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____ Monday November 30, 2015 ____



Science, Technology and Innovation Council: Canada's Innovation Challenges and Opportunities

2014 report on the state of Canada's science, technology and innovation system that are still needed in 2016

Ottawa - On Friday the Science, Technology and Innovation Council (STIC) released State of the Nation 2014, a major report that concludes that Canada's poor business innovation performance represents the country's most profound and urgent science, technology and innovation (ST&I) challenge.

The State of the Nation 2014 report, Canada's Innovation Challenges and Opportunities- the fourth public report from STIC-charts progress from a baseline set in 2008 and compares Canada's performance to global competitors across the business, knowledge and talent pillars of the ST&I ecosystem.

ST&I drive economic prosperity and fuel advances that improve societal wellbeing. "Proactively pursuing-and achieving-a sustainable competitive advantage in ST&I is the path to higher living standards and a superior quality of life for Canadians," said Kenneth Knox, Chair of STIC. "Success requires that all players in the ST&I ecosystem work more closely together in a "systems" approach. It requires better integrating organizations, activities and funding mechanisms in a more coherent, coordinated whole to help us realize more impact from the investments we make."

Despite ongoing efforts to improve Canada's lagging business innovation performance, it has continued to deteriorate. "Canada has fallen behind its global competition on key performance indicators, reflected most tellingly in business investment in research and development. In 2013, Canada ranked 26th among international competitors on business enterprise expenditures on research and development as a share of gross domestic product," added STIC member Sophie Forest, Managing Partner, Brightspark Ventures. "Addressing this performance gap is critical to Canada's future."

On a more positive note, Canada maintains a solid foundation in the quality of knowledge production and its educated population. However, our investments in these areas have begun to lag those of competitor countries. "We cannot be complacent," said STIC member Amit Chakma, President, Western University Canada. "Maintaining and enhancing excellence requires that our investments keep pace with those of our global competitors."

The Council, chaired by Kenneth Knox, is comprised of senior individuals from the business, research, education, and government communities. The Council provides the Government of Canada with independent advice on key science, technology, and innovation policy issues and produces the public State of the Nation reports that measure Canada's ST&I performance against international standards of excellence.

A copy of STIC's State of the Nation 2014 report, Canada's Innovation Challenges and Opportunities, as well as biographical notes on the Council members, can be found at

State of the Nation 2014

The fourth State of the Nation report from Canada's Science, Technology and Innovation Council (STIC) tracks the country's science, technology and innovation (ST&I) performance against global competitors.

State of the Nation 2014 concludes that it is on business innovation that Canada faces its most profound and urgent ST&I challenge. Canada is not globally competitive in this critical part of the ST&I ecosystem, and it is falling further behind global competitors and facing a widening gap with the world's top five performing countries.

On other indicators, State of the Nation 2014 confirms what previous State of the Nation reports have found: Canada maintains a solid foundation in its educated population and the quality of its knowledge production. However, other countries have been increasing their investments in knowledge at a faster pace than Canada, a reality that has started to impact Canada's relative ranking - i.e., its competitiveness - on key research and development (R&D) funding indicators.

Business Innovation

Canada is not globally competitive

• Canada is not investing in private sector innovation at a competitive level, reflected most tellingly in investment in business R&D.

• Canada's business enterprise expenditures on research and development (BERD) as a share of gross domestic product (GDP) is considerably lower than in many other advanced economies.

• Canada's ranking on BERD intensity fell from 18th in 2006 to 26th in 2013. From 2007 to 2014,

• Canada's overall investment in business R&D dropped by over $1 billion.

• Canada is in the middle of the pack in information and communications technologies (ICT) investment as a share of GDP (i.e., ICT investment intensity), ranking 13th out of 25 countries.

• Canada is not making progress in effectively absorbing advanced research talent into the private sector. In 2012, Canada ranked 15th out of 33 countries in business enterprise researchers per thousand employment in industry, a substantial drop from 7th position in 2006. This poor performance in private-sector absorption of research talent is mirrored at the broader level of science and technology (S&T)-related occupations across the economy. In 2011, S&T-related occupations accounted for 30 percent of total employment in Canada, which positioned Canada 22nd out of 43 countries.

• Canada is out of step with its international competitors in the balance between direct and indirect government support for business R&D. In 2013, Canada ranked 10th in overall government funding of business R&D as a share of GDP. Its 4th place ranking in indirect funding and 28th place ranking in direct funding reflected the federal government's greater reliance on indirect funding mechanisms (i.e., tax credits).

• On a positive note, data suggest that Canada's small and medium-sized enterprises were at the forefront in introducing product and process innovations, positioning Canada fourth on this measure. However, our large companies lagged global competitors, positioning Canada 19th.

We cannot be complacent

• Canada enjoys some real "star power" in the scientific world. With 96 researchers among the top 1 percent of the most cited in their respective fields, Canada ranked 6th on this measure after countries with significantly larger populations.

• While the U.S. and the U.K. continued to dominate the global university rankings, Canada was very competitive within a second tier of comparator countries.

• While Canada continued to exhibit strength in the quality of knowledge production, it lost ground against international competitors in terms of funding for R&D. Although Canada's higher education expenditures on R&D (HERD) have been increasing over time, its HERD as a share of GDP (i.e., HERD intensity), at 0.65 per cent, remained steady. With other countries increasing their spending more significantly, Canada fell from 3rd position in 2006 to 8th in 2013 on HERD intensity.

• More broadly, while Canada's total funding of R&D activities (i.e., gross domestic expenditures on R&D or GERD) remained essentially unchanged between 2008 and 2014, Canada's global ranking on GERD as a share of GDP fell from 16th in 2006 to 24th in 2013.

Canada's talent base continued to be an asset, although showed mild signs of erosion

• Canada made significant progress in growing the number of PhD graduates in science and engineering. Between 2006 and 2012, Canada more than doubled the number of science and engineering doctoral degrees granted per 100,000 population, from 4.6 to 9.6. As a result of this growth, Canada rose on this measure from 19th of 23 countries in 2006 to 17th of 28 countries in 2012.

• On international tests, Canadians outperformed many of their peers abroad. Canadian 15-year-olds performed just shy of the leaders in reading, math and science. Similarly, Canadian adults performed relatively well in literacy, numeracy and problem solving in technology-rich environments.

• Canada's talent performance showed some mild signs of erosion against competitors. While Canada experienced 7 percent growth in the number of graduates (not including PhDs) in science, engineering, business and health in the period between 2006 and 2012, its global ranking slipped from 14th to 16th. With respect to the number of college graduates in business, engineering, science and health, Canada ranked fifth among comparator countries in 2012 (down from second in 2008).
The Way Forward

Responsibility for reversing Canada's poor business innovation performance and growing its knowledge and talent advantages rests with all players in the ST&I ecosystem-working together, working differently, in a "systems" approach characterized by collaboration, integration and strategic investment. To address Canada's ST&I performance challenges and build on our strengths, STIC recommends that Canada:

• close the gap on firms' investment in innovation;
• redress the imbalance of direct and indirect government funding for business R&D, to provide • greater direct support for high-risk, high-reward business R&D;
• embrace risk-taking;
• boost higher education expenditures on R&D to keep pace with other countries' support for "intellectual infrastructure"; and
• invest strategically, further focusing government funds to build globally competitive critical mass in targeted areas.

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