Foreign Firm R&D share in Canada

Economists and policy makers care about public and private sector spending on R&D because research and development activity shapes the products and services that are available in the marketplace. Low propensity to spend in this area can compromise a firm’s ability to compete as product markets evolve over time. When the problem is systemic, like it is in Canada, it means our economic potential is capped.

In our research, we dug into some of the Canadian and international data surrounding research and development spending and found some concerning trends:

• Foreign firms operating in Canada spend 8 times more on R&D on a per firm basis than Canadian-owned firms. This is true across every industry other than those dominated by the public sector including education and utilities (See Chart 1 below).
• Foreign firms operating in the retail trade space spent an average of $85 million each on R&Din Canada in 2023. Canadian firms in the retail trade space spent an average of $6 million each in 2023.
• 44% of all R&D spending in 2023was focussed on the ICT (information, communications and technology) sector – almost double the share devoted to manufacturing.
• As a share of GDP, Canada’s private sector spends just half of the OECD average on R&D, only two-fifths of what the U.S.’s private sector spends and just one-quarter of South Korea’s private sector (See Chart 2 below).

Statistics Canada does not provide information on which companies are included in the survey but there is plenty of other data around to piece together what is going on. Read more analysis by Kaylie here.