What Is Research and Development (R&D)?

The Big Driver of Innovation

What does it mean to be innovative? The key element is research and development (R&D).

R&D is a scientific investigation that explores the development of new goods and services, new inputs into production, new methods of producing goods and services, or new ways of operating and managing organizations.

"Research" aims to generate knowledge in the hopes that it will help create or improve a product, process or service. "Development" converts research findings or other knowledge into a new or improved product, process or service.

In concrete terms, R&D brings new knowledge and processes to Canadian businesses — the new, higher value-added products, processes and services that Canada needs in order to thrive in a knowledge-intensive market. Innovative companies can offer skilled employment opportunities for Canada's knowledge workers.

Companies embarking on R&D projects need to adopt focused business strategies, obtain secure financing and undertake risk management.

Why Is Research and development (R&D) Important?

Advantage Canada: Building a Strong Economy for Canadians — a long-term plan published by the Government of Canada in November 2006 — explains how the global economy has been altered over the past 20 years by the rise of new emerging economies, reduced trade barriers, and lower telecommunications and transportation costs. The production of goods and services is organized along global supply chains now, spread across countries according to their comparative advantage.

Research and development (R&D) allows Canada to participate in new markets and industries, and lets Canadian businesses offer their customers new or improved products, processes and services.

Return on investment

An active R&D community can attract additional highly skilled personnel into related fields of innovation. Individual Canadians win, too, because R&D brings economic development, employment opportunities, and cost savings and benefits conferred by the new products, processes and services created. It also elevates knowledge among Canadian employees, and encourages Canadian workers to remain here in Canada.

What Makes Research and Development (R&D) Difficult?

The genesis of every groundbreaking invention is a great idea.

But pulling together the skills, expertise and resources needed to develop, test and deploy the idea can prove challenging. In addition, research and development (R&D) projects have long gestation periods before the product gets to market and sales revenue starts rolling in. Depending on the project, commercial success may not achieve its full potential for 20 years or more. This kind of timeline and uncertainty limits the number of traditional financing sources interested in funding pre-market projects.

There's also a level of risk and uncertainty about R&D projects and their likely outcomes. The exploration of new ideas involves charting uncharted territory. Not all projects will succeed, technically and/or commercially, but experience has taught governments around the world that even projects that have limited or even no commercial success can generate some economic, social or environmental benefits.

Investing in R&D makes sense, for without measured risk, innovation and all the benefits it generates would cease to exist. That's why governments play an important role in supporting the development of great ideas.

R&D Process Flowchart

Description of Figure

R&D Process
  • Ideas
    • Basic Research
  • Applications
    • Applied Research
    • Technology Development
  • Prosperity
    • Markets and Users

What is the Government's Role in Research and Development (R&D)?

The Government of Canada recognizes the vital role innovation plays in achieving Canada's social and economic goals, and contributing to the well being of Canadians. Innovation's benefits extend far beyond the success of individual companies.

The challenges facing innovative Canadian companies include the need to ensure that they have secure funding partners who understand research and development (R&D) timelines and remain committed through the long term.

The Government of Canada helps to facilitate the innovation process through various programs, including tax credits for scientific research and experimental development (SR&ED). Repayable R&D contributions programs such as the Strategic Aerospace and Defence Initiative operated by the Industrial Technologies Office can effectively multiply investments and the benefits they generate by leveraging private sector contributions and attracting foreign investors to Canada.