Industrial Research and Development

Industrial Research and Development

Technological innovation is essential for economic growth and for the improvement of the quality of life. Industrial research and development (R & D) is at the heart of the innovative process. While R & D is carried out in sectors other than industry, mainly government and the universities, industrial R & D is most clearly linked to technological innovation and hence to economic growth.

Prior to WWII, Canadian industry depended largely on imported TECHNOLOGY. The few indigenous innovations were the work of individual inventors rather than the result of systematic, planned research and development. During WWII, the MANUFACTURING industry grew spectacularly and the R & D to support it grew almost as rapidly. Canada emerged from the war with the world's fourth-largest manufacturing output, exceeded only by the US, UK and USSR. No one expected Canada to maintain this position when countries such as Japan, Germany, France and Italy recovered from the war.

After the war, Canada had a substantial lead over most other countries in many HIGH-TECHNOLOGY fields. The Defence Research Board (DRB) and the Armed Forces, supported in some areas by the NATIONAL RESEARCH COUNCIL (NRC) and other government agencies, made a valiant but usually unsuccessful effort to maintain this lead. The history of industrial R & D and innovation in Canada from 1945 to the 1970s can be told vividly by tracing the history of some of these defence-initiated activities (see DEFENCE RESEARCH). The outstanding technological success of that postwar period was nuclear power and the evolution of the CANDU reactor.

Canada became involved in building a heavy-water reactor for producing plutonium as part of the US-British-Canadian atomic bomb effort. Credit for getting the projects started so quickly and so successfully must go mainly to C.J. MACKENZIE, then acting president of the NRC, who had the support of C.D. HOWE, then minister of munitions and supply. Credit for the success of the design of the early reactors NRX and NRU goes to the team led by Sir John Cockcroft from Cambridge, England. British and French involvement made a significant contribution in the early stages but, over the years, the CANDU venture has become almost completely Canadian. Final success was due to the impetus provided by John ROBARTS, then premier of Ontario, who decided that ONTARIO HYDRO would order the first commercial CANDUs. The result was a series of nuclear reactors, designed and built in Canada, that were among the most successful power-producing reactors in the world. Unfortunately the technological accomplishments proved easier to achieve than the commercial ones. Very few CANDUs have been exported.

Private enterprise with, in some cases, effective support from government has made significant advances. At the end of the war, Canada had developed a substantial electronic research capability partly in government and partly in industry. The Defence Research Board set out to maintain and expand this capability by supporting industry financially and through work in its laboratory, the Telecommunications Research Establishment, at Shirley Bay, Ont. The NRC Division of Radio and Electrical Engineering was also involved in the venture. This initiative contributed to the establishment of the Bell-Northern Research Laboratory, also at Shirley Bay, and to the worldwide success of Northern Telecom Ltd, Mitel Corp and many other Canadian electronics ventures (see ELECTRONICS INDUSTRY).

Work at Bell-Northern Research led to advances in digital and electronics switching technology that have made Northern Telecom one of the world's major manufacturers of telephone switching equipment. In 1976 the Telecommunications Research Establishment was taken over by the Department of Communications, which continued the policy of supporting industry in areas such as SATELLITE COMMUNICATIONS.

Development in the AEROSPACE INDUSTRY has been much more complex. Col W.W. Goforth, creator of the DRB, talked about the advent of satellites as early as 1945. From the beginning, DRB programs included work on rockets and electronics for guided missiles. The DRB laboratory at Shirley Bay designed and built the first Canadian satellites, the Alouette and Isis series. RCA Victor in Montréal, involved as a subcontractor, was chosen by the government in 1962 as prime contractor for research and planning for the first Canadian COMMUNICATIONS satellite. Telesat Canada was then formed and gave the contract for construction to Hughes Aircraft in California.

RCA Victor was anxious to follow its successful R & D by production of both satellites and Earth stations; instead it was given another research contract to work on the next generation of communications satellites. In January 1977 RCA sold its R & D facilities outside Montréal to Spar Aerospace Ltd of Toronto and abandoned satellite research in Canada. The DRB laboratory, by then transferred to the Department of Communications, continued to work on future satellites with Spar.

In 1954 the Canadian Armed Forces expressed interest in possible future uses of technology using infrared radiation for various purposes. DRB gave DE HAVILLAND CANADA a contract for R & D work under which a specialist team was brought over from England to transfer this technology to Canada. Work began in the special projects and applied research division of de Havilland, which was later purchased by L.G.A. Clarke and became Spar Aerospace Ltd.

After many years of successful participation in the US space program, Spar broke into the headlines in 1981 with the CANADARM, the remote-manipulator system built for the US Space Shuttle. Spar has also worked with Hughes Aircraft on the Anik series of communications satellites and was completely responsible for Anik D, launched in 1982. The company built 2 similar satellites for Brazil.

Canadian universities showed an early interest in COMPUTER SCIENCE. In 1951 the NRC and DRB supplied the University of Toronto with one of the world's big computers, the FERUT, made by the Ferranti Co in England. Shortly thereafter, Ferranti established a research lab in Toronto and DRB gave it a major contract. Many of the following leaders of computer technology in Canada were trained in this laboratory. Its first major project was Datar, an information management system for the Canadian Navy that pioneered new concepts and technology in information management. It was so far ahead of its time that no other navy adopted it, though it served as a model for later systems.

Under the impetus of defence production, Canada emerged from WWII with a relatively large, successful and innovative aircraft industry. At the end of the war the industry was largely government owned but, because of C.D. Howe's commitment to private enterprise, it was soon sold to British and US companies. In Toronto, the A.V. Roe Co designed, developed and produced the AVRO CF-100 fighter and the Orenda engine, both thoroughly competent and successful ventures by world standards. At the same time, as a private venture, A.V. Roe designed and built the AVRO JETLINER; which first flew in 1949, only a few days after the de Havilland Comet flew in England. However, Howe ordered work stopped on the aircraft.

By 1959 the AVRO ARROW, a new supersonic fighter, had made several spectacularly successful test flights and its Iroquois engine was doing very well on the test bed. However, costs had greatly outrun estimates and the US Air Force refused to place an order for the aircraft. Prime Minister John DIEFENBAKER ordered the project stopped and all prototypes and parts not just scrapped but physically destroyed. Subcontracts from the Arrow and other aircraft production supported a large and growing number of small companies capable of high-quality innovation and production. Although they were supported by the Arrow contract, their services stimulated progress in many related industries.

During most of the past three decades there has been concern and debate in Canada about the low level of business spending on R&D as measured in international comparisons. The level, as a share of GDP, was 0.76% in 1985 and 0.73% in 1990, about half that of other advanced industrial countries. Twenty-five firms perform more than half Canada's industrial R&D. Much the largest performer is BCE INC (Bell Canada, Bell Northern Research and Northern Telecom). Among the largest 6 are ATOMIC ENERGY OF CANADA, ONTARIO HYDRO and HYDRO-QUÉBEC. One sector with substantial growth in industrial R&D during the past decade is the PHARMACEUTICAL INDUSTRY, stimulated by the strengthening of patent protection in 1987.

The R&D expenditures by Canadian industry were estimated to be $5.2 billion in 1991. That amounted to only about 55% of total Canadian R&D still, a major rise from 36% in the mid-1970s. Among the 12 largest OECD economies, Canada ranked 10th in the ratio of industrial R&D to GDP.

Canadian firms, when grouped by sectors, generally perform much less R&D than their trade competitors. Using the indicator of R&D as a percentage of sales, Canadian firms undertake R&D at a rate about one-third to one-half the rate of their leading international sectoral competitors. A notable exception is TELECOMMUNICATIONS.

The reasons for the lower level of R&D spending in many Canadian industries are the choice of business and technology strategy (which in part leaves many resource-based Canadian companies as primarily commodity product focused and essentially non-participants in many higher value adding segments); the relatively small size of many Canadian firms (for example in auto-parts, machinery and food processing); the high absolute thresholds of R&D expenditure required to be a meaningful player in some product lines, especially for breakthrough technology strategies; and the degree of foreign ownership of Canadian firms (especially important in the case of the AUTOMOTIVE INDUSTRY, but also relevant in sectors such as petrochemicals and oil and gas, see PETROCHEMICAL INDUSTRY; PETROLEUM INDUSTRIES).

In the important forest product sector, Canadian firms spend less than 0.5% of their sales on R&D, about half the level of leading US and European firms. In 1990 there were about 500 employees in R&D, or about half the number in just one leading American firm. About 17% of Canadian forest product R&D is performed by co-operative research institutions and 43% by governments and universities (see FOREST ECONOMICS; PULP AND PAPER INDUSTRY).

Increasing effort has been devoted to marshalling Canada's university-based research in support of broad or detailed industry interests. A major federal government program in this regard is the Networks of Centres of Excellence, supporting world-class research of interest to industry in areas such as genetic diseases, neuroscience, microelectronic networks, concrete and telecommunications. (see SCIENTIFIC RESEARCH AND DEVELOPMENT.)

In the 1990s the federal government has shut down most of its grant programs designed to stimulate industrial R&D. It has placed increased reliance for this objective on tax incentives which are among the most generous in the world. And in 1995 the government introduced a Technology Partnership Canada investment program, designed to share the risks and rewards of private sector R&D, primarily with the AEROSPACE INDUSTRY, but also those firms developing certain enabling technologies.

Despite the uncertainties of governmental and managerial support, the genius of Canadians continues to break through. The aircraft industry has continued to be moderately innovative with the DE HAVILLAND OTTER, which dominates northern flying, the Dash 7 and Dash 8, the CANADAIR CHALLENGER, the Pratt and Whitney (United Aircraft) gas turbine engines and other successful aircraft such as Bombardier's regional jet. Through companies such as Northern Telecom, Mitel, Newbridge, Cognos, Corel, and others, the Canadian communications and electronics industry is now a front runner in fibre optics, digital data management, microprocessors, high speed communications networks and computer software.

Canada has repeatedly demonstrated that it has the human, educational and research resources to do first-class industrial R & D. Success, measured in industrial jobs and exports, depends on a climate favourable to R & D at all levels - industry, government and universities - and a bold and aggressive attitude in industry towards technological innovation and entrepreneurship. If these can be created and maintained, Canada will be well placed for the new knowledge economy.

See also INVENTORS AND INNOVATIONS; SCIENTIFIC RESEARCH AND DEVELOPMENT.