Canada hasn’t dropped off the map when it comes to global R&D...yet. But unless a pattern of underinvestment is reversed, we are headed in that direction.

Policy discussions of research and development (R&D) and of innovation in Canada often take on a best-of-times, worst-of-times flavour. This makes the issues seem bewildering, all too often leading to hands being thrown in the air and cries of “paradox.” But the facts are not so mysterious when we examine trends and understand that today’s R&D and innovation performance is the result of investments made years ago — and, of course, that our performance tomorrow is conditioned by our actions today.

These issues are the focus of Competing in a Global Innovation Economy: The Current State of R&D in Canada, a new report from the Council of Canadian Academies.

On the “best-of-times” side of the ledger, the evidence is clear: Canada remains a solid performer when it comes to fundamental and applied research.

Canada continues to account for nearly 4 percent of the world’s peer-reviewed research publications (such as journal articles, conference proceedings and book chapters), a share that has declined only slightly in recent years. In comparison with our 2 percent share of world GDP and our 0.5 percent share of world population, we consistently punch above our weight in research publications. Growth in Canada’s research output has also remained relatively strong. While our growth in academic publications is lower than the world average — which is driven by rapid increases in emerging economies, such as China — it is higher than that of many of our peers in the G7, including the United States, the United Kingdom, Germany and Japan.

When top-cited scientists and researchers around the world are surveyed, 60 percent report that Canada has a “world-leading” research program or facility in their field of study.

Even better, Canada is holding steady when it comes to research impact. Canada ranks sixth in the world by the Average Relative Citation or ARC score (a commonly used metric designed to capture the extent to which researchers’ publications are being cited by their peers), the same rank we had in 2012. Further, when top-cited scientists and researchers around the world are surveyed, 60 percent report that Canada has a “world-leading” research program or facility in their field of study and more than a third identify Canada as among the top five countries in the world. These are remarkable achievements, well worth celebrating.

And Canadians, by and large, are well educated. We have the highest level of educational attainment among OECD countries, although among 25- to 34-year-olds, we have now slipped behind Japan and South Korea. Our production of PhD graduates is middling, but it has grown in recent years and there is little evidence to suggest any pervasive deficit of scientific or technical skills. Canada’s strong research impact, described above, suggests our universities and colleges employ among the most accomplished researchers in the world.

Indeed, our comparatively deep pools of fundamental research talent, as well as our strong research infrastructures and programs, now draw the investment of major technology companies and multinational enterprises to Canada.

Our fundamental research performance today reflects strategic investments in infrastructure and training made decades ago through agencies such as the Canada Foundation for Innovation, the National Research Council, the three national granting councils, provincial governments and many others.

Contributions to knowledge will always have intrinsic value within the academy, but the practical importance of Canada’s fundamental R&D achievements goes far beyond scholarly work. The thriving communities of tech start-ups in our cities take advantage of “made-in-Canada” research advances; of our welcoming social climate, stable and competitive regulatory and fiscal policies, and low barriers to business creation; and of a venture capital environment that is much improved from a decade ago. Canada now ranks behind only the United States and Israel in venture capital investment as a share of GDP. Tech start-ups formed today can become global leaders, employing many thousands of Canadians while generating widespread economic and social benefits.

Now for the “worst-of-times” side of the ledger. Canada’s ability to participate in world-leading R&D and innovation is threatened, from two directions.

First, our record of overall R&D investment since the turn of the century is dismal. In 2001, Canada invested just over 2 percent of GDP in R&D (see figure 1). This was below the OECD average at the time. Since then, this ratio has further declined in Canada, while climbing across OECD nations and most of the rest of the world. Canada now invests only 1.7 percent of GDP in R&D. Meanwhile, several of the world leaders have reached and surpassed 3 percent. In stark terms, Canada now needs to more than double national R&D expenditures to equal the levels of investment in these leading countries.

This will come as no surprise to many. Low and declining business-led R&D investment especially has long been the source of hand-wringing in Canada.

What is less well known is that trends in government and higher education are almost equally dispiriting. In-house government R&D (R&D done in government labs and research facilities) has declined over the past decade in Canada and, adjusted for inflation, is now lower than it was in 2001. Not coincidentally, research publications from the federal government have also declined precipitously. R&D spending in Canada’s universities, colleges and polytechnics has grown ― but more slowly than the OECD average. The net result is that, even in the public and higher education sectors, our standing has declined.

Reversing this long slide in overall R&D investment is essential if we are to forestall a future of reduced research performance. The recent investments in fundamental science and infrastructure by the federal government in the 2018 budget were welcome steps in the right direction, but much more will be needed to keep pace, never mind close the gap, with our peer nations.

Much of the intellectual property originating in Canada is now sold or licensed to firms abroad, and many Canadian entrepreneurs and firms are unprepared or underprepared to compete in the intensely competitive global IP landscape.

The second threat to Canada’s future comes from without. Pundits are often quick to bemoan Canada’s innovation failures. In fact, however, the available evidence suggests that Canada does very well when it comes to translating R&D achievements into innovations with commercial potential.

Where we fall short is in growing this potential. All too often, Canada’s most promising technology start-ups are acquired and developed elsewhere, leading to a loss of social and economic benefits. Similarly, much of the intellectual property originating in Canada is now sold or licensed to firms abroad, and many Canadian entrepreneurs and firms are unprepared or underprepared to compete in the intensely competitive global IP landscape. Our tax treatment of R&D is more generous and more competitive to smaller firms than it is to larger ones ― making Canada too often a better place to start a company than to grow one.

Canadian Prime Minister Justin Trudeau talks to the owner of Hydrogenics Daryl Wilson of Mississauga as he shows him a bus equipped with their technology in Beijing, China on Monday, Dec. 4, 2017. THE CANADIAN PRESS/Sean Kilpatrick

To fully reap the rewards of our considerable R&D advantages, we have to become better at supporting our nascent technology ventures as they grow, giving them more reasons to stay in Canada rather than decamping to Silicon Valley or elsewhere. We have great potential; we must improve our capacity to capitalize on that potential.

The world stands on the brink of profound changes. Technologies such as artificial intelligence, autonomous vehicles, synthetic biology, personalized medicine, networked production processes and many others promise widespread social benefits; they also threaten to become a source of major industrial and societal disruption. Canada has what it takes to be among the nations that define this future, and to benefit strongly from the new technologies and applications that emerge. It also has the potential to be passed by, left by the wayside.

The separate trends in Canadian R&D are both encouraging and discouraging, but they are not mysterious. The duality simply reflects that today’s achievements are due to the foresight of previous generations of policy-makers and leaders who prepared Canada to compete in the global knowledge economy. The question now is whether future generations of Canadians will benefit similarly from the investments and decisions made by our generation.

Photo: CALGARY – Prime Minister Justin Trudeau listens as Craig Lawson MacKenzie, left, and Jesse Rafael Rodriguez, second from left, explain a flow lab during a tour of the MacPhail School of Energy at the Southern Alberta Institute of Technology Polytechnic, on Wednesday, Dec. 21, 2016. THE CANADIAN PRESS/Jeff McIntosh.

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