Friday, March 21, 2014

Research and Development across Canada

Quebec allocates almost the same share of its gross domestic product to research and development as the province of Ontario but the number of patents delivered in Ontario is the double of that in Quebec. This difference lies in the dynamism of the two economies.

The first of the two TV debates in view of April 7, 2014 general election took place yesterday, March 20, between the leaders of four political parties. Were debating Mrs. Françoise David for Quebec Solidaire, Mr. François Legault for  the Coalition for the Future of Quebec, Mr. Philippe Couillard for the Liberal Party of Quebec, and the outgoing Prime Minister Mrs. Pauline Marois for the Quebecois Party. Economic issues were the first of the four topics discussed. To the question which strong medicine, the party leaders were proposing to stimulate Quebec’s economy, Mrs. Marois was the only one to talk about reviving foreign trade and research and development (R&D). I found it unfortunate that she did not went deep into these points that differentiate her from her challengers.
R&D is the investment in the design of the goods that an economy will produce in the future or in the discovery of new and better ways of doing things. Nowadays, innovations resulting from R&D are protected with patents. As a matter of fact, R&D stimulates growth in an economy since it increases business investment spending and revives exports and investments abroad given the know-how domestic firms gain from it.   

In terms of percentage of its gross domestic product (GDP), Quebec invests more than any other province in Canada in R&D. As it appears in Figure 1 below, between 1981 and 2011, it is, on average, 2.02 % of Quebec’s GDP that is allocated to this activity versus 2.01 % in Ontario.
Figure 1: Share of Gross Domestic Expenditure on R&D in GDP, average, 1981-2011, Data Source: Statistics Canada
Figure 1: Share of Gross Domestic Expenditure on R&D in GDP, average, 1981-2011, Data Source: Statistics Canada, NL: Newfoundland & Labrador, PE: Prince Edward Island, NS: Nova Scotia, NB: New Brunswick, QC: Quebec, ON: Ontario, MB: Manitoba, SK: Saskatchewan, AB: Alberta, BC: British Columbia, Territories: Nunavut, Northwest Territories, and Yukon
 While the share of GDP invested in R&D is almost the same in Quebec and Ontario, the number of patents granted in Ontario is the double of that in Quebec.
Figure 2: Percentage Share of Patents Granted by the USPTO to Institutions across Canada, Average, 1980-2012, Data Source: Institute of Statistics of Quebec
Figure 2: Percentage Share of Patents Granted by the USPTO to Institutions across Canada, Average, 1980-2012, Data Source: Institute of Statistics of Quebec
Without any doubt, there is more room to entrepreneurship in Ontario than in Quebec. That is why the two provinces allocating the same share of their GDP to R&D end up with different productivities as far as patents are concerned. To be more prosperous, Quebec has to foster the creation and expansion of small and medium size companies.