Innovation falls to 71.9% during pandemic, survey says

The 'Survey of Innovation and Business Strategy,' conducted by Statistics Canada for 2020-2022, critically assesses innovation trends during the challenging COVID-19 pandemic years.

The survey emphasizes that innovation, defined as the introduction of new products and processes to market or business operations, is crucial for economic growth and sustainability.

During the 2020-2022 period, marked by the pandemic, the innovation rate saw a significant drop. The proportion of businesses that introduced product or business process innovations fell to 71.9 percent, a decrease from the previous reference period's 79.8 percent (2017-2019).

This decline was observed in both product and process innovations, with the product innovation rate decreasing by just over 6 percent to 46.6 percent, and the business process innovation rate decreasing almost 10 percent to 63 percent.

The pandemic's influence was notably evident in the nature of innovation. Specifically, for product innovators, 5.1 percent brought new or improved products to market exclusively in response to the pandemic, while 38.8 percent reported that at least some of their product innovations were pandemic related.

Similarly, for business process innovation, 4.8 percent of businesses reported innovations as a direct pandemic response, and 41.4 percent declared some of their innovations were related to the pandemic.

The survey also found that the ranking of innovation rates across enterprise size groups and regions remained unchanged during the pandemic. Large businesses (78.4 percent) were more likely to innovate compared to medium (75.1 percent) and small businesses (71 percent).

Regionally, businesses in Ontario (75.1 percent) reported the highest proportion of innovators, followed by the “rest of Canada” category (72.2 percent), Alberta (71.5 percent), Quebec (70 percent), and Atlantic Canada (58 percent).

In the services-producing sector, the top four sectors with the highest innovation rates were information and cultural industries (79.5 percent), finance and insurance (79 percent), professional, scientific, and technical services (78.2 percent), and wholesale trade (77.4 percent).

The agriculture, forestry, fishing, and hunting sector had the lowest innovation rate at 50.9 percent.

Regarding innovations with environmental benefits, these decreased during the pandemic, with 46.5 percent of businesses introducing such innovations, down from 56.9 percent in the 2017-2019 period.

The survey identified COVID-19, lack of skills, and uncertainty and risk as the top three obstacles to innovation in 2022. Over one-half of Canadian businesses (50.6 percent) encountered these obstacles, with regional variations in their impact.

Moreover, over two in five businesses (41.1 percent) that implemented business process innovations reported savings related to production costs or overall expenditures on support business functions, a decrease from 48.8 percent in 2019.

There were differences across business sizes, with large businesses reporting the highest proportion of savings.

In the realm of product innovation, 65 percent of businesses developed new or improved products themselves, and nearly two in five (38.4 percent) of these businesses filed or registered their product innovations in Canada to protect their intellectual property. Large businesses were more likely to protect their IP.

Business collaboration for innovation activities showed a preference for partnering with other businesses or organizations (79 percent) over post-secondary institutions (13.7 percent) and research institutions (3.4 percent).

The role of government support in fostering innovation was significant, with 34.1 percent of businesses using at least one government support program for innovation-related activities. This support led to higher innovation rates (83.3 percent) compared to businesses not using such support (66 percent).

Large businesses were more inclined to use government support, and the most critical programs were identified as government tax incentive or tax credit programs (32.7 percent), followed by government grants and contribution programs (30.6 percent), and government training and hiring programs (28.9 percent).