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Study: Impact of technology use on productivity growth and business performance

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The Daily


Wednesday, December 5, 2007

A new report has found robust evidence of a close link between the growth of productivity in Canadian businesses and the use of advanced technologies.

The report puts into perspective the results of several analytical studies conducted at Statistics Canada that have examined the relationship between the use of advanced technology and business performance in the manufacturing sector.

Over the last 40 years, dramatic changes have taken place in the composition of investment in the Canadian economy, as investment has shifted towards advanced information and communications technologies (ICT). The growth rates of ICT capital services have consistently eclipsed those associated with other forms of investment (i.e., non-ICT machinery and equipment, engineering structures, building structures, land and inventories).

These changes in production technology are seen by many to have been associated with marked improvements in Canada's aggregate labour productivity growth rates during the 1990s.

While macroeconomic research on productivity has emphasized the extent to which economic growth has moved closely in step with aggregate ICT investment, complementary microeconomic research conducted at Statistics Canada has investigated the relationship between advanced technology use and different measures of business performance, such as changes in relative productivity and market share.

These studies have found that changes in the relative productivity and market share of manufacturing plants reflect differences in technology use after other factors related to plant performance—such as investments in innovation and overall capital intensity—are taken into account.

Advanced communications technologies warrant special emphasis, as the use of these technologies was shown to be closely associated with changes in productivity.

These studies also suggest that the adoption of advanced technology involves a continual process of learning—one that requires substantial investments in developing the skills required to support new production methods.

More intensive users of technology often report facing more barriers to technology adoption than do non-intensive users, probably because intensive users have chosen a strategic path that requires more problems to be solved.

But businesses that are able to overcome the difficulties associated with technology adoption are often rewarded with improvements in productivity relative to their peers, along with gains in market share.

Communications technologies were shown to be an integral part of more comprehensive strategies in which different types of advanced manufacturing technologies are combined with one another. These comprehensive strategies were associated with stronger productivity gains.

The research paper "Innovation Capabilities: Technology Use, Productivity Growth and Business Performance: Evidence from Canadian Technology Surveys" (11-622-MIE2007016, free) part of The Canadian Economy in Transition series, is now available from the Publications module of our website.

More studies related to innovation, technology use and productivity are available free of charge at (/studies-etudes/econo-eng.htm).

For more information, or to enquire about the concepts, methods or data quality of this release, contact John Baldwin (613-951-8588) or Guy Gellatly (613-951-3758), Micro-economic Analysis Division.