Quebec’s Performance in Innovation

In this study, we analyze the link between innovation and productivity. At first, we define and describe the most frequently used measures of innovation: survey data, research and development expenditures, and patents. We find that survey data actually measure innovation, but that it is not currently well suited for international comparisons. On the other hand, research and development expenditures and patents are not accurate measures of innovation, but rather are inputs in the innovation process. However, patents are inputs closer to an innovation than are research and development expenditures. Secondly, we compare the performance of Quebec for these different measures to the performance of other industrialized countries. Our analysis shows that the province ranks between the 10th and the 11th positions among the OECD countries analyzed for the size of its research and development expenditures relative to its gross domestic product while it ranks between the 15th and the 16th for the patents. Given the level of research and development expenditures, performance in terms of patents should be higher. We therefore question the efficiency of research and development in Quebec and conclude that Quebec’s performance is less than the average of the industrialized countries studied. Finally, we examine how public funding of research and development could explain the low level of efficiency observed. We find that the Canadian public funding is the second most generous among OECD countries analyzed. Unfortunately, the public funding could be too generous and cause a crowding out effect. The fact that indirect public funding is preferred to direct public funding would also explain the low efficiency of research and development in Quebec and Canada. We therefore recommend that should be reviewed in depth the public funding of research and development in order to maximize its impact on productivity.