Report: Canadian Productivity Suffering Due to Inadequate Business Investment in Technology and Innovation

September 27, 2024 TruthUSA

A lack of investment in innovation and technology by Canadian corporations is hindering productivity, according to a recent report by the Fraser Institute.

The report comes after Ottawa’s announcement of the formation of a working group to address the low economic productivity in the country.

In August, Treasury Board President Anita Anand stated that the group will assess productivity challenges in both the public and private sectors.

The Fraser report examines the investment patterns of corporations in both countries, highlighting that Canadian companies mostly invest in property, while U.S. companies prioritize information and communications technologies (ICT) and intellectual property products (IPP).

Steven Globerman, a senior fellow at the Fraser Institute and the report’s author, emphasized the significance of investments in machinery, equipment, and research and development for improving worker productivity and enhancing living standards.

Globerman, in a press release, highlighted the importance of ICT and IPP in fostering productivity growth and pointed out Canada’s trailing behind the U.S. in these areas for over a decade.

From 2001 to 2010, 26% of Canada’s investment went to ICT or IPP, compared to 44% in the U.S. This figure decreased to 23% from 2014 to 2021 in Canada, while remaining constant in the U.S.

Globerman stated in the report that policy measures encouraging higher investment in ICT- and IPP-related assets are essential for enhancing Canada’s productivity performance.

He further added, “Technology-related ICT and IPP categories of assets are closely linked to productivity growth as they embody new technology directly or act as primary channels for introducing and diffusing new technology throughout the economy,” emphasizing their significance.

Significant Investment in Canadian Real Estate

Globerman observed that Canadian corporations have a greater emphasis on real estate investments compared to American firms.

He explained, “The divergence in investment focus among asset categories implies that Canadian companies perceive investing in Dwellings and Other Structures as more profitable relative to ICT and IPP compared to U.S. corporations.”

He linked the substantial increase in residential property values in Canada compared to the U.S. with the preference of Canadian investors, including corporate ones, to invest more heavily in real estate assets.

He concluded that the disparity in asset investments between Canadian and U.S. companies significantly contributes to Canada’s lagging productivity performance.

Noé Chartier contributed to this report.

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