For the second year in a row, corporate research and development (R&D) spending fell among Canada’s top corporate R&D spenders, from $10.6 billion in fiscal 2006 to $10.3 billion in fiscal 2007.

This represents a drop of 3% according to Canada’s Top 100 Corporate R&D Spenders List 2008, released today by Research Infosource Inc. In fiscal 2007, 61 firms increased their R&D spending while 37 posted declines.

Despite posting declines in R&D spending in fiscal 2007, Nortel Networks (down 15.8%) and BCE (down 13.6%) held onto the top two spots on the top 100 list.

Magna International held onto third place with an increase of 11.3% and Pratt & Whitney Canada remains in fourth with a drop of -7.7%. IBM Canada moves up a spot rounding out the top 5 with an increase in R&D spending of 4.7%.

“R&D spending in Canada is heavily influenced by Nortel Networks and BCE and both posted sharp declines in 2007,” says Ron Freedman, CEO of Research Infosource. “Removing these firms from the equation, R&D spending grew by 3.3%. However, if we correct for inflation, spending remained flat over the period.”

Companies lowered their R&D spending despite increases in revenue. While revenues grew by 9.2%, research intensity (R&D spending as a percentage of revenue) dropped by 12% from 3.6% in fiscal 2006 to 3.2% in 2007.

Only 19 companies made Research Infosource’s $100 Million Club, an elite group of firms that spent $100 million or more on R&D in fiscal 2007. This is a drop from the 24 companies on the list last year. Club members accounted for only 67% of total Top 100 R&D spending in 2007, compared with 72% in fiscal 2006. These large R&D spenders posted a significant 10% drop in spending, compared with a healthy jump of 15.3% for companies spending less than $100 million.