in knowledge and talent development is vital to ensuring a strong foundation for science, technology and innovation.

Canada also continues to face challenges related to knowledge transfer—in effectively moving knowledge developed in higher education institutions to companies that have the ability to absorb it and translate it into commercially viable products and/or solutions to health, environmental and social problems. Anecdotally, we know that a great deal of knowledge transfer is occurring “on two feet”—in other words, through the movement and interplay of people. However, on the traditional measures of licensing and creation of spinoff companies from universities, Canada’s performance is typically disappointing, especially compared to that of the United States (U.S.).

Similarly, Canada continues to face challenges in deploying our talent to full advantage to drive discovery and commercialization. On this front, Canada’s performance continues to be disappointing on two of the most telling indicators of a country’s ability to deploy its innovation talent to best advantage: the share of human resources in science and technology, and the proportion of researchers employed in the private and public sectors.

As concluded in State of the Nation 2010, the greatest cause for concern continues to lie in Canada’s business innovation performance. Although we recognize that innovative activity is occurring that is not captured in official data, it is nonetheless clear that Canadian businesses are not sufficiently harnessing innovation to make competitive gains. In international rankings related to business innovation, Canada continues to place in the middle of the pack on most measures and, in some cases, Canada’s rank has declined. Canada’s relatively low business R&D intensity and limited availability of venture capital are areas of particular concern, as is the large gap with the U.S. in private sector investment in productivity-enhancing ICT.

Underlying this mixed performance story is the funding story. The dollar value of Canada’s total R&D funding has declined from its peak in 2008, while total funding as a percentage of GDP has declined continuously since 2001. This stands in stark contrast to most other countries, whose gross domestic expenditures on research and development (GERD) and GERD-to-GDP ratios have been increasing. The more recent declines in total Canadian R&D funding efforts are attributable predominantly to lower funding from the private sector.

These findings, and more, are explored in greater depth in the succeeding chapters. The key elements of the performance story are highlighted in the following table, which provides summary comparisons of Canada’s performance across the 20 core indicators since the baseline of the State of the Nation 2008 report. These 20 core indicators were identified by STIC in State of the Nation 2010, to use on an ongoing basis to better enable benchmarking, especially against comparator countries, on key measures of science, technology and innovation.

Canada has strong foundations on which to build, but we must do better. All participants in our STI ecosystem have a role to play in driving enhanced performance to elevate Canada to the ranks of the world’s leading innovative economies, so that we might enjoy the economic and societal benefits associated with realizing our full STI potential. All players in Canada’s STI ecosystem must embrace this responsibility—focusing our resources and efforts, looking to the lessons to be learned from global leaders, improving agility to take advantage of opportunities, and working in concert to allow Canada to “run with the best.”

State of the Nation: Summary and Comparison of Core Indicators
Indicators State of the
Nation 2008
State of the
Nation 2010
State of the
Nation 2012
Change
2010–12
Change
2008–12
Resources for Research and Development (R&D) and Innovation
Gross domestic expenditure on R&D (GERD) as a share of Gross Domestic Product (GDP) 2.00% (2006) 1.92% (2008) 1.74% (2011) Decrease Decrease
Rank 16th out of
41 available
economies (2006)
17th out of
41 available
economies (2008)
23rd out of
41 available
economies (2011)
Decrease Decrease
GERD by funder (CAD millions) Refers to data only available for Canada 2006 2009 2012
• Business 14,874 14,148 14,067 Decrease Decrease
• Higher Education 4,574 4,824 5,404 Increase Increase
• Federal Government 5,226 5,959 5,838 Decrease Increase
• Provincial Governments 1,467 1,661 1,681 Increase Increase
• Foreign Sector 2,252 2,120 1,960 Decrease Decrease
• Private Non-Profit 827 944 1,077 Increase Increase
GERD by performing sector (CAD millions) Refers to data only available for Canada 2006 2009 2012
• Business 16,474 15,569 15,493 Decrease Decrease
• Higher Education 9,625 10,818 11,528 Increase Increase
• Federal Government 2,496 2,762 2,475 Decrease Decrease
• Provincial Governments 310 352 348 Decrease Increase
R&D financed by business, by sector (CAD millions) Refers to data only available for Canada 2006 2009 2012
• Business 13,947 13,113 13,107 Decrease Decrease
• Higher Education 808 896 863 Decrease Increase
R&D financed by federal government, by sector (CAD millions) Refers to data only available for Canada 2006 2009 2012
• Business 260 313 406 Increase Increase
• Federal Government 2,434 2,684 2,400 Decrease Decrease
• Higher Education 2,488 2,932 3,002 Increase Increase
Direct federal government support to business R&D as a share of GDP 0.02% (2005) 0.02% (2008) 0.03% (2010) Increase Decrease
Indirect federal government support to business R&D as a share of GDP 0.21% (2005) 0.22% (2008) 0.21% (2010) Decrease
Intramural government R&D: share of GDP 0.19% (2006) 0.19% (2008) 0.18% (2011) Decrease Decrease
Business R&D and Innovation
Business expenditure on R&D (BERD) as a share of GDP 1.14% (2006) 1.04% (2008) 0.89% (2011) Decrease Decrease
Rank 18th out of
41 available
economies (2006)
21st out of
41 available
economies (2008)
25th out of
41 available
economies (2011)
Decrease Decrease
Business expenditure on machinery and equipment (M&E) as a share of GDP Refers to data only available for Canada 6.6% (2004) 6.6% (2007) 5.7% (2011) Decrease Decrease
Business information and communications technology (ICT) investment intensity
(ICT investment as a share of non-residential gross-fixed capital formation)
N/A N/A 17% (2009) N/A N/A
Rank N/A N/A 9th out of
20 available
economies (2009)
N/A N/A
Information technology (IT) services intensity
(in select industries)
N/A 2.3% for mining and
quarrying; 7.9% for
finance and insurance
(Year of data: mid-2000s)
N/A N/A N/A
Rank N/A 3rd out of 27 for mining
and quarrying; 7th out of
27 for finance and insurance
(Year of data: mid-2000s)
N/A N/A N/A
Venture capital (VC) investment as a share of GDP Refers to data only available for Canada 0.13% (2007) 0.09% (2008) 0.09% (2011) Decrease
Trade in technology-intensive services – Receipts as a share of total commercial services receipts Refers to data only available for Canada N/A 42.1% (2009) 38.8% (2011) Decrease N/A
Trade in technology-intensive services – Payments as a share of total commercial services payments Refers to data only available for Canada N/A 39.4% (2009) 39.1% (2011) Decrease N/A
Number of cross-border trademarks N/A 28.6 (Average 2005–07) N/A N/A N/A
Rank N/A 19th out of 38
available economies
(Average 2005–07)
N/A N/A N/A
Direct resident trademark applications 17,719 (2004) 21,101 (2007) 20,449 (2010) Decrease Increase
Rank 20th out of
212 available
economies (2004)
17th out of
212 available
economies (2007)
17th out of
212 available
economies (2010)
Increase
Knowledge Development and Transfer
Higher education expenditure on R&D (HERD) as a share of GDP 0.66% (2006) 0.68% (2008) 0.66% (2011) Decrease
Rank 3rd out of
41 available
economies (2006)
4th out of
41 available
economies (2008)
9th out of
41 available
economies (2011)
Decrease Decrease
University-industry collaboration in R&D Rank 14th out of 134
economies (2008)
7th out of 139
economies (2010)
15th out of 144
economies (2012)
Decrease Decrease
Total new licences for universities and affiliated teaching hospitals Refers to data only available for Canada N/A 524 new licences
(2008)
537 new licences
(2009)
Increase N/A
Talent Development and Deployment
Programme for International Student Assessment (PISA) science, mathematics
and reading (Score and Rank)
2006 2009
• Science 534, 3rd out of
57 available
economies
529, 8th out of
74 available
economies
N/A N/A N/A
• Math 527, 7th out of
57 available
economies
527, 10th out of
74 available
economies
N/A N/A N/A
• Reading 527, 4th out of
57 available
economies
524, 6th out of
74 available
economies
N/A N/A N/A
Percentage of 25–64 year old population with tertiary education 47% (2006) 49% (2008) 51% (2010) Increase Increase
Rank 1st (out of
OECD member
economies)
1st (out of
OECD member
economies)
1st (out of
OECD member
economies)
Growth in total number of degrees granted in tertiary science, engineering and all fields of study 2005–08 2006–10
• Science N/A 28.00% 31.80% N/A N/A
• Engineering N/A 9.10% 7.30% N/A N/A
• All Fields of Study N/A 13% 5.40% N/A N/A
Total number of degrees granted in doctoral programs 2008 2010
• Science N/A 1,704 1,928 Increase N/A
• Engineering N/A 891 1,036 Increase N/A
• All Fields of Study N/A 4,827 5,416 Increase N/A
Researchers per 1,000 employment 2005 2008
• All sectors N/A 8.2 8.5 Increase N/A
Rank N/A 13th out of
35 available
economies (2007)
12th out of
37 available
economies (2009)
Increase N/A
• Business sector N/A Increase 5.2 Increase N/A
Rank N/A 8th out of
35 available
economies (2007)
9th out of
37 available
economies (2009)
Decrease N/A
• Government, higher education and non-profit sectors N/A 3.2 3.3 Increase N/A
Rank N/A 19th out of
35 available
economies (2007)
18th out of
37 available
economies (2009)
Increase N/A

For rankings, the Science, Technology and Innovation Council used all economies for which data were available.

For most OECD statistics, this refers to OECD member countries and other key economies measured by the OECD.

Performing sector refers to the sector of the economy that carries out R&D activities, while funding sector refers to the sector that pays for the R&D.

For example, the business sector funds a significant amount of activities within the higher education sector.

Figures and rankings in the State of the Nation 2008 and 2010 columns may not always appear as originally reported.

If data have been revised since the publication of those reports, the revised data have been used.

N/A stands for Not Available.

Refers to data only available for Canada Refers to data only available for Canada; all other data are international.


1Economic and Development Review Committee of the OECD, OECD Economic Surveys: Canada, Paris (June 2012), p. 2.

2World Economic Forum, The Global Competitiveness Report 2012–2013, Geneva (2012).