Main article

1. Introduction
2. Methodology
3. Measuring technological change
4. Technological change in the private sector
5. Technological change in public sector organizations
6. A comparison of technological change in the private and public sectors
7. Key findings and discussion
8. References

1   Introduction

To remain globally competitive, today’s firm must always be ready to adapt and evolve. Public organizations must also evolve in order to provide more effective and efficient services. Through adoption of newer, more advanced, technologies and practices, private sector firms and public organizations can increase their production capabilities, improve their productivity, and expand their lines of goods and services. The extent of the acquisition of new technology is an indicator that is important to measure and analyze.

The contribution of technological change to the economy has long been of interest to academics and policy analysts. This paper will provide an analysis of technological change within the Canadian economy based on data from the 2006 Survey of Electronic Commerce and Technology where firms indicated how they introduced significantly improved technologies.

The paper will explore differences in the use of methods of introduction of significantly improved technologies by firm/organization size and by industry in both the private and public sectors and will contribute to a better understanding of use of methods of introducing these significantly improved technologies within the Canadian economy.

The paper will begin with a brief presentation of previous work carried out on technology introduction. The methodology used in this paper will be described. A description of concepts used in the analysis will follow. Analytic results examining technological change in the private sector overall, by industry and by size, and the public sector overall, by industry and by size will be presented. A comparison of technological change in the private and public sectors will follow. The paper will conclude with a discussion of analytic results and further analytic work that could be undertaken.

Literature review

Technology introduction and adoption is an important innovation activity. Studies of manufacturing survey results have found that manufacturing establishments that use advanced technologies outperform establishments that do not (Baldwin, Diverty and Sabourin, 1995; Baldwin and Sabourin, 2001, 2004; Baldwin et al., 2003). These studies also found that advanced technology adoption in manufacturing leads to better jobs and higher salaries/wages than those of non-adopters. Gains in market share at the expense of non-adopters and growth in labour productivity advantage were other findings. Adoption of advanced technologies affects firm performance.

The Survey of Electronic Commerce and Technology has provided data on technology use and, as a result, technological change in private industries and public organizations. Research has found that four out of five public sector organizations introduced significantly improved technologies (Earl, 2001, 2002a, 2002b, 2004b, 2004c). In contrast, less than half of private sector firms introduced significantly improved technologies (Earl, 2002a, 2002b, 2004a and 2004b). In other words, the percentage of public sector organizations introducing significantly improved technologies is twice that of private sector firms (Earl, 2002a, 2004b, 2004c). Within the private sector, the goods producing sector was just as likely as the services producing sector to acquire significantly improved technologies (Earl, 2002b, 2004a, 2004b).

Even if technologies are purchased off the shelf a firm must have the internal capabilities to successfully integrate these new technologies or risk failure (Montgomery and Levine, 1996). In their study of advanced manufacturing technologies, Arundel and Sonntag (2001) found that the method of introduction of advanced technologies into a firm was an indicator of the firm’s internal capabilities, in particular, process engineering capabilities. They found that about half of advanced manufacturing technology users only purchased their advanced technologies off the shelf (46.1%), one quarter customized or significantly modified existing technologies (25.7%) and one quarter (28.2%) developed new technologies.

The adoption and use of advanced technologies has been the subject of study for decades (von Hippel, 1988). Statistics Canada conducted its first survey of technology use and planned use in 1987 (Statistics Canada, 1987) and there were similar surveys in the United States, Australia and some other countries (Ducharme and Gault, 1992). Since 1989, there have been survey questions on the methods of adoption of technologies that have illustrated the role of the user in the process of adoption. As users can adopt by purchasing technology, by modifying it, or by creating it, adopting firms can be classified as innovative at the level of new to the firm, the market or the world (OECD/Eurostat, 2005).

There has been a growth in the literature on the phenomenon of “user innovation”. Von Hippel (2005) has argued that traditional models of innovation place consumers as the final link in a value chain. In this model, users can choose between products but have little influence on design or the creation of these products. Manufacturers create products and service industries provide services based on needs identified by the suppliers of these goods and services. However user needs are heterogeneous creating a dilemma for mass manufacturers, standard service providers and the users that rely on these suppliers to conduct business. In cases where existing goods and services do not meet their needs, users must search for their own solutions which include customizing existing technologies or developing new technologies. When these technologies are produced for use as part of the plant’s operation as opposed to having the new technology created with the prime purpose of being a product for sale this phenomenon has been referred as “user innovation” (von Hippel, 2005).

This paper will contribute to a better understanding of technology introduction by developing statistical indicators of different methods of introduction of technologies and whether these methods differ by size or industry or between private sector firms and public sector organizations.

2   Methodology

2.1  About the Survey of Electronic Commerce and Technology

This paper uses data from the Survey of Electronic Commerce and Technology (SECT), a cross-economy survey that covers most industrial sectors of the North American Industrial Classification System (NAICS) with the exception of local governments. The collection entity for the survey is the statistical enterprise and the survey uses Statistics Canada’s Business Register as its frame. In 2006, the survey was sent to about 19,000 enterprises with income more than a specified limit (either $100,000 or $250,000, depending on the sector). The quality of estimates has been assessed based on a combination of standard error and imputation rates. Only estimates of publishable quality have been used in this analysis. ¹ 

In this paper, three size classes have been created for the private sector: small (0 to 19 employees); medium (20 to 249 employees) and large (at least 250 employees). For the public sector, size classes include: small (1 to 99 employees); medium (100 to 499 employees); and large (at least 500 employees).

In this paper, eighteen industrial sectors contribute to the estimates for private firms. These eighteen sectors are divided into two major aggregations, the goods producing sector and the services producing sector. Within the services producing sector, there are two further breakouts, one for goods related services and another for intangible services. ²  Public sector organizations include those in one of three sectors: Educational services (NAICS 61), health care and social assistance (NAICS 62), and public administration (NAICS 91).

All comparisons of estimates made within this paper have been evaluated for statistically significant differences. The value of the standard error of each estimate provides a confidence interval of the estimate, the likelihood that the estimate falls within the given range 95 times out of 100. Where confidence intervals for individual estimates overlap, these estimates are said to not be statistically significantly different from each other. The confidence intervals for estimates presented in the charts included in this paper are represented by bars that extend above and below the estimate itself.

3   Measuring technological change

The Survey of Electronic Commerce and Technology 2006 asked firms if they introduced significantly improved technologies during the years 2004 to 2006. If significantly improved technologies were introduced, firms were asked to indicate how they were introduced. Four options were provided including: by purchasing off-the-shelf technologies; by licensing new technologies; by customizing or significantly modifying existing technologies; and by developing new technologies (either alone or in conjunction with others). Respondents were asked to check all that applied.

The analysis approach used in this paper is based on that of Arundel and Sonntag (2001) which categorizes technology introduction by highest level of use. This approach considers that the degree of effort required for each method increases as the complexity of the introduction method, and resulting need for internal capabilities, increases. These range from minimal for purchasing off-the-shelf technologies to extensive in the case of developing new technologies. All responses were then assigned to one of three classes depending on the highest level of required internal capabilities to create a taxonomy of type of firm or organization:

1. Technology purchaser: These firms or organizations either purchase technologies off-the-shelf or license new technologies;
2. Technology modifier: These firms or organizations customize or significantly modifiy existing technologies; or
3. Technology developer: These firms or organizations develop new technologies, either alone or in conjunction with others.

For example, an organization that indicated it both customized or significantly modified existing technologies and that they developed new technologies were classified in the category technology developer. A firm classified to the category of technology purchaser used only this method and neither customized nor developed new technologies.

4   Technological change in the private sector

This section examines the introduction of significantly improved technologies in private sector firms. During the three years 2004 to 2006, 42.8% of private sector firms indicated that they had introduced significantly improved technologies.

Half (47.1%) of private sector firms in goods producing industries introduced significantly improved technologies, a significantly higher percentage than the one-third (34.5%) of firms in services producing industries (Chart 1). ³ 

4.1  Method of introduction of significantly improved technologies by private sector industry

Among the 42.8% of private sector firms that introduced significantly improved technologies during the period 2004 to 2006, one-quarter of private sector firms were technology developers (22.7%), one-quarter were technology modifiers (26.2%), and one-half were only technology purchasers (51.1%) (Chart 2). These findings are consistent with those of Arundel and Sonntag (2001) who analyzed manufacturing industries using the Survey of Advanced Technology in Canadian Manufacturing 1998.

There are no differences in the percentage of each type of firm between the private sector overall and its components: the goods producing sector and the services producing sector.

4.2  Method of introduction of significantly improved technologies by size of private sector industry

Four out of five large private sector firms (80.5%) introduced significantly improved technologies during the period 2004 to 2006, double the percentage of small firms (39.5%). Medium-sized firms were no more likely than large firms to have introduced a significantly improved technology (64.2%), but were more likely than small firms to do so (Chart 3).

Firms in each private sector firm size class were equally likely to be technology developers as technology modifiers; however technology purchasers were most likely small firms (Chart 4). Small firms were the only size class that show a propensity towards one method of technology introduction with one-half (55.1%) of firms being technology purchasers. Both medium and large firms were no more likely to be technology purchasers than they were to be technology modifiers or developers. ⁴ 

5   Technological change in public sector organizations

This section examines the introduction of significantly improved technologies in public sector organizations. During the three years 2004 to 2006, four out of five (81.8%) public sector organizations indicated that they had introduced significantly improved technologies (Chart 5). Educational services (88.2%) organizations are the mostly likely public sector organizations to introduce significantly improved technologies followed closely by health care and social assistance (82.5%) and public administration organizations (73.3%).

The percentage of organizations that introduced significantly improved technologies varies by size of public sector organization. Large public sector organizations (90.3%) were most likely to introduce significantly improved technologies (Chart 6). Medium (77.1%) and small (61.4%) organizations had an equal likelihood of introducing significantly improved technologies.

5.1  Method of introduction of significantly improved technologies by public sector industry

Among the four out of five (81.8%) of public sector organizations that introduced significantly improved technologies during the years 2004 to 2006, public sector organizations were more likely to be either technology purchasers or technology developers than they were to be technology modifiers. More than one third (37.1%) were only technology purchasers, one quarter (23.7%) indicated they were technology modifiers and more than one third (39.3%) indicated they were technology developers (Chart 7).

Educational services (37.3%) and health care and social assistance organizations (46.5%) had equal likelihood of being only technology purchasers. Organizations in each of these two public sector industries were more likely than public administration organizations (24.2%) to be technology purchasers.

Organizations in all three public sector industries were equally likely to indicate that they were technology modifiers.

Among the three public sector industries, public administration organizations were the most likely to indicate that they were technology developers. More than half (57.9%) of public administration organizations indicated that they were technology developers compared to one third (38.0%) and one quarter (26.7%) of educational services and health care and social assistance organizations respectively.

A comparison of type of organization in each public sector industry shows that educational services organizations were more likely to be technology purchasers (37.3%) or developers (38.0%) than to be technology modifiers (24.7%). Half of health care and social assistance organizations were technology purchasers (46.5%) compared to one quarter that were technology modifiers (26.8%) and one quarter that were technology developers (26.7%). More than half of public administration organizations (57.9%) were technology developers with the remainder having equal likelihood of either being technology modifiers (17.9%) or only technology purchasers (24.7%).

5.2  Method of introduction of significantly improved technologies by size of public sector organization

A comparison of the methods of technology introduction by each size class among organizations that introduced significantly improved technologies shows that small and medium sized public sector organizations show no affinity for one method of technology introduction over another (Chart 8). Large public sector organizations are more likely to be technology purchasers (36.7%) or to be technology developers (42.3%) than they are to be technology modifiers (21.0%).

6   A comparison of technological change in the private and public sectors

Public sector organizations (81.8%) were twice as likely as private sector firms (42.8%) to introduce significantly improved technologies during the years 2004 to 2006.

Private sector firms (51.1%) were more likely to be technology purchasers than public sector organizations (37.1%) (Chart 9). The inverse is observed for technology developers where more than one third (39.3%) of public sector organizations are technology developers compared to one quarter (22.7%) of private sector firms. There is no difference in the propensity for either sector to be technology modifiers (23.7% private, 26.2% public).

Private sector firms were not compared to public sector organizations by size class as the size classes for these two sectors are not comparable.

7   Key findings and discussion

Data from the 2006 Survey of Electronic Commerce and Technology has provided information on the methods used by private sector firms and public sector organizations to introduce significantly improved technologies during the years 2004 to 2006.

This paper has adopted the approach of Arundel and Sonntag (2001) for looking at types of firms that introduced technology. It has found that private firms were most likely to be technology purchasers, and had an equal likelihood to be either technology modifiers or developers. This pattern of technology adoption is similar to that found in a study of manufacturing firms by Arundel and Sonntag based on the Survey of Advanced Technology in Canadian Manufacturing 1998. It would be interesting to analyze a more detailed breakdown of the eighteen component private sector industries to explore whether this pattern is exhibited at this level of industry detail. It would also allow comparison of the pattern for the manufacturing industry over time.

Perhaps the most interesting finding is that half of private sector firms and almost two thirds of public sector organizations do not simply purchase the technologies but modify or develop the technologies they need. This is evidence that technology users, and not only manufacturers of technology, are involved in a significant way in process innovation. This evidence supports the arguments of researchers who have begun to study issues of user innovation.

This study also found that public sector organizations were more likely to be technology developers than their private sector counterparts, similar to the findings of Earl (2004b, 2004c). Conversely, private sector firms were more likely to be technology purchasers than public sector organizations. Before drawing conclusions on the extent of technology developers in the private and public sector it would be interesting to examine the extent to which size distribution within each sector, private and public, can explain the difference.

Contrary to what may be expected, the size of a private firm does not appear to be a critical determinant as to whether a firm will be a technology modifier or technology developer. Large firms are no more likely than small firms to be technology modifiers or technology developers.

Similarly, the industrial classification of a firm does not appear to have an effect on the type of technology adoption used by a firm. Private firms in the goods producing sector and the services producing sector were equally likely to be technology purchasers, technology modifiers and technology developers. It would be interesting to explore whether differences exist at the level of individual industries.

With the exception of information and cultural services (71.8%), there are no differences in the percentage of firms that introduced significantly improved technologies. Information and cultural services has a higher percentage of firms that introduced significantly improved technologies than: wholesale trade (45.1%); retail trade (42.4%); transportation and warehousing (34.5%); real estate and rental and leasing (34.0%); administrative and support, waste management and remediation services (42.9%); arts, entertainment and recreation (36.7%); accommodation and food services (37.6%); and other services (excluding public administration) (38.3%). The percentage of firms that introduced significantly improved technologies in information and cultural services was not significantly different than the percentage of firms in: finance and insurance (47.6%); professional, scientific and technical services (49.0%); management of companies and enterprises (40.1%); educational services (excluding public administration) (44.5%); and health care and social assistance (excluding public administration) (49.1%).

8   References

Arundel, Anthony and Viki Sonntag (2001). “Patterns of Advanced Manufacturing Technology (AMT) Use in Canadian Manufacturing: 1998 AMT Survey Results”, Statistics Canada catalogue 88F0017MIE, no. 12, Ottawa.

Baldwin, John R. and David Sabourin (2004). “The effect of changing technology use on plant performance in the Canadian manufacturing sector”, Statistics Canada catalogue 11F0027MIE, no. 20, Ottawa.

Baldwin, John R., David Sabourin and David Smith (2003). “Impact of Advanced Technology Use on Firm Performance in the Canadian Food Processing Sector”, Statistics Canada catalogue 11F0027MIE, no. 12, Ottawa.

Baldwin, John R. and David Sabourin (2001). “Impact of the Adoption of Advanced Information and Communication Technologies on Firm Performance in the Canadian Manufacturing Sector”, Statistics Canada catalogue 11F0019MIE, no. 174, Ottawa.

Baldwin, John R., Brent Diverty and David Sabourin (1995). “Technological adoption and industrial transformation,” in T. Courchene (ed.), Technology, Information and Public Policy, in the Bell Canada Papers on Economic and Public Policy 3. Kingston, Ontario: John Deutsch Institute for the Study of Economic Policy, 95-130.

Ducharme, Louis Marc and Fred Gault (1992), Surveys of Advanced Manufacturing Technology, Science and Public Policy, 19, no. 6., pp 393-399.

Earl, Louise (2002) “Innovation and change in the public sector: A seeming oxymoron”, Statistics Canada catalogue 88F0006XIE, no. 1, Ottawa.

Earl, Louise (2002). “An overview of organisational and technological change in the private sector, 1998-2000”, Statistics Canada catalogue 88F0006XIE, no. 9, Ottawa.

Earl, Louise (2004). “Starting the new century: technological change in the Canadian private sector, 2000-2002”, Statistics Canada catalogue 88F0006XIE, no. 1, Ottawa.

Earl, Louise (2004). “An historical comparison of technological change: 1998-2000 and 2000-2002, in the private and public sectors”, Statistics Canada catalogue 88F0006XIE, no. 7, Ottawa.

Earl, Louise (2004). Technological change in the public sector, 2000-2002. Statistics Canada catalogue 88F0006XIE, no. 8, Ottawa.

Montgomery, Joseph C., Marilyn Block and Lawrence Levine (1996). “The Transition to Agile Manufacturing”, Milwaukee, WI: ASQC Quality Press.

NESTA (2007), Hidden Innovation: How innovation happens in six ‘low innovation’ sectors, London, United Kingdom: NESTA.

(OECD)/Eurostat (2005). Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data, 3rd edition, Paris and Luxembourg: OECD/Eurostat.

Raymond, Jason. (2006) Methodology of the Survey of Electronic Commerce and Technology 2006. Internal Statistics Canada document.

Statistics Canada (1988). “Survey of Manufacturing Technology 1987. Final report”, Ottawa, Canada.

van Tol, Bryan and Geoffrey Li (2004). “Large public and private sector organizations and their use of ICTs”, Innovation Analysis Bulletin no. 5 volume 2. Statistics Canada Catalogue no. 88-003-XIE.

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von Hippel, Eric. (2005), “Democratizing Innovation”, Cambridge, MA: MIT Press.