ITIF-評估加拿大的創(chuàng)新、生產(chǎn)力和競爭力 ASSESSING CANADIAN INNOVATION,PRODUCTIVITY,AND COMPETITIVENESS

ASSESSINGCANADIAN

INNOVATION,PRODUCTIVITY,

ANDCOMPETITIVENESS

ByRobertD.AtkinsonandLawrenceZhang

APRIL2024

innovationpolicy.ca

innovationpolicy.ca

AssessingCanadianInnovation,

Productivity,andCompetitiveness

ROBERTD.ATKINSONANDLAWRENCEZHANG|APRIL2024

Canadafacesunprecedentedchallengesininnovation,productivity,andcompetitiveness.ThefirststepinaddressingthemistodevelopaclearunderstandingoftheCanadianeconomy’s

underlyingstructureandperformanceineacharea.Policymakersmustthentailorstrategiesforspecificindustriesandtechnologiesinsteadoffocusingonprincipallyonmacrofactors.

KEYTAKEAWAYS

.Canadalagspeercompetitorsonkeyinnovationindicators,particularlyintheareasofresearchanddevelopment,intellectualproperty,andinnovationoutcomes.

.Canada’sproductivityperformancehasbeendismal.Forcomparison,Americanlabourproductivitygrowthwas160percentfasterthanCanada’sfrom2002to2020—andAmerica’sgrowthinthatperiodwasactuallylowinhistoricalterms.

.Fromindustrytoindustry,Canadianlabourproductivitygrowthisquitedivergent,withsomesectorsgrowingsubstantiallyandothersactuallydeclining.

.Canada’scompetitivepositioninadvancedindustriesisweak,asitsglobalmarketshareshavefallendramaticallyoverthelast25years.Itnowhas42percentlessadvanced-

industryoutputasashareofitseconomythantheglobalaverage.

.Canada’scrisiscannotbeadequatelyunderstoodoraddressedbylookingonlyatbroad

macrofactorssuchastaxrates,infrastructure,andeducation.Policymakersmustdevelopeconomicstrategiesfocusingonfirm,sector,andtechnologylevels.

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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CONTENTS

KeyTakeaways 1

Introduction 3

DistinguishingInnovation,Productivity,andCompetitiveness 4

Competitiveness 4

Innovation 6

Productivity 7

InnovationPerformance 8

R&D 8

IntellectualProperty 18

HigherEducation 20

LabourForce 25

TechnologyUse 26

Fast-GrowingBusinesses 29

ProductivityPerformance 30

CompetitivenessPerformance 43

WhatToDo 52

Principle1:Reject“SilverBullet”Solutions 52

Principle2:MoveBeyondIngredientism 53

Principle3:ThinkSectorsandTechnology,NotMarketsandEconomy 54

Principle4:Lookto“Productionists”forAdviceonInnovation,Productivity,and

Competitiveness 55

Principle5:FocusLessonIndustrialRecruitmentandMoreonSupportingCompanies

AlreadyinCanada 55

Principle6:TheOnlyWaytoAvoidtheGravitationalPulloftheUnitedStatesIsfor

CanadatoMakeItsOwn 56

Principle7:SeeBigandMedium-SizedBusinessesasBeautiful 57

Principle8:EmbraceNorthAmericanIntegration,NotSeparation 58

Principle9:RejectthePrecautionaryPrincipleandEmbracetheInnovationPrinciple 60

Principle10:MakeInnovation,Productivity,andCompetitivenessaTopPriority 60

Conclusion 61

Endnotes 62

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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INTRODUCTION

IthasbecomeacottageindustryinCanadatodelveintothenatureandcausesofCanada’s

strugglinginnovation,productivity,andcompetitiveness(IPC)performance.Whilemuchgood

analysishasbeenconducted,attheendoftheday,thereisstillnoconsensusontheextentandcausesofCanada’spoorIPCperformance.Andbecauseofthat,oftenreflectinganeedto

identifythe“silverbullet”solution,numerousconclusionsandrecommendationshavebeenputforth:lessregulation,moreregulation(e.g.,antitrustenforcement),tighterlinkageswithNorthAmerica,weakerlinkageswithNorthAmerica,moreeducation,andachangeinculture,amongothers.

Gettingtheanalysisandpolicyrecommendationsrightiscriticalbecausetheenvironmentin

whichCanadafindsitselfissignificantlymorechallengingthanevenadecadeago.First,Chinahasbecometheworld’slargestmanufacturerandadvancedindustryproducer,placingsignificantcompetitivepressuresonCanadianfirmsinahostofindustries.Inthisregard,thedemiseof

NortelandtheconcomitantriseofHuaweiwerejustanopeningsalvo.

Second,therehasbeenanOrganizationforEconomicCooperationandDevelopment(OECD)-

wideproductivityslowdownaswehavewaitedforthematurationofthenextwaveofgeneral-

purposetechnologies(artificialintelligence(AI),next-genchips,advancedelectro-mechanicalsystems,etc.)andtheirbroad-scaleadoption.ButCanada’sslowdownhasbeenworsethanthatofmanycountries,includingtheUnitedStates’.Thisstagnationposesasignificantthreatto

CanadaasanagingpopulationincreasinglyexertsadragoneconomicgrowthandaslowerrelativelivingstandardsincreaseoutmigrationofknowledgeworkerstoAmerica.

Finally,Canadahasnotadequatelytranslatedspendingbillionsatresearchuniversitiesand

havingahighlyeducatedworkforceintorobustratesofdomesticinnovation,eitherthrough

organizationsadoptingnewtechnologiesorcompaniesproducingandsellingtechnologyglobally.Asmoreandmoretechnologiesrequireabeyond-Canadascaleforsuccess,thisposesnew

challengesforCanadianentrepreneursandcompanies.

SomeofCanada’schallengesareintrinsic.Abundantnaturalresourcesarebothablessingandacurse(ablessingbecausethewagesinthesectoraresohighandacursebecausetheirexportsleadtoarelativelyhighervalueoftheloonie).Canada’sproximitytotheU.S.marketprovides

opportunitiestoCanadiancompanies,butitalsoisa“blackhole”gravitationalpullthatattractsCanadiantalent,intellectualproperty(IP),andcompanies.Moreover,Canada’sforeignbranchplantfirms,builtbehinda100-yeartariffwall,createindustrialcapabilitythatmightnot

otherwisehaveemerged,butthatalsomeanslimitedresearchanddevelopment(R&D)andexports.

1

ButotherCanadianchallengescanbeovercome,providedCanadianswanttoovercomethem.

Morecouldbedonetoencourageuniversitiestoplayastrongerroleinsupportingprivatesectorinnovation.TheSR&EDtaxcreditcouldberedesignedtobeaspurtoR&Dincreases.

2

CanadianpolicymakerscouldstoplookingtoEuropeasaregulatorymodelforemergingtechnologiesandinsteadlooktotheUnitedStatesforwaystogrowagloballyvibranttechnologyeconomy.MorecouldbedonetocreateaCanadiansinglemarket,ratherthanamarketof10provinces.Ottawacouldadoptarobust,sectoral-basedproductivitystrategy.AndmorecouldbedonetoplaceIPCrenewalatthecentreofCanadianpolitics,forallthepoliticalparties.

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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Thisreport—thefirstoftheInformationTechnologyandInnovationFoundation’s(ITIF’s)

CanadianCentreforInnovationandCompetitiveness—examinestheseissues.ButitfirstclarifiesthekeydifferencesbetweenthethreeconceptsofIPC—termsthatarecommonlyconfusedin

Canadianpolicydiscourse.ItthenpresentsdataonCanadianIPC,comparingperformancewiththeUnitedStatesandsixothercomparatornations(Australia,China,Germany,SouthKorea,

Poland,andtheUnitedKingdom).Finally,itlaysoutthefollowingtenoverarchingprincipleswebelieveshouldguidefutureIPCpolicyefforts:

1.Reject“silverbullet”solutions.

2.Movebeyondtheideathatnationaleconomiescansucceedbyfocusingonbasiceconomicingredients.

3.Thinkintermsofspecificindustriesandtechnologies,notmarketsandtheoveralleconomy.

4.Lookto“productionists”foradviceonIPC.

5.FocuslessonindustrialrecruitmentandmoreonsupportingcompaniesalreadyinCanada.

6.TheonlywaytoavoidthegravitationalpulloftheUnitedStatesistomakeourown.

7.Seebigandmedium-sizedbusinessesasbeautiful.

8.EmbraceNorthAmericanintegration,notseparation.

9.Rejecttheprecautionaryprincipleandembracetheinnovationprinciple.

10.MakeIPCatoppriority.

DISTINGUISHINGINNOVATION,PRODUCTIVITY,ANDCOMPETITIVENESS

Tolistentomanypundits,economists,andpolicymakersdiscussingtheeconomicsofgrowth,itwouldbeeasytogetconfusedaboutexactlywhatismeantbythreeofthemostcommonlyusedterms“innovation,”“productivity”and“competitiveness”and“Aretheysynonymous?

Conflicting?Unrelated?”Infact,whilethethreetermsarerelated,theyareclearlydistinctandrefertodifferentthings.

Competitiveness

Itisquitecommonfororganizationsandpunditstodefine“competitiveness”as“productivity.”Harvard’sMichaelPorterhasstated,“Theonlymeaningfulconceptofcompetitivenessatthe

nationallevelisproductivity.”

3

TheWorldEconomicForum’sGlobalCompetitivenessReport

agrees,definingcompetitivenessas“thesetofinstitutions,policies,andfactorsthatdeterminethelevelofproductivityofacountry.”

4

IMD’sWorldCompetitivenessYearbookdefinesitevenmorebroadlyashowan“economymanagesthetotalityofitsresourcesandcompetenciesto

increasetheprosperityofitspopulation.”

5

IMDincludesvirtuallyallfactorsrelatedtoeconomicperformance,includingyouthemploymentlevels,levelofinflation,andrealgrossdomestic

product(GDP)growth.Butifeverythingiscompetitiveness,theninpracticenothingis.

Infact,competitivenessisnarrowerthanproductivity.Toseewhy,it’simportanttodifferentiatebetweentradedandnontradedindustries.Atradedindustryisonethatsellsasignificantshare

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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ofitsoutputoutsideaparticulargeographicalarea.Forexample,aprintingfirminOntariothatsellsprintedmaterialtocustomersacrossCanadawouldbeatradedfirmfromtheperspectiveoftheOntarioeconomy,butanontradedfirmfromtheperspectiveoftheCanadian.Incontrast,asoftwarefirminMontrealthatsellssoftwarethroughouttheworldwouldbeatradedfirmfrom

theprovincialandnationalperspective.

Competitivenessistheabilityofanationtohavearobusttradedsectoreconomyrelativeto

importswhilemaintainingfavourable“termsoftrade”whentherealpriceofexportsisadjustedtoreflectall“salesdiscounts”(includinganartificiallylowcurrency,suppressedwagesinexportsectors,artificiallylowtaxesontradedfirms,anddirectsubsidiestoexporters)andimport

restrictions.Underthisdefinition,anationmayrunalargetradesurplus(onecomponentofcompetitiveness).However,ifitdoessobyprovidinglargediscountstoitsexportsorlimits

imports,itwouldnotbetrulycompetitive,forsuchpolicieswouldreduceitstermsoftradebyrequiringitsresidentstogiveupsomeoftheirincometoforeignbuyersorforcethemtopayhigherpricestodomesticproducers.

Unfortunately,whiledataexistsontradebalancesforvirtuallyallnations,dataontheextentofexportdiscountsandimportrestrictionsisdifficulttoobtain.Assuch,itishardtoidentifywhichcountriesaretrulycompetitive,althoughataquickglance,itwouldappearthatnationssuchasAustria,Germany,andSwedenwouldbeonthelist(theyruntradesurpluseswhilealsohaving

relativelyhighwages),whilenationssuchasChina(toomuchdiscounting)andtheUnitedStates(toolargeatradedeficit)wouldnotbelisted.However,Canadaappearstoberelatively

competitivewithtradebalancesclosetozero.

6

Butthisreflects,insignificantpart,afallinthevalueoftheCanadiandollar,especiallyrelativetotheU.S.dollar,whichmakesimportsmoreexpensiveandexportscheaper.

7

Competitivenessistheabilityofanationtohavearobusttradedsectoreconomyrelativetoimportswhilemaintainingfavourable“termsoftrade”whentherealpriceofexportsisadjustedtoreflectall“salesdiscounts”andimportrestrictions.

Buteventhatdefinitionofcompetitivenessistoonarrowbecauseitdoesnotdifferentiate

betweencomparativeadvantageandcompetitiveadvantage.Ofcourse,Canadahasa

comparativeadvantageinminerals,agriculture,andtimber,anditrunstradesurplusesinallofthese,including$29billioninmineralsin2023.

8

Nottotakeawayanythingfromthecompaniesandworkersintheseindustries,butthiswasacomparativeadvantagethatwasbestowedupon

ratherthanearnedbyCanada.

Whatreallymatterswhenassessingcompetitivenessistheperformanceofanationinnon-

natural-resource-basedsectors,especiallytechnologicallyadvanced,high-valuesectors.Itisinthesesectorsthatemploymentmultipliersandwagesareusuallyveryhigh.AswediscussinthesectiononCanadiancompetitiveness,thesesectorsincludecomputersandsemiconductors,

motorvehicles,aerospace,andmachineryandsoftware,whereCanadiancompetitivenessisquitelow.

Tobesure,productivitygrowthcanhelpcompetitiveness—especiallyifitisconcentratedin

tradedsectors,whichlowerstheircostsandenablesthemtosellmoreinglobalmarketswithoutdiscounts.Butproductivitygrowthcanalsoberelativelyunrelatedtocompetitivenessifitis

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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concentratedinnon-tradedsectors.Imagineanationwithstrongproductivitygrowthbutalmostallofitinnontradedsectorssuchasgrocerystores,electricutilities,andnursinghomes.

Certainly,incomeswouldgoupasrelativepricesinthesesectorsfall,butfirmsintradedsectors

wouldonlyseemodestreductionsintheircoststotheextenttheypurchaseinputsfromnontradedfirms.

Innovation

Whilethetermcompetitivenessisusuallyincorrectlydefined,innovationisusuallydefinedmoreaccurately,althoughalltoooftentoonarrowly.Manyseeinnovationasonlytechnologicalin

nature,resultinginshinynewproductssuchasApple’siPadorBoeing’s787Dreamliner.StillothersbelieveinnovationpertainsonlytotheR&Dactivitygoingonatuniversities,national

laboratories,andstart-ups.

Whilethisisalltrue,itismuchtoolimitinginscope.TheOECDproperlydefinesinnovation

morebroadlyas“aneworimprovedproductorprocess(orcombinationthereof)thatdiffers

significantlyfromtheunit’spreviousproductsorprocessesandthathasbeenmadeavailabletopotentialusers(product)orbroughtintousebytheunit(process).”.”

9

However,evenwhenitisproperlydefined,manyequateinnovationwithcompetitiveness,

productivity,orboth.Forexample,Bloomberg’srankingofthe50mostinnovativenations

includesproductivityasoneofitssevenvariables.Likewise,theCanadianCouncilofAcademieshaswritten,“GiventhepotentialofIR&D[industrialR&D]toboosteconomicgrowth,its

relativelylowintensitycanhelpexplainCanada’spersistentproductivitygapwiththeUnited

States.”

10

InhistestimonytoParliament,formerBlackberryCEOJimBalsilliestated,“Whenyoustarttodothat[getmoreIPfromR&D],yougetleverage,whichdriveswhat’scalledproductivityor[GDP]percapita.That’showtheseothereconomiesgetmorewealthperworkerandhowtoputmore

moneyintheaverageCanadian’spocket.”

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Innovationcanincreaseproductivityandcompetitiveness,butitisnotsynonymouswitheither.

Butwhileinnovationisrelatedtocompetitivenessandproductivity,itisnotsynonymouswith

them.Forexample,theinnovationofthesmartelectricgridwillhelpboosttheproductivityof

theelectricindustrybutwillnothaveadirectimpactoncompetitivenessbecauseelectricutilityservicesarenottypicallytradedacrossborders.Likewise,thedevelopmentofanewtechnologytobetterpredictweatherpatternsmightbenefitqualityoflife,butitwouldalsonotdirectly

affectproductivity.Incontrast,thecreationofanewdrug,anewkindofairplane,orafastercomputerchipwouldnotonlyenhancetradedsectorindustries’competitiveness

(pharmaceuticals,aerospace,andsemiconductors),butalsoimprovequalityoflife.Thus,

certainlyinnovationcanincreaseproductivityandcompetitiveness,butitisnotsynonymouswitheither.Giventhefactthatadvancedindustriesgloballyaccountforaround12percentofGDP,

thelocomotivepowerofR&Dinthesefirmstodrivegrowthis,bydefinition,limited.Moreover,innovationcanbeeasilypurchasedfromfirmsaroundtheworld.CanadianhospitalscanbuythelatestSwissscanningmachines,andinsurancecompaniescanbuyJapaneseAIsoftware.

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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Productivity

Productivityisperhapsthemoststraightforwardandeasilydefinedofthethreefactors.

Productivityisoutputperunitofinput.Theunitofinputcanbelabourhours(labour

productivity)orallproductionfactorsincludinglabour,machines,andenergy(totalfactorof

productivity).Despitethissimplicity,manystillconfusetheuseoftheterm.Forexample,somehavearguedthatmovingjobstoChinaraisesproductivitybecausedoingsolowerscosts.But

whilethismightreduceprices,itisactuallylikelytodecreaseoutputperunitofinputsincefirmsinChineseusefewermachinesandarelessefficientlyorganized.

Economieshavethreewaystogrowoverthemediumandlongerterm:growthinworkers,growthinproductivityacrosstheboard,orashifttohigh-productivityindustries.Thefirst,growthinthenumberofworkers,isanonsustainablestrategyand,moreimportantly,doesnothingtoincreasepercapitaincomegrowth.

Thesecond,the“growtheffect,”occurswhenanation’sproductivitygoesupnotbysomehigh-productivityindustrysectorsgettingbigger,butratherbyallsectorsgettingmoreproductive.Forexample,acountry’sretail,banking,andautomobilemanufacturingsectorscanallincreasetheirproductivityatthesametime.Thiscanhappenifallthefirmsincreasetheirproductivity,orif

thelow-productivityfirmsinaparticularindustrylosemarketsharetohigh-productivityfirmsinthesameindustry(e.g.,smallbookstoresgooutofbusinessbecauseconsumersprefertobuye-booksonline).Thisprocessoccursinallsectors.OnestudyofCanadianmanufacturingfindsthatplantturnoverfromentryandexitcontributesfrom15to25percentofmanufacturing-labour

productivitygrowth,withtheother75to85percentcomingfromindividualplantscontinuingtobecomemoreproductive.

Thethird,the“shifteffect,”occurswhenthemixoflow-andhigh-productivityindustriesina

nationchanges.Forexample,ifadevelopingnationloses500agriculturaljobs(which,in

developingnations,normallyhavelowproductivity)andgains500jobsinasoftwarefirm(whichnormallyhavehigherproductivity),overallnationalproductivitywouldincrease.

Thelion’sshareofproductivitygrowthinmostnationscomesnotfromchangingthesectoralmixtohigher-productivityindustries,butratherfromallindustriesboostingtheirproductivity.

Butwhichproductivitystrategy—across-the-boardgrowthortheshifteffect—isthebestpathtohigherproductivity?Theanswerdependsinlargepartonthesizeofaneconomyandtoalesserdegreeonthetypeofsector.Thelargertheeconomy,themoreimportantthegrowtheffectis

sincerelativelylessoflarge-economyoutputistraded.Moreover,themorelocal-servingthe

sectoris,themoreimportantthegrowtheffectis.Tounderstandwhy,consideranautomobile

factoryinasmallcity.Ifitsmanagersinstallanewcomputer-aidedmanufacturingsystemandraisetheplant’sproductivity(thegrowtheffect),alargeshareofthebenefitswillflowtothe

firm’scustomersaroundthenationandevenaroundtheworldintheformoflowerprices.Thecitywillbenefitonlytotheextentthatitsresidentsbuycarsfromthatfactoryorifsomeoftheincreasesinproductivitygotohigherwagesinsteadofonlytolowerprices.Ingeneral,thelion’sshareofproductivitygrowthinmostnationscomesnotfromchangingthesectoralmixtohigher-productivityindustries,butratherfromallindustries,evenlow-productivityones,boostingtheirproductivity.

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INNOVATIONPERFORMANCE

Innovationcannotbecapturedinasinglemeasure,thoughitisfrequentlyshrunkdownto

rankings,indexes,andscorecardstomakeiteasiertodigest.However,suchreductionismcanmakeitharderforpolicymakerstogainmorecompleteunderstandingofwhereexactlyCanada’sweaknessesininnovationare.

WhileitmaybehelpfulingaininganoverallunderstandingoftheglobalinnovationecosystemtohearthatCanadaranks15thontheGlobalInnovationIndex,orthatitgetsa“C”lettergradeonitsscientificarticles,thesedonotindicateexactissuesforimprovement,onlygeneralareas.

12

Moreover,noneofthemajornationalinnovationindexesprovideeffectiveassessmentsofcountries’innovationperformance.

OurgoalisnottoprovideacomprehensivelistofindicatorsforeveryaspectofCanada’s

innovationecosystem,buttopointoutspecificmeasuresthathighlightCanada’sperformance,bothgoodandbad.Assuch,tobestprovideaninformativeoverviewofCanada’sinnovation

performance,weexploreanumberofdifferentindicatorsfromarangeofstatisticalbodiesandinternationalagencies.

R&D

Asakeycomponentofinnovation,R&DisregularlyhomedinonwhendiscussingCanada’s

innovationperformance—andrightfullyso,ascountrieswithhighlevelsofR&Darefrequentlyhigh-performanceeconomieswhosefirmsgaintheabilitytocapitalizeuponthisknowledge

creation.

Basedonthefollowingindicators,Canadalagsbehindmanyofitspeersandcomparator

countriesinspendingonR&D,withavirtuallyflatlevelofspendingonR&Dacrosstheeconomyovertimein

figure1

,comparedwithmoderatetohighlevelsofgrowthacrossmanyother

countries.CanadahasseenparticularlypoorperformanceinbusinessexpendituresonR&D,withfirmsdrasticallyunderspendingonR&Dinvestmentscomparedwithothercountriesevenafter

adjustingforGDPaswellasfirmsize.

Canada’shigher-educationR&Dexpenditureishigherthanthatofthecomparatorcountries,

althoughthisonlyaccountsforasmallportionofgrossR&DexpendituresinCanadaandwithothercountries.Finally,Canada’sgovernmentexpenditureonR&Dfallsbehindothercountries,andincreasingthiscouldbeanareaofopportunityforthefederalgovernmenttospurCanadianinnovationintargetedindustries.

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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Figure1:GrossexpenditureonR&DasapercentageofGDP

13

6%

5%

4%

3%

2%

1%

0%

201120132015201720192021

Korea

UnitedStates

=0-Germany

UnitedKingdom

-0一China

Canada

Australia

Poland

Figure2

decomposesoverallR&Dexpenditureintoitsthreecomponents:businessexpenditureonR&D(BERD);higher-educationexpenditureonR&D(HERD),andgovernmentexpenditureonR&D(GOVERD).ThisillustrateshowsignificantlytheR&DgapbetweenCanadaandother

advancedeconomiesisderivedfrombusinessR&D.ThoughCanadaleadsinhigher-education

R&DspendingandtrailsquitefarbehindingovernmentR&Dspending,theoverallmakeupof

R&DacrosscountriesshowsthatevensignificantgovernmentinvestmentinpublicsectorR&DisunlikelytoaddressCanada’slowlevelofoverallR&D.

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

10

Figure2:R&DcompositionasapercentageofGDP(2021)

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6%

5%

4%

3%

2%

1%

0%

Canada

China

Australia

Germany

UnitedStates

Poland

Korea

United

Kingdom

GOVERD

HERD

BERD

Figure2

showsthatCanadaisessentiallytiedforlastwithAustraliaandPolandamongthe

comparatorcountriesinbusinessspendingonR&D.Meanwhile,businessR&Dinothercountrieshasincreasedsignificantlyinthepast10years.Initscurrenttrajectory,itappearsthatPolandwilllikelysurpassCanadainthenearfuture.ThoughCanada’sabsolutelevelsofbusiness

investmentinR&DarehigherthanPoland’sduetothesizedisparitybetweenthetwo

economies,Poland’soverallGDPcontinuestosignificantlyriseyearoveryear,fasterthanCanada’srateofgrowth.

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

11

Figure3:BusinessexpenditureonR&DasapercentageofGDP

15

5%

4%

4%

3%

3%

2%

2%

1%

1%

0%

201120132015201720192021

Korea

UnitedStates

=0-Germany

UnitedKingdom

-0一China

Canada

Australia

Poland

Canadianfirmsmadeupjust28ofthetop2,500firmsonthe“2022EUIndustrialR&D

InvestmentScoreboard,”whichliststhefirmsthatinvestthemostinR&Daroundtheworld.

Canadaagainfallsbehindmanyofthecomparatorcountries,withCanadabelowallbutAustraliaandPolandwhencomparingtopR&Dcompaniesafteradjustingforsizeofeconomy.(See

figure

4

.)

Figure4:Companiesinthetop2,500globalR&Dinvestorspertrillionsofdollarsofpurchasingpowerparity(PPP)GDP(2022)

16

Poland

Australia

Canada

Korea

Germany

China

UnitedKingdom

UnitedStates

051015202530354045

ITIFCENTREFORCANADIANINNOVATION&COMPETITIVENESS|APRIL2024PAGE

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WhileU.S.GDPwasapproximately11timesgreaterthanCanada’s,thenumberoffirmsontheR&D2,500listwas30timeshigher.(See

table1

.)

Table1:Numberoffirmsinnineadvancedtradesectors(2021)

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Sector

United

States

Canada

RestoftheWorld

Total

PharmaceuticalsandBiotechnology

263

6

209

478

SoftwareandComputerServices

197

6

134

337

TechnologyHardwareandEquipment

71

3

133

207

ElectronicandElectricalEquipment

41

2

206

249

IndustrialEngineering

28

1

138

167

AutomobilesandParts

28

2

118

148

AerospaceandDefence

15

2

27

44

GeneralIndustrials

15

0

49

64

AlternativeEnergy

2

0

6

8

To