Quebec’s R&D Lag: A Roadblock to Innovation and Competitiveness

Too many Quebec entrepreneurs believe they don’t need to innovate because their current approach “works just fine.” But this status quo mindset could seriously undermine the competitiveness of Quebec businesses. As Luc Sirois, Quebec’s Chief Innovator, puts it : “A company that doesn’t innovate is a company that dies.”

That’s a stark reality, especially in today’s world where research and development (R&D) plays a critical role in helping businesses adapt and grow in an increasingly competitive environment.

A Worrying Decline in R&D Investment

Over the past decade, Quebec has seen a steep drop in R&D investment, while many other regions and countries have been ramping up their spending in this area.

• In 2022, business R&D expenditure (BERD) as a percentage of Quebec’s GDP fell below that of several major economic partners. Ontario, for example—once lagging behind Quebec in 2014—has now pulled ahead.
• This decline was accelerated by fiscal tightening introduced in 2014, particularly through reforms to R&D tax credits.
• At the same time, the business landscape has grown more complex, with trade tensions with the U.S. and heightened global competition.

Low investment in innovation directly impacts Quebec businesses’ ability to stay competitive. It limits how they differentiate themselves and weakens their positioning on international markets. One of the root causes of this underinvestment is the complexity of Quebec’s innovation tax credit system. For many companies—especially small and mid-sized manufacturers—the bureaucracy is simply too overwhelming, making it harder to access available financial incentives.

Innovation as a Strategy to Counter Trade Pressures

Recognizing this issue, the Quebec government announced a new, simplified innovation tax credit program in its 2025–2026 budget. This new system is designed to:

• Cut down on red tape for innovative businesses
• Maximize the impact of tax incentives on competitiveness
• Boost R&D investment through an additional $271.5 million in funding over five years

Two key measures were introduced to respond to business needs:

1. An expanded refundable R&D tax credit that now includes equipment and pre-commercial research expenses—not just researcher salaries
2. Accelerated depreciation, allowing companies to invest more quickly in innovation

With these measures, the government hopes to reverse the trend and reignite R&D investment in Quebec.

Navigating a Competitive and Complex Business Environment

The past few years have seen rapid shifts across multiple industries, especially with the rise of artificial intelligence (AI), which is transforming both industrial and commercial processes. Meanwhile, the business climate has grown more unpredictable due to economic uncertainty, U.S. tax reforms, and global trade tensions. Since Quebec’s economy is closely tied to that of the United States, these factors have a direct impact on local supply chains and business competitiveness.

To remain resilient and drive growth, Quebec must reposition itself strategically by doubling down on innovation. But right now, a productivity gap is making it harder for our businesses to stand out on the global stage.

At Revtech Systems, we help manufacturing companies rise to these challenges by integrating robotics and machine vision solutions tailored to their needs. Reach out to our team of specialists to unlock your potential.