Canada has become relatively more innovative compared to a group of international peers since the Conference Board of Canada last ranked the country and its provinces.

On the industry group’s 2021 ranking, Canada earned a “C” grade – placing it at number 11 among the 16 countries examined, up two places since 2018. While Canada has improved on a few indicators, the change in its ranking can largely be attributed to the underperformance of Japan and Australia, the Conference Board notes.

The top-three countries with “A” grades are Switzerland, followed by the U.S. and Sweden. Denmark, Austria and Finland also performed well, each receiving “B” marks.

The research, unveiled this week, includes a second ranking comparing the 16 countries and Canada’s 10 provinces. On that performance list, Ontario remains the top-ranked province for innovation, though it earned a “C” grade (down from a “B” two years earlier), falling two spots and placing ninth overall. Quebec also fell two spots into eleventh on the report card.

Nova Scotia and Newfoundland and Labrador reclaimed their “D” grades, while the provinces of New Brunswick, Prince Edward Island, Saskatchewan, and Manitoba remain the lowest-ranked provinces, receiving “D–” grades.

“Until recently, Canadian businesses have had little competition, high resource prices, generally good trade with the United States, and other favourable conditions. This has meant that they haven’t had to innovate as much as businesses in other countries to be profitable,” the Conference Board notes in a summary of the findings.

“But a low-innovation, high standard of living equilibrium is unsustainable. Volatile resource prices, changing demographics, and increasing economic protectionism are exposing Canada’s business innovation weakness and generating pressure to become more innovative in the coming years.”

The group says the country as a whole continues to “exhibit relatively weak innovation performance,” adding that it’s too early to judge whether recent provincial and federal government initiatives – such as the Innovation Superclusters Initiative, which comes with $950 million in federal government funding, and Innovative Solutions Canada, which funds R&D and tests prototypes in real-life settings – are having a positive impact.

Various indicators were used to measure the provinces’ innovation performance, each falling under one of three categories: innovation capacity (such as the investments and resources that provide a foundation for research), innovation activity (such as entrepreneurial ambition and business R&D activity), and innovation results (such as evidence the research is having an impact on things like patents, new ventures and labour productivity).

When it comes to business R&D (shown below), seven provinces received “D–” grades. British Columbia and Prince Edward Island were the only provinces to improve, recording an increase in spending as a percentage of GDP, since the Conference Board’s previous report card.