Canadian firms slash R & D spending again

Canadian corporations cut spending on research and development for the fifth year in a row, despite increasing revenues.

Corporate revenues up during same period

Canadian corporations cut spending on research and development for the fifth year in a row, despite increasing revenues, reports an annual study by a business intelligence firm.

Research and development spending was down 9.4 per cent in the 2010 fiscal year to $9.4 billion compared to $10.4 billion in 2009 among the top 100 companies in Canada reporting investments in that area, reported Research Infosource Inc., a division of The Impact Group, Wednesday. The fiscal year runs from April 1 to March 31.

The spending cuts came despite the fact that the same companies reported a 4.7 increase in revenues – a trend also seen in other years.

"There does not appear to be a strong relationship between R & D spending and corporate revenues," said Ron Freedman, CEO of Research Infosource, in a statement. "Clearly, other factors are at play in the anemic performance."

A report released by Canada's Science, Technology and Innovation Council in June found that Canada invests less in innovation than key global competitors. That report said universities and governments in Canada were playing their part in investing and conducting R&D, but the private sector was falling behind and limiting Canada's overall innovation performance. It warned that Canadian businesses need to invest more on research and development so the economy can cash in on ideas from the country's impressive talent pool.

According to the Research InfoSource study, Research in Motion remained Canada's top R & D spender in 2010, contributing nearly $1.4 billion. That was an increase of 26.3 per cent compared to 2009. During the same period, the company's revenues increased slightly less – just 20.1 per cent.

Overall, 48 companies in the top 100 increased their research spending, 48 decreased their spending, and four did not change their spending in 2010.

Twenty-two companies spent $100 million or more on research in 2010, accounting for $6.67 billion or 71 per cent of total spending among the top 100. Freedman noted that the overall results were skewed by sharp research spending cuts by Telus Corp. and Nortel Networks Corp., which was still active in 2010. If they were removed from the top 100, the remaining 98 companies showed an overall 3.5 per cent increase in R & D spending in 2010.

Freedman also cited a positive longer-term trend in a recent Statistics Canada report – the number of companies performing research increased from 8,741 in 1997 to 22,314 in 2007.

Research Infosource suggested that global trends such as the movement of manufacturing plants to Asia and the near disappearance of in-house corporate research labs in recent decades may be contributors to the slide in corporate research spending. It added that government incentive programs also play a role.

A report released by a government-appointed panel in October found that governments in Canada spend more on supporting business R&D per capita than most countries in the industrialized world. However, it said Canada's research and development funding system is too complicated and confusing. It noted that many businesses find the Scientific Research and Experimental Development program so complicated that they hire consultants to help with their applications, reducing the final amount that can actually be spent on research.