Guy Rouleau, left, Peter MacKinnon, Heather Munroe-Blum and Howard Alper, right, are members of the Science, Technology and Innovation Research Council. (CBC)

Canadian businesses are stingy in funding research and development and that needs to change if Canada is to compete more strongly on the world stage, says a report released Tuesday by the Science, Technology and Innovation Research Council.

"There's a big role for business to invest in R&D and it simply hasn't done that at a level that would have it be competitive across these sectors with the very best in the world," council member Heather Munroe-Blum, principal and vice-chancellor of McGill University, said at a news conference.

'There is the need to change the culture within the business leadership.'— Howard Alper, STIRC chairman

"Everybody else is investing, growing, developing, so we need to do the same," added Guy Rouleau, a University of Montreal genetics researcher, speaking with council chairman Howard Alper and Peter MacKinnon, president of the University of Saskatchewan.

The council of 18 members from the fields of research, business and government was appointed by the federal government in 2007 to provide policy advice on science and technology issues and measure Canada's performance in those areas against that of other nations.

In its first report, called Canada's Science, Technology and Innovation System: State of the Nation 2008, the council compares Canada with the other 29 countries in the Organization for Economic Co-operation and Development, including those in the G7, using 50 indicators of science and technology performance.

It found Canada is second last in the amount spent on research and development by companies as a portion of the gross domestic product.

And while the study found Canada spends more public money on university-based research than most other nations, the council recommended that such funding be more focused on priority research areas specified by the industry minister.

Canada should also boost local and international collaborations between academics and industry, as well as among companies, the report says.

If Canada doesn't keep up with other countries, Rouleau said, it risks having fewer commercial successes like Research In Motion's BlackBerry smart phone in the future.

The report noted that low business R&D spending and commercialization in Canada has persisted for 40 years, even though the government provides some of the best "innovation tax incentives in the world."

Others have reported similar findings. A report issued by the Council of Canadian Academies last week found Canadian businesses rely on outdated business models, are slow to incorporate new technology, tend to follow the lead of other countries and don't get the same payoff from research spending.

Alper said the problems are something that businesses in Canada need to address.

"There is the need to change the culture within the business leadership," he said.

Munroe-Blum said other measures may be needed, such as direct investment in businesses.

"We need business to compare itself to other companies in its own sector and collaborate in partnerships that allow a progressive uptake of science and technology," she said.

In addition to low business research and development spending, the council found other weaknesses that could hamper innovation in Canada and the country's ability to benefit from it:

• Fewer Canadian students, compared with students in other countries, are completing master's and doctoral degrees in science, engineering and business, and Canada is failing to attract top international students.
• A significant portion of the population has low literacy and numeracy skills and that has changed little in the past decade.
• Collaboration among Canadian companies is relatively low and collaboration between companies and researchers at public research institutions such as universities, colleges and government laboratories is low as well.
• Venture capital is "frail."
• Canada's best researchers lack international visibility and recognition.

The council said Canada is doing well in some areas:

• There is strong public funding for research, development and higher education.
• Young Canadians excel in science, math and reading.
• Canada has taken measures to attract research talent from abroad.

30% of funding should target priorities: chairman

However, Rouleau said Canada needs to reconsider how its research money is being spent.

The council recommended that research funding be focused more on four priority areas and sub-priority areas within them to build on Canada's strengths.

Alper said it is important to keep a balance between that targeted funding and funding for excellent research in a broad range of fields.

Australia and Japan both target roughly 30 per cent of their research funding at priority areas and 70 per cent at other areas, he said.

"I think that balance is appropriate for Canada as well," said Alper, who was on the committee that helped set priorities for Australian prime minister John Howard's government when it set a similar target.

When he was asked later how close Canada is to that balance, he said it's too early to say.

The increased targeting of funds has resulted in cuts to some non-priority areas. That has led to criticism by some researchers, who accuse the government of abandoning certain areas in which Canada excels and suggested that could lead to a brain drain.

In April, more than 2,000 Canadian researchers signed a letter asking the government to rethink funding cuts included in the January budget, calling them "a huge step backward for Canadian science."

On Tuesday, members of the council acknowledged the criticism. Munroe-Blum said groups will naturally advocate on their own behalf, and basic science is important, however, "It's very clear that nations that are thriving on the basis of their science, technology and innovation also look to where their greatest strengths are and invest in those."

There are certain areas where the council believes Canada leads and could build its strength to beat out international competitors, she added.

The council's 2008 report is intended to be a baseline against which Canada's progress will be measured in the future. The next report will look at data from 2010.