Editorial - 18-7

Where did all of Canada’s high-tech companies go? That’s the $64,000 question arising from data showing that the number of R&D-performing firms over the last 10 years has actually declined. Between 1994 and 2000 — a period when the high-tech sector was booming (some would argue bubbling) — the number of high-tech firms conducting R&D dropped from 11,638 to 10,418, a net loss of 1,120 (see back page).

Preliminary data reveal that the decline accelerated rapidly with the bursting of the high-tech bubble, which should give policy makers serious pause about the impact of decisions made during that time. These data have been circulated privately in recent weeks, and the reaction has reportedly been one of shock and surprise. That includes officials at Statistics Canada, who generated the data in the first place!

For the past 20 years, Ottawa has been setting targets for R&D spending. Under Brian Mulroney the government called for a doubling, while the current regime wants the private sector to triple R&D output by 2010. The objective isn’t R&D spending for its own sake, but to broaden the base of firms that are striving to become more innovative through R&D. Whatever strategies have been implemented to date, they’re obviously not working.

There’s no simple explanation for why the decline occurred, but clearly more analysis is required to come up with answers. It’ll be interesting to see whether the decline is uniform across sectors and jurisdictions. Preliminary perusal of the data indicates that there are distinct discrepancies. This story is far from over.