R&D expenditures surge past $30 billion, as preliminary data for 2023 and projections for 2024 show sustained growth in business-led innovation
Canada’s business sector has continued to ramp up its research and development (R&D) spending, hitting a record $30.4 billion in 2022. This marked a 9.4% increase over 2021, reflecting the ongoing investment in innovation that has been on an upward trajectory since 2016. Although the growth pace is expected to slow slightly in 2023, preliminary data indicates a further 3.4% increase, with projected spending reaching $31.4 billion. For 2024, businesses are optimistic, with spending intentions pointing to a 4.8% rise, pushing expenditures to $32.9 billion.
The steady increase in R&D investments underscores the critical role these activities play in driving innovation, supporting economic growth, and ensuring Canada remains competitive on the global stage. However, despite these gains, Canadian businesses still trail behind other advanced economies in terms of R&D intensity relative to gross domestic product (GDP).
From 2014 to 2024, Canada has witnessed significant changes in its R&D spending landscape. According to the data, the spending has consistently increased, particularly in the past three years, as businesses have placed a higher emphasis on innovation and technological development.
Total In-house R&D Expenditures (2014–2024)
| Year | Total In-house R&D Expenditure (Billions CAD) | Annual Growth (%) |
|---|---|---|
| 2014 | $20.5 | — |
| 2015 | $21.0 | 2.4 |
| 2016 | $21.6 | 2.9 |
| 2017 | $22.4 | 3.7 |
| 2018 | $23.5 | 4.9 |
| 2019 | $24.3 | 3.4 |
| 2020 | $28.5 | 17.3 |
| 2021 | $27.8 | -2.5 |
| 2022 | $30.4 | 9.4 |
| 2023* | $31.4 | 3.4 |
| 2024** | $32.9 | 4.8 |
R&D Expenditure Breakdown: Where Does the Money Go?
In 2022, a substantial portion of the $30.4 billion was funneled towards current in-house expenditures, which include wages, materials, and services directly supporting R&D activities. Notably, wages and salaries alone accounted for $20.7 billion, or 71.5% of total current in-house expenditures. This represents a significant increase from 61.8% in 2014, illustrating the growing importance of highly skilled R&D personnel. The total number of full-time equivalents (FTEs) engaged in R&D activities also rose sharply over this period, from approximately 154,000 in 2014 to over 212,000 by 2022, marking a 4% annual growth rate.
Allocation of In-house R&D Expenditure (2022)
| Category | Amount (Billion CAD) | Percentage of Total (%) |
|---|---|---|
| Wages and Salaries | $20.7 | 68.1 |
| Services Supporting R&D | $5.6 | 18.4 |
| Materials for R&D | $2.1 | 6.9 |
| Other Related Costs | $0.5 | 1.6 |
| Capital Investments | $1.5 | 4.9 |
Outsourcing and External Collaboration in R&D
External collaboration through outsourcing R&D activities has remained a key element of Canada’s innovation strategy. In 2022, businesses allocated $5.8 billion to outsourced R&D, with the majority going to Canadian performers (68.1%), while foreign performers accounted for the remaining 31.9%. However, projections for 2024 suggest a shift, with the share of outsourcing to Canadian firms expected to drop to 61.5%. This adjustment reflects a more globalized approach to R&D partnerships, where Canadian firms increasingly look beyond domestic borders for expertise.
Emerging technologies such as biotechnology and nanotechnology are rapidly shaping the future of Canada’s industrial R&D landscape. Medical biotechnology, driven by advances in personalized medicine and pandemic-related innovations, has seen a significant surge in investment, doubling from $561 million in 2019 to $1.2 billion in 2022.
Conversely, agricultural biotechnology has remained relatively stable, with expenditures hovering around $123 million in 2022. This field focuses on enhancing crop yields and resilience to environmental stressors. Nanotechnology, which applies nanoscale materials to improve industrial applications, reached $79 million in 2022, down from $99 million in 2020 but still above 2019 levels.
R&D Expenditures in Emerging Technologies (2016–2022)
| Technology | 2016 (Million CAD) | 2019 (Million CAD) | 2022 (Million CAD) |
|---|---|---|---|
| Medical Biotechnology | $350 | $561 | $1,200 |
| Agricultural Biotechnology | $115 | $130 | $123 |
| Nanotechnology | $60 | $64 | $79 |
| Industrial Biotechnology | $50 | $50 | $66 |
| Environmental Biotechnology | $44 | $48 | $24 |
As Canadian businesses continue to invest in research and development, the nation’s capacity for innovation remains strong. The record-breaking $30.4 billion spent in 2022 reflects both the confidence and commitment of the business sector to driving technological advancements. While the growth rate for 2023 and beyond is expected to moderate, early indicators suggest that R&D will continue to play a pivotal role in Canada’s economic future.
However, with R&D expenditures still hovering around 1% of GDP, Canadian businesses have room to grow to match the efforts seen in other advanced economies. Collaborating globally and embracing emerging technologies like biotechnology and nanotechnology will be crucial in elevating Canada’s R&D efforts further and securing its place as a leader in innovation on the global stage.