Executive summary

Dramatic changes in the composition of investment have taken place in the Canadian economy over the last 40 years as investment has shifted toward advanced information and communications technologies (ICT). The growth rates of ICT capital services have consistently eclipsed those associated with other forms of investment — non-ICT machinery and equipment (M&E), engineering structures, building structures, land and inventories. From 1961 to 2002, ICT M&E grew faster than non-ICT M&E. And the difference between the two increased over time. ICT M&E grew 27% faster than non-ICT M&E from 1961 to 1973, 171% faster from 1973 to 1979, 456% faster from 1979 to 1989, and some 552% faster from 1989 to 2002. As a result, ICT capital came to increasingly dominate the overall contribution to output growth that came from increases in capital. From 1963 to 1971, ICT M&E accounted for just 5% of capital's contribution to growth; by contrast, its contribution to capital's contribution increased to 40% from 1989 to 2002 (Baldwin and Gu 2007).

Using detailed data from technology surveys, a set of studies was conducted to evaluate whether technological differences among rival producers have led some firms to outperform others, after other correlates of performance are taken into account. These studies provide more insight into the different types of advanced technologies being used than do many macro-level studies, as the latter tend to focus narrowly on specific commodities, like computers. The technology surveys that support the research discussed herein collected detailed information on a broad range of technology investments — ranging from new information and communications technologies to a host of other advanced production technologies, such as robots, flexible manufacturing systems and automated retrieval systems. With this detail available, these Statistics Canada studies also evaluate whether particular technologies, such as advanced communications technology, are more closely associated with success than others, and therefore could be said to provide the basis on which other advanced technologies and technology strategies are built.

All of the papers described in this review found a robust link between advanced technology use and plant performance, this being after controlling for other firm characteristics such as capital intensity, whether the firm is performing research and development and the general emphasis given to innovation. This indicates that technology strategy is an important separate facet of innovation that affects a firm's performance and substantiates the macro evidence that has linked the productivity resurgence in the 1990s to the ICT revolution. The studies indicate that plants that adopted advanced technologies improved their productivity relative to their compatriots who did not adopt the technologies, which in turn was associated with increases in market share of advanced technology adopters. These microeconomic studies also suggest that technologies well beyond simple computers and software were responsible for productivity growth — robots, material systems and other advanced production technologies all had an impact. Finally, the research suggests that communications technologies played a key role in understanding performance differentials among rival producers. These technologies, in particular, were closely linked to superior performance.

View the publication Innovation Capabilities: Technology Use, Productivity Growth and Business Performance: Evidence from Canadian Technology Surveys in PDF format.