International comparisons of R&D effort: The case of the Canadian pharmaceutical industry

Abstract The Canadian federal government, anxious to stimulate innovation, announced recently a policy objective for the economy: the attainment of industrial research expenditures reaching 1.5 percent of the gross national product. The proposed substantial increase over the current level is rationalized by comparison with economy-wide research intensities (GERD/GNP) in other OECD countries. This paper questions the economic validity and policy relevance of international aggregate comparisons. It argues that inter-country comparisons should take place at individual industry levels where technologies are similar and proposes a methodology for formulating RD this Canadian industry presumably does not require governmental attention to its R&D activities.