Canada is slipping behind its global competitors on innovation, as business investment in research and development fails to keep up, according to a group that advises government on science and innovation.

The Science, Technology and Innovation Council says poor business innovation performance is Canada's most "profound and urgent" science, technology and innovation challenge.

From 2007, when STIC began operating, to 2014, Canada's overall investment in business R&D dropped by over $1 billion, according to the council's State of the Nation report for 2014, released Wednesday.

Canada's business enterprise expenditures on research and development as a share of gross domestic product are considerably lower than in many other advanced economies, falling from 18th in the world in 2006 to 26th in 2013.

"One of the areas we're concerned about is the complacency in business, said Kenneth Knox, a a former Ontario deputy minister of science and technology. and chair of STIC.

He said the private sector has to drive innovation strategy for it to be effective.

"The private sector has to come up with strategies of some sort so we can ensure from a governmental point of view and from an education point of view that we're playing the role that needs to be done," Knox said in an interview with The Exchange.

The STIC was put together by the Conservatives in 2007, with members from business, research, education and government and is meant to provide the government with advice on innovation issues. However, it is critical of the Harper government's approach to boosting innovation and science.

'Out of step' on R&D funding

It points to the previous federal government's increased reliance on tax credits to fund business innovation as a factor dragging down business investment. Canada is "out of step with its international competitors" in not providing more direct government support for business R&D, according to the report.

It also marked a drop in funding for higher education research compared to leading competitors such as the U.S. and U.K.

It urges the new federal government, which has promised a more friendly attitude toward science, to take measures to boost both business and education research spending.

Ottawa must "embrace risk-taking" and focus "government funds to build globally competitive critical mass in targeted areas," the STIC says in its report.

Canada's science stars

"Success requires that all players in the science, technology and innovation ecosystem work more closely together in a 'systems' approach," said Knox.

"It requires better integrating organizations, activities and funding mechanisms in a more coherent, co-ordinated whole to help us realize more impact from the investments we make," he said.

The report says Canada has some real "star power" in the scientific world, with 96 researchers who rank among the top one per cent of the most cited in their respective fields.

Canada has both the talent and the cluster of educated people needed to be globally competitive, more than doubling the number of science and engineering doctoral degrees granted per 100,000 population from 2006 to 2012, the report says.

But there is poor private-sector absorption of research talent.

"We have to keep investing on the education side, but then we have to convince businesses to absorb our talent into their workforces," Knox said.

"There's a debate that rages – are we not graduating the kind of skilled workforce that companies need or are they just not accepting them in."

In 2011, science- and technology-related occupations accounted for about 30 per cent of total employment in Canada.