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R&D spending back in fashion after 5-year lull

The exterior of one of the Research In Motion’s buildings in Waterloo, Ont.

MIKE CASSESE/REUTERS

After a five-year decline in spending for research and development, Canadian companies increased their R&D outlays in fiscal 2011, an annual study finds.

Corporate R&D spending increased by 6.1 per cent to $10.9-billion last year among the 100 biggest-spending firms, according to Research Infosource Inc.

The results were propelled by a 7.2 per cent combined spending increase by members of the "$100-million Club" – the 24 top companies that spent at least $100-million on R&D in fiscal 2011, says the report.

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Together, they spent $8.14-billion, or 74 per cent of total top-100 spending, up from $7.59-billion a year earlier, according to the results.

Research In Motion Ltd. hung onto its first-place ranking, with a $1.54-billion R&D spend in 2011, a 10.8-per-cent increase over the fiscal 2010.

Montreal-based Bombardier Inc. climbed 8 positions to take the No. 2 spot, with a 27-per-cent increase and total R&D spending of $1.34-billion.

Infosource chief executive officer Ron Freedman cautions, however, that corporate revenues rose even faster than R&D spending, by 10.4 per cent among the companies that disclosed their revenue.

That means R&D spending growth failed to keep up with income growth, he said in a news release.

"The fiscal 2011 data comes as quite a surprise – a pleasant one at that," he said.

"We were expecting at best flat performance."

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A sectorial breakdown indicates that the communications-telecom equipment sector spent the most, with aerospace not far behind.

Spending in the pharmaceutical sector declined: 21 pharma-biotechnology firms spent a total of $1.27-billion in fiscal 2011, down from $1.39-billion in 2010, "a significant drop of –8.3 per cent," said Toronto-based Infosource.

Mr. Freedman said in an interview that the 2011 results in the annual survey show there is much volatility in R&D investment in Canada.

The 2011 data represent "quite an uptick from what we used to see," he said.

But he noted that there was only a 2.9-per-cent increase in R&D spending in 2011 among the other 76 firms besides the 24 that invested $100-million or more.

"There is still a dependency on a small number of large performers," he said.

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He warned that next year's results may be negatively affected by the federal government's new tax-credit regime, which lowers the base amount allowed for tax deductions.

"I think next year is going to be a very problematical year."

The Top Ten:

  • 1. Research In Motion Ltd.: $1.542-billion, up 10.8 per cent
  • 2. Bombardier Inc.: $1.336-billion, up 27 per cent
  • 3. BCE Inc.: $569.1-million, down 30.7 per cent
  • 4. Magna International Inc.: $519.3-million, up 12 per cent
  • 5. IBM Canada Ltd.: $500-million, down 9.3 per cent
  • 6. Pratt & Whitney Canada Corp.: $473-million, up 19.7 per cent
  • 7. Atomic Energy of Canada ltd.: $441.9-million, down 7.2 per cent
  • 8. Ericsson Canada Inc.: $323-million, down 8.5 per cent
  • 9. AMD Canada: $283.3-million, up 17.2 per cent
  • 10.Alcatel-Lucent: $237-million, up 1.7 per cent
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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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