Jianmin Tang

Issues and Commentaries Issues et commentaires Are Foreign-Controlled Manufacturing Firms Less R&D-Intensive than Canadian- Controlled Firms?

Using firm-level data, this paper examines the R&D intensity (R&D per unit of output) of foreign-controlled and Canadian-controlled firms based in Canada. The empirical results suggest that foreign-controlled firms, after accounting for the influence of other factors, are less R&D-intensive than Canadian-controlled firms, and this gap has not narrowed during the past ten years. On average, R&D intensity tends to be higher in high-tech and export-oriented firms, compared to low and medium technology and non-exporting firms. However, despite a lower R&D intensity, foreign-controlled firms based in Canada are more productive and pay higher wages than Canadian-controlled firms. These results in turn suggest that foreign-controlled firms benefit heavily from technology and knowledge transfer from their parent companies.

Competitiveness Challenges Facing Canadian Industries

The objective of this paper is to evaluate the competitive position of Canadian industries vis-a-vis their American counterparts. Our results suggest that recent good economic news and a strong trade performance mask Canadas competitiveness difficulties. The export surge and a big increase in the trade surplus were largely the result of a strong US economy and a large real depreciation of the Canadian dollar vis-a-vis the US dollar, but were not due to any improvement in underlying competitiveness. As a matter of fact, Canada lost substantial ground to the United States in productivity, the fundamental determinant of the underlying competitiveness. Canadas relatively weak performance in terms of capital accumulation, innovation, highly skilled labour, greater importance of small-sized firms in the economy and a slower shift to New Economy industries all have contributed to its productivity and competitiveness difficulties.

ICT Capital and MFP Growth: Evidence from Canadian and U.S. Industries

Abstract Labour productivity growth in the Canadian business sector has averaged less than 1.0 percent since 2000, more than 40 percent below the average growth rate during 1981–2000. On the other hand, labour productivity growth accelerated in the U.S. in the post-2000 period compared to the average growth prior to 2000. Available research shows that the divergence in labour productivity growth was entirely due to the gap in multifactor productivity (MFP) growth. This paper looks at the possible role of information and communications technologies (ICTs) in the recent productivity growth divergence between the two countries. Using data on 33 industries over the period 1987–2000, it examines empirically the impact of ICTs on MFP growth in Canada and the U.S., taking into account ICT-related investments in intangibles and the issue of endogeneity of the explanatory variables. The regression results suggest that ICT capital is not a significant determinant of MFP growth in Canada and the U.S., implying that it was not responsible for the post-2000 productivity growth divergence between Canada and the U.S. via the MFP channel. However, ICT capital could have contributed somewhat to the labour productivity growth gap via the capital deepening channel, because the ICT capital-labour ratio has increased at a faster pace in the U.S. than in Canada since 1995.