Yoshua Bengio, founder of the AI institute Mila, in 2023. A new report shows investment in Canadian R&D continues to decline relative to global competitors.Christinne Muschi/The Canadian Press
In October, University of Montreal computer scientist Yoshua Bengio reached an extraordinary milestone. According to the academic search engine Google Scholar, he is the first living person to be cited in research literature more than one million times.
Dr. Bengio was born in France and raised and educated in Montreal. A pivotal figure in the discoveries that underpin the AI revolution, he can rightly be called an example of Canadian science at its best – a homegrown genius whose impact is global and, now, record-setting.
But in the world of science and technology, having an all-star player does not guarantee a profitable team.
Like his prize-winning counterparts, Geoffrey Hinton at the University of Toronto and Richard Sutton at the University of Alberta, Dr. Bengio’s work has kept Canada at the forefront of artificial intelligence research. Nevertheless, a list of the world’s top 50 AI companies compiled this year by Forbes includes only one Canadian entry and Canadian businesses have been slower than others to adopt the technology.
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AI is not the only field where Canadian expertise has not correlated with economic benefits. Based on a new report, anyone looking for signs of an innovation-fuelled renaissance to address the challenges the country faces has reason to worry.
The report, issued Tuesday by the Council of Canadian Academies, takes a comprehensive look at the state of science and technology in Canada – the first such assessment since 2018. At its focus is the role that research and development plays in economic growth across the country.
Like previous iterations, the report demonstrates that investment in Canadian R&D is historically weak. But what is striking about this latest snapshot is that those investments are continuing to decline relative to global competitors, and at an accelerating rate.
Given Canada’s fractured trade relationship with the United States, China’s emergence as an R&D superpower, and the sweeping changes anticipated from AI and other technologies, the report concludes that innovation is playing a key role in the country’s productivity crisis.
Because innovation drives productivity and is central to economic performance, the low rate of R&D portends higher costs and a falling standard of living. According to the report’s authors, solving that problem will require more than a single policy initiative or tax incentive.
“We need a new partnership between government and business to change the trajectory of the innovation across our entire economy,” said Ilse Treurnicht, an entrepreneur and former chief executive of Toronto’s MaRS Discovery District, who chaired the expert panel behind the report.
By design, reports from the federally funded Council of Canadian Academies do not make recommendations. In theory, this allows governments to take on board the council’s findings and arrive at their own policy decisions. In practice, it means politicians can avoid appearing as though they are not acting when action is recommended.
Yet the report, based on an 18-month investigation, has managed to be emphatic that action is required. In so many words, it suggests a major rethink of Canada’s approach to innovation is required – in particular in how it trains, encourages and utilizes the country’s intellectual capital.
For industry, that means viewing brainpower like it typically treats minerals, timber and other natural resources: as a critical asset and a source of national wealth. For leaders in government and academia, it means a concerted focus on what the report calls the country’s greatest weakness: the underused capacity of Canadians to create prosperity through innovation. As the report makes clear, a failure to address the issue comes with tangible consequences.
“Canada is going down the path of no longer being able to afford things we need, like health care and defence, and things we want, like social programs,” said David Castle, a professor of science, technology and innovation policy at the University of Victoria who was not involved in the report but reviewed its findings.
“Leaders across all sectors should study the report because we are experiencing decades of system-level failure to get ahead of the problem,” he said.
Business-based R&D is losing ground in Canada
Economies can be compared using a measure called “research intensity” – meaning how much a jurisdiction spends on research and development relative to its gross domestic product. Last year, for example, Canada collectively spent $55-billion on R&D, which translates to a research intensity of about 1.8 per cent.
In comparison, the 38 countries that make up the Organization for Economic Co-operation and Development had an average research intensity of 2.7 per cent in 2023, the most recent year for which figures are available. That is significantly higher than Canada, which does not make the list of the top 20 countries with the highest research intensity.
The underperformance comes in spite of Canada having greater than average spending on R&D in its higher education sector, particularly at its most research-intensive universities.
Where Canada lags is in the amount of research conducted by its government agencies, but especially in its business sector, where investments hover around 1 per cent, or about half the OECD average.
In the past, this disparity has sometimes been chalked up to a large resource sector that may be less dependent on innovation than other kinds of industries. The new report maintains this is not enough to explain the gap – or the continued decline relative to the global average since 2000.
Other factors include a shift from manufacturing to a more service-based economy in Canada — although a similar dynamic has not prevented the business sector in the U.S. from making above-average investments in R&D. In Canada, however, the report finds that the lion’s share of business R&D investments is concentrated in a few industrial sectors and the majority of investments come from small to medium-sized companies with fewer than 250 employees.
Panel members found that two barriers to engagement in R&D were typically cited by business leaders. One was the overall risk and uncertainty inherent in the process and the other, a shortage of skilled individuals to pursue innovation.
Elicia Maine, a panel member and professor of innovation and entrepreneurship at Simon Fraser University in Burnaby, B.C., said both barriers could be addressed in part by promoting the needed expertise in Canada.
“Uncertainty can be a benefit, and it can be managed,” she said.
Canadian businesses are slow to adopt innovation
In addition to conducting less R&D activity relative to other countries, Canada’s business sector is less likely to make use of innovations created elsewhere.
In hard numbers, the report found that the willingness of Canadian businesses to adopt new technologies dropped from 32 per cent in 2017 to 19 per cent by 2022.
“The piece that I think is a bit scary is the most commonly cited reason for not using advanced technologies – by a wide margin – is that it is not viewed as applicable or necessary for the business,” said Dr. Treurnicht.
Whereas, in the past, Canadian companies may have succeeded by being as innovative as they needed to be, the pace of technological change and growing competition could puts a premium on more forward-looking strategies.
If there is an area where government can play a useful role, it is by facilitating a more effective transfer of innovation from universities into the private sector, said Peter Morand, a consultant and former dean of science and engineering at the University Ottawa, who was not involved in the report. But such an effort would need to be a broad and well-defined priority.
“If the government really wants to improve our productivity and improve the economy, there has to be an all-of-government commitment to do that,” he said.
Higher education needs to go higher
The report identifies the higher education sector as a bright spot in an otherwise underwhelming research ecosystem, but with an important caveat.
Based on the percentage of its population with postsecondary accreditation, Canada is often counted among the most educated countries in the world. This reputation rests in part on the organization of the school system in Quebec, where CEGEP – a level of education that students complete between Grade 11 and university or college – is counted as postsecondary in global metrics.
Annual investments in research
and development: Canada vs. OECD
Percentage of GDP, by sector
THE GLOBE AND MAIL SOURCE: OECD;
COUNCIL OF CANADIAN ACADEMIES
Annual investments in research and
development: Canada vs. OECD
Percentage of GDP, by sector
THE GLOBE AND MAIL SOURCE: OECD;
COUNCIL OF CANADIAN ACADEMIES
Annual investments in research and development: Canada vs. OECD
Percentage of GDP, by sector
THE GLOBE AND MAIL SOURCE: OECD; COUNCIL OF CANADIAN ACADEMIES
From an innovation perspective, what matter more is that Canada is underrepresented in the proportion of its population with an advanced degree – including a master’s or a PhD. The net effect is that there are fewer people trained in the highest levels of any technical area.
The deficit becomes a problem in industry when those skills are needed to onboard leading technologies that could confer competitive advantage.
It also squares with earlier data, including a 2014 report, released by the council as well, which found positive attitudes toward science in Canada, but less direct connection to employment than other countries with comparable economies.
The report underscores the need not just for more advanced education but for education that is integrated with the business sector to address the country’s long-standing productivity shortfall.
“We could mitigate it if we taught innovation skills to the people who are going to be innovating,” Dr. Maine said.
While the panel’s conclusions echo those of earlier reports, they do so with a more diverse and larger array of data.
A final takeaway message is that the country has not measured enough to understand why efforts to change its R&D track record have not succeeded.
“If we’re serious about building a real innovation economy, we have to really up our analytical capacity,” Dr. Treurnicht said.