Economic transitions >

Overview and description of publications

• Overview of the research program
  • Sources of industrial dynamism in the new economy
• Industrial dynamism in the new economy publications
• Shifts in the composition of labour markets towards knowledge workers
• Knowledge worker publications
• Investments in technology-based products and services
• Investments in technology-based products and services publications
• Guides to research

Overview of the research program

In recent years, many economic analysts have championed the idea of a New Economy—a fundamental shift in the competitive system, driven by the impact of new information and communication technologies on many business models and production routines. New technologies have had a profound effect on patterns of production, distribution and consumption. And these technologies serve as catalysts for new cycles of innovation and growth.

The Canadian Economy in Transition is a series of new analytical reports that explore the dynamics of industrial change. The idea for this series grew out of several independent research projects at Statistics Canada, all of which address topics related to the growth and development of the New Economy. These studies, along with other reports on firm and industry dynamics, form the basis for our research program on economic transitions.

Research on economic transitions finds a wide audience. Entrepreneurs, business analysts and government officials all benefit from new empirical studies that describe how the industrial landscape is changing. Entrepreneurs and business analysts want to be able to identify new sources of growth and economic opportunity. Government officials want information that aids in the design and evaluation of policies that may improve our economy’s industrial competitiveness.

The idea of the New Economy is multidimensional: We not only find ourselves in a New Economy, but also in a knowledge-based economy, a digital economy, an information economy, an internet economy, an innovation economy, a high-tech economy, a real-time economy, and a global-economy. Our research on economic transitions addresses this multidimensionality in two ways.

First, we strive to offer a comparative perspective when evaluating the dimensions of the New Economy. Like other research studies, our analysis of industrial structure focuses on highly-visible information and communication technology (ICT) industries. But our program also examines other sources of industrial innovation, such as science-based industries. This comparative approach yields insights on industrial change that would be lost if our interest resided exclusively with the technology sector. Studies that investigate the dissemination of advanced technologies will follow a similar model. Core ICT inputs—such as computers, software and telecommunications equipment—are extensively studied. But we also plan to focus on other technology-based goods and services that better reflect the outputs of Canada’s domestic technology sector as well as imports of advanced technology.

Second, we assemble a healthy range of quantitative indicators when evaluating the input and performance characteristics of different economic sectors. These include many of the standard indicators, such as GDP, wages and employment growth. But we also make use of less common analysis variables, such as changes in labour quality, profit rates, and sector-specific estimates of multifactor productivity.

The first set of studies on economic transitions focuses on three thematic areas: (1) sources of industrial dynamism in the New Economy, (2) shifts in the composition of labour markets towards knowledge-intensive occupations, and (3) investment in technology-based products and services.

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Sources of industrial dynamism in the new economy

Industrial transitions are driven by dual forces of growth and decline. By the 1990s, new computer-based innovations in communications and information management had fuelled a growing interest in emergent technology industries. Computer services and telecommunications were widely trumpeted as the new industrial dynamos—breeding grounds for entrepreneurship and investment, and catalysts for innovation and growth.

Our research on industrial transitions centers on two aggregates—ICT industries and science-based industries. Both make important contributions to systems of industrial innovation. We describe each below.

• Information and communication technology (ICT) industries:

  For many business analysts, ICT industries are synonymous with “high-technology industries” or the “emergent technology sector”. These industries develop, deliver and support many of the new products and services at the heart of the technology revolution. Our empirical profile of ICT industries is based on a new taxonomical standard for technology statistics developed by the OECD. In our major report on New Economy industries (The Growth and Development of New Economy Industries), we explore production and performance heterogeneity within the ICT sector by reporting on three sub-sectors: (1) core ICT services (e.g., computer services and telecommunications), (2) other ICT services (e.g., cable television, ICT distributive trades), and (3) ICT manufacturing (e.g., electronic products industries).

• Science-based industries:

  Technology industries are not the lone source of industrial innovation in the New Economy. Our research program develops a richer perspective on industrial change by also profiling science-based industries—industries that make large investments in research and development and skilled labour. Most highly-visible ICT industries are classified as science-based, but so are many R&D-intensive and skill-based industries that fall outside the boundaries of the ICT sector. Our major report on New Economy industries divides science industries into three sub-sectors: (1) ICT-based science (e.g., computer services, telecommunications, electronic products), (2) non-ICT science-based goods (e.g., aircraft industries, industrial chemicals and pharmaceuticals), and (3) non-ICT science-based services (e.g., architecture, engineering and technical services). Our use of a science-based classification substantially increases the number of industries that are designated as part of the New Economy. Whereas only 19 SIC industries are classified as ICT-based, 51 SIC industries are designated as science-based.

A major objective of our research program is to evaluate the extent to which these New Economy hubs, ICT and science, have different long-run growth and performance profiles than other, more traditional, sectors of the economy. ICT and science industries are compared to a residual category of other industries—industries that (1) are not classified as ICT-based and (2) are not, on the basis of their R&D and human capital characteristics, designated as science-based. This other industry aggregate spans a diverse mixture of operating environments which together account for the majority of Canada’s economic output. Basic distinctions in production activity are examined via separate analyses for goods and services industries.

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Industrial dynamism in the new economy publications

Major research findings related to this theme are outlined below.

• On average, ICT industries have more dynamic long-run input and performance profiles than industries located outside of technology and science-based environments. GDP growth, employment growth, productivity growth, investments in technology, and R&D expenditures are all areas in which the ICT sector excels.
• Science industries are also highly dynamic. Long-run multifactor productivity growth in science-based goods industries located outside of the technology sector actually exceeds the ICT sector average, as do long-run profit margins. Knowledge workers are just as prevalent in many science environments, and science industries exhibit higher investment intensities than ICT industries.
• Growth in ICT and science-based employment during the 1990s was largely concentrated in Canada’s major urban centres. ICT job creation is driven by urban economies: cities with more diversified industrial structures and larger employment bases tend to have a larger percentage of their local workforce employed in ICT industries.
• The contribution of ICT industries to labour productivity growth differs substantially across Canada’s provinces. In the Atlantic region, ICT industries account for 10% of labour productivity growth over the 1990 to 1997 period; in British Columbia, ICT industries account for 52% of labour productivity growth.
• Neither the ICT sector nor the science sector should be viewed as homogeneous. Productivity growth is far more apparent in ICT manufacturing industries than in highly-visible core ICT services (i.e., computer services and telecommunications). Science-based goods industries also enjoyed better MFP performance than any combination of service industries studied. New Economy service industries excel in other dimensions. Core ICT services lead the way in terms of GDP and employment growth. But science-based services outside of ICT are home to the largest improvements in labour quality. Profit margins are higher in science-based goods and core ICT services—reflecting higher levels of capital intensity.
• Examples of economic dynamism are not limited to technology and science-based environments. Substantial numbers of other industries—industries not classified as ICT-based or science-based—outperform the ICT sector average in each of our analysis categories (e.g., GDP growth, profitability, multifactor productivity growth). And a small number of industries, including a cluster of automotive industries, outperform the ICT sector average across a large number of input and performance categories.

Beckstead, D. and G. Gellatly. 2003. The growth and development of new economy industries. The Canadian Economy in Transition Research Paper Series 11-622-MIE2003002. Analytical Studies Branch. Ottawa: Statistics Canada.

Beckstead, D., M. Brown, G. Gellatly and C. Seaborn. 2003. A decade of growth: The emerging geography of new economy industries in the 1990s. The Canadian Economy in Transition Research Paper Series 11-622-MIE2003003. Analytical Studies Branch. Ottawa: Statistics Canada.

Yan, B. and J.P. Maynard. 2004. Inter-provincial differences in productivity growth: an analysis for selected time periods – 1990 and 1997. The Canadian Economy in Transition Research Paper Series 11-622-MIE. Analytical Studies Branch. Ottawa: Statistics Canada. Forthcoming.

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Shifts in the composition of labour markets towards knowledge workers

Strategies for attracting, developing and retaining highly-skilled workers are widely perceived as requisites for success in the New Economy. Recent Statistics Canada studies of Canadian firms support this view. Technology-based manufacturing firms place more stress on highly skilled workers than other businesses. And technology-based firms are also more likely to train their workers in response to skill shortages. For service-based firms, the line between labour development strategies and formal innovation activities is often blurred. Many small firms report that skill development strategies, such as training, effectively serve as their innovation strategy.

In the New Economy, an economy where competitive fortunes depend increasingly on technological innovation and information management, knowledge workers are a highly-prized commodity. While skill shortages in technology industries garner widespread attention, the demand for knowledge workers is ubiquitous, extending well beyond the boundaries of visible, high-tech sectors. Skilled workers are integral to all systems of industrial innovation.

Our research program on economic transitions examines the extent of the shift towards “high-knowledge” occupations in Canadian industry. Our analysis of occupational structure identifies 40 occupational groups in three main categories—professional workers, technical workers and management workers—as knowledge-based. This taxonomy draws on previous Canadian research on high-knowledge occupations in conjunction with multivariate techniques that evaluate wage and educational criteria.

The dimensionality of Canada’s high-knowledge workforce is examined in two ways.

• Knowledge sector:

  Our major report on occupational structure (Dimensions of Occupational Changes in Canada’s Knowledge Economy) explores the growth of the knowledge sector—the share of the workforce employed in knowledge-based occupations. This definition is not industry-specific; rather, it is based simply on the occupational structure of the Canadian labour market.

• High-knowledge industries:

  Our occupational taxonomy is also used to explore the concentration of knowledge workers in different industrial environments. We define a set of high-knowledge industries (a collection of industries with the largest concentrations of knowledge workers) that, in turn, can be compared with ICT and science-based industries, two industrial aggregates that we associate with the growth and development of the New Economy.

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Knowledge worker publications

Major research findings related to this theme are outlined below.

• The share of employment accounted for by knowledge workers has increased in all regions of the country. Because of differences in industrial and urban structure, these gains are most apparent in Ontario and Quebec. After taking basic differences in urbanization and industry structure into account, most provinces have similar concentrations of knowledge workers.
• Patterns of long-run skill growth are widespread, occurring in many different sectors of the Canadian economy. Knowledge workers are not confined to highly-visible ICT industries, or R&D-intensive science industries. The growth in knowledge workers has been about equal in goods-producing industries and service industries.
• Knowledge workers are well represented in most ICT and science industries—industries that are associated with the growth and development of the New Economy. But many industries that are located outside of these two New Economy hubs also place a premium on knowledge workers. Finance and investment industries and professional services, such as legal and management consultants, are home to large concentrations of knowledge workers, but they are not considered ICT-based or science-based. This helps to underscore a basic issue regarding the dimensionality of the New Economy: its boundaries depend on which criteria (e.g., technology, R&D, innovation, skilled workers) are given more priority when evaluating interindustry differences.
• Most studies of high-knowledge industries focus exclusively on the business sector. Yet quasi-public industries (education and health) and public industries (government services) are also home to relatively large concentrations of knowledge workers. Extending the analytical focus beyond the business sector significantly alters the composition of the high-knowledge landscape.
• The relative wages of knowledge-to-non-knowledge workers have declined slightly over time in ICT and science-based environments. By contrast, knowledge workers are earning more over time relative to non-knowledge workers in other areas of the economy.

Beckstead, D. and T. Vinodrai. 2003. Dimensions of occupational changes in Canada’s knowledge economy, 1971-1996. The Canadian Economy in Transition Research Paper Series 11-622-MIE2003004. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R. and D. Beckstead. 2003. Knowledge workers in Canada's economy, 1971-2001. Insights on the Canadian economy. Catalogue No. 11-624-MIE2003004. Analytical Studies Branch. Ottawa: Statistics Canada.

Beckstead, D. and G. Gellatly. 2004. Are knowledge workers part of the new economy? A note on the concentration of knowledge workers in different industrial environments. The Canadian Economy in Transition Research Paper Series 11-622-MIE. Analytical Studies Branch. Ottawa: Statistics Canada. Forthcoming.

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Investments in technology-based products and services

Our research program has concentrated on two aggregates, ICT-based industries and science-based industries, when exploring the industrial structure of the New Economy. ICT industries are evaluated because they develop and support key technological innovations; science industries because of their emphasis on two innovation inputs, R&D and human capital.

An objective of our research program on transitions is to better understand the dissemination of technology-based products and services across different sectors of the economy, and how the use of these technologies contributes to performance differentials across different industries and groups of firms. We anticipate that an explicit focus on the commodity dimensions of the New Economy may yield new insights into the sources of industrial dynamism.

Two lines of analysis are described below.

• Macroeconomic impacts of ICT:

  Macroeconomic studies explore patterns of ICT investment across different sectors of the economy. These studies generally investigate aggregate relationships between ICT capital and economic performance (e.g., the contribution of ICT capital to aggregate output growth or to aggregate productivity growth). Our research also develops profiles of investment and capital intensity in different industrial environments based on major ICT products and services.

• Microeconomic impacts of ICT:

  Microeconomic research on the New Economy has stressed the reorganization of business models around emergent technologies, and examined the impact that technology adoption has had on firm performance (e.g. changes in relative profitability or market share).

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Investments in technology-based products and services publications

Major research findings related to this theme are outlined below.

• Since 1981, Canadian businesses have dramatically increased their investment in major ICT products (computers, software, telecommunications equipment). Investment in ICT technologies grew at an average annual rate of 16% from 1981 to 2000. The price of ICT commodities, after accounting for quality improvements, has declined sharply, falling by 9.3% per annum.
• Improved multifactor productivity performance in the post-1995 period is associated, in part, with the impact of ICT capital formation across the business sector. ICT capital (computers, software, telecommunications equipment) is the largest contributor to growth in capital services.
• Core ICT service industries (computers services and telecommunications) are themselves major users of ICT products and services. On average, investments in computers, software and telecommunications equipment account for 20% of GDP in core ICT service industries. For ICT manufacturing industries and science-based industries, these ICT technology investments account for less than 3% of industry GDP. Core ICT service industries are also more capital intensive—when evaluating their expenditures on technology in relation to the size of their workforce.
• At the firm-level, differences in ICT use are correlated with performance outcomes. Manufacturing firms that invest in advanced communications technologies, or that combine ICT capital with other advanced technologies, have enjoyed higher relative gains in productivity and market share.
• Skill development is also correlated with the technological competencies that businesses develop. Technology-based firms are more likely to train their workers than other businesses.

Chowhan, J. 2004. Who trains? High-tech industries or high-tech workplaces? The Canadian Economy in Transition Research Paper Series 11-622-MIE. Analytical Studies Branch. Ottawa: Statistics Canada. Forthcoming.

Armstrong, P., T.M. Harchaoui, C. Jackson and F. Tarkhani. 2002. A Comparison of Canada-U.S. economic growth in the information age, 1981-2000: the importance of investment in information and communication technologies. Economic Analysis Research Paper Series 11F0027MIE2002001. Analytical Studies Branch. Ottawa: Statistics Canada.

Baldwin, J.R. and D. Sabourin. 2001. Impact of the adoption of advanced information and communication technologies on firm performance in the Canadian manufacturing sector. Analytical Studies Research Paper Series 11F0019MIE2001174. Analytical Studies Branch. Ottawa: Statistics Canada.

Beckstead, D. and G. Gellatly. 2003. The growth and development of new economy industries. The Canadian Economy in Transition Research Paper Series 11-622-MIE2003002. Analytical Studies Branch. Ottawa: Statistics Canada.

Guides to Research

• Gellatly, G. 2003. A guide to research on the new economy. The Canadian Economy in Transition Research Paper Series 11-622-MIE2003001. Analytical Studies Branch. Ottawa: Statistics Canada.