Innovation

Business innovation in Canada: R&D, venture financing, patents, and technology exports

Innovation turns research into new products, processes, and businesses. It is also important for driving the productivity growth that raises living standards. Canada is strong on the inputs: it educates a highly skilled workforce, and its researchers per capita rival the leaders. Yet on many measures of business innovation output, such as private-sector R&D, high value patents, and high-technology exports, it sits below most of its peers. That gap has persisted for decades.

The charts below place Canada relative to its 16 OECD peers across the innovation pipeline. For the research base itself, see Science; for how much the economy invests overall, see business investment and productivity on the Economy page.

Business R&D (BERD, % of GDP)

The clearest gauge of business led innovation is how much the private sector itself spends on research and development. Canadian business R&D has run well below the peer average for decades. This is a contributor to the country’s productivity gap.

Venture capital

Young, research-intensive firms need risk capital to grow. Venture-capital investment, as a share of GDP, shows how much of that financing an economy mobilizes. Canada has a larger venture market than many peers, but it remains well below the United States.

High-value patents

Patent counts reward quantity, and most patents are low-value domestic filings. Triadic patent families — inventions patented at the European, US, and Japanese offices together — screen those out, so they track genuinely commercial, internationally protected inventions. Per million people, Canada produces far fewer of these than the research powerhouses (Switzerland, Japan, Korea), despite a comparable research workforce.

High-technology exports

Innovation shows up in what a country sells. High technology exports measure how research-intensive a country’s traded goods are. This includes fields such as aerospace, pharmaceuticals, electronics, and scientific instruments. Canada’s share sits below most peers and well under the leaders (Israel, Korea, Switzerland).

How governments back business R&D

Most governments help fund business R&D in two ways: direct funding (grants and contracts) and tax incentives (credits that lower the cost of research, like Canada’s Scientific Research and Experimental Development program). Canada leans on tax credits far more than direct grants. This shows the latest year split for each peer with Canada outlined.

The economy behind the gap

Canada’s economy leans toward resource extraction, finance, and real estate more than the R&D-intensive manufacturing that drives most private research in peer economies. Also, a large share of the innovation Canada does produce is owned or performed from outside the country.

Canada’s economy, by industry

Real estate is the largest economic sector, followed by manufacturing, health and social services, and finance. Mining, oil and gas (highlighted alongside finance) is a significant share, and it’s concentrated in a few provinces. Together, finance, real estate, and resource industries make up more of the economy than manufacturing and the knowledge-intensive sectors that perform most private R&D.

Who performs Canada’s business R&D

More than a third of the research and development performed by businesses in Canada is carried out by foreign-controlled firms. Foreign investment brings real R&D activity to Canada, but it also means a large part of the country’s business research is performed by firms headquartered elsewhere.

Where invention value goes

Inventions made in one country are often owned by companies in another. About a quarter of the patents invented in Canada are owned by US entities. This is the highest share of any peer country and a concrete measure of how closely Canadian invention is tied to firms south of the border.

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