Plans to spend more on Canadian R&D in 2011

The Dec. 9, 2011 news item on CBC (Canadian Broadcasting Corporation) News provides a hint of relief in what has become a rather dismal performance in industrial R&D spending. Canadian companies planned to spend more on R&D in 2011 than they had for years. From the news item,

Research and development spending by industry is expected to increase in 2011 — the first time in four years that has happened in Canada.

“The 2011 industrial R&D spending intentions suggest that recovery is underway after three consecutive years of declining R&D spending that occurred across almost all industrial sectors,” said a Statistics Canada report Friday.

If you look at the CBC’s news item today (Dec. 12, 2011), you’ll see this correction,

Canada’s R & D spending-to-GDP ratio in 2009 fell to the level it was in 1994, not 2004 as originally reported.

If I understand things correctly, there was a precipitous fall in 2009 and now in 2011, we’re enjoying a modest increase in plans for R&D spending.

From the Statistics Canada Daily, Dec. 9, 2011 issue,

2011 (intentions)

Businesses in Canada anticipated spending just over $15.6 billion on industrial research and development (R&D) in 2011, up 5.0% from 2010.

Almost half (49%) of this industrial R&D spending is anticipated to be spent in the manufacturing sector ($7.7 billion), an 8.0% increase from 2010. In 2011, about 43% of industrial R&D is anticipated to be spent in the services sector ($6.8 billion), up 3.1% from the previous year. The remaining 8% of R&D spending is anticipated to be spent in primary industries, utilities and construction.

The 2011 industrial R&D spending intentions suggest that recovery is underway after three consecutive years of declining R&D spending that occurred across almost all industrial sectors. However, total R&D spending intentions are still below the $16.8 billion spent in 2007. [emphasis mine]

You can read the bulletin and article,

The article, “Industrial research and development, 2007 to 2011,” is now available in the service bulletin Science Statistics, Vol. 35, no. 4 (88-001-X, free), from the Key resource module of our website under Publications.

Having seen some very questionable definitions of R&D, I checked one of the descriptions that Statistics Canada used, from the Data quality, concepts and methodology: Data quality, concepts and methodology page,

Generally speaking, industrial R&D is intended to result in an invention which may subsequently become a technological innovation. An essential requirement is that the outcome of the work is uncertain, i.e., that the possibility of obtaining a given technical objective cannot be known in advance on the basis of current knowledge or experience. Hence much of the work done by scientists and engineers is not R&D, since they are primarily engaged in “routine” production, engineering, quality control or testing. Although they apply scientific or engineering principles their work is not directed towards the discovery of new knowledge or the development of new products and processes. However, work elements which are not considered R&D by themselves but which directly support R&D projects, should be included with R&D in these cases. Examples of such work elements are design and engineering, shop work, computer programming, and secretarial work.

If the primary objective is to make further technical improvements to the product or process, then the work comes within the definition of R&D. If however, the product, process or approach is substantially set and the primary objective is to develop markets, to do pre-production planning or to get a production or control system working smoothly, then the activity can no longer be considered as part of R&D even though it could be regarded as an important part of the total innovation process. Thus, the design, construction and testing of prototypes, models and pilot plants are part of R&D. But, when necessary modifications have been made and testing has been satisfactorily completed, the boundary of R&D has been reached. Hence, the costs of tooling (design and try-out), construction drawings and manufacturing blueprints, and production start-up are not included in development costs.

Pilot plants may be included in development only if the main purpose is to acquire experience and compile data. As soon as they begin operating as normal production units, their costs can no longer be attributed to R&D. Similarly, once the original prototype has been found satisfactory, the cost of other “prototypes” built to meet a special need or fill a very small order are not to be considered as part of R&D.

Here’s what they specifically will not include,

Research and development should be considered to be “Scientific Research and Experimental Development” as defined in Section 37, Regulation 2900 of the Income Tax Act; this section specifically excludes the following:

  1. market research, sales promotion,
  2. quality control or routine analysis and testing of materials, devices or products,
  3. research in the social sciences or the humanities,
  4. prospecting, exploring or drilling for or producing minerals, petroleum or natural gas,
  5. the commercial production of a new or improved material, device or product or the commercial use of a new or improved process,
  6. style changes, or routine data collection

My fingers are crossed that these good intentions became reality.

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