An in-depth study of Canadian industrial performance over a 7-year period shows that industrial R&D is eroding in Canada.

The study, which was released today by the Impact Group consulting firm, finds that while the amount of money devoted to R&D in Canada nearly doubled from 1994 to 2000, the total number of companies performing research remained essentially static.

In total, there were 11,132 companies performing R&D in Canada in 1994 and 11,437 in 2000. During a period of unprecedented economic growth, 9 out 10 provinces showed a decline in the number of industrial R&D performers.

According to the study, only Quebec showed a net gain, increasing the number of companies performing R&D in that province by 34%. On a regional basis, Western Canada lost 26% of its performers, Atlantic Canada was down 37%, and Ontario lost 14%.

Across 46 industry sectors, only 16 increased the number of companies performing R&D, while 30 showed a decline. The 16 posting an increase are both from the hi-tech as well as more traditional sectors, and include computer and related services; scientific and professional equipment; motor vehicle parts and accessories; pharmaceutical and medicine; agriculture; and primary metals.

Counting the number of companies performing R&D in Canada, the majority are small firms (less than 100 employees). In 1994, 87% of all R&D performers were small companies and by 2000 it was 85.8%.

Large companies (500 or more employees) conducting R&D in Canada decreased from 4.4% in 1994 to 4% in 2000. This small drop is significant as large firms spend the lion’s share of R&D dollars. The study notes that gaining or losing one large R&D performer has a much greater impact on overall trends and can mask underlying dynamics.

“During the 1990’s the policy and business communities delighted in the growth of R&D spending, but failed to notice a pernicious erosion of the base of R&D performers”, says Ron Freedman, author of the study. “A healthy economy needs increasing innovation in all sectors. Our data suggests that two thirds are in decline. To reverse this slide we need to reexamine our current federal and provincial innovation policies and programs.”