Technology Diffusion

Europe has been enormously unsuccessful in creating substantial digital businesses for over three decades.

Innovation, productivity, and competitiveness must be top priorities for Canada’s next federal government, not sidenotes or vague aspirations to be addressed with little more than lip service.

It’s easy to get excited about new breakthroughs, but the real power lies in diffusing technological advances throughout the entire economy.

Legislated procurement targets for SMEs should be a tool to stimulate technology R&D and commercialize Canadian innovations, and not a goal in and of itself. Focusing on firms that develop innovative solutions for government problems will create opportunities for Canadian firms to scale up and drive innovation, productivity, and competitiveness.

U.S. policymakers are targeting RISC-V, an open-source semiconductor architecture, over concerns about China's influence. Restricting U.S. firms from participating could undermine domestic innovation and competitiveness while benefiting China.

Canada faces unprecedented challenges in innovation, productivity, and competitiveness. The first step in addressing them is to develop a clear understanding of the Canadian economy’s underlying structure and performance in each area. Policymakers must then tailor strategies for specific industries and technologies instead of focusing on principally on macro factors.

The word “innovation” appears a total of 97 times and “productivity” 63 times in Canada’s 2024 federal budget, and many measures targeted towards innovation and productivity reflect that focus. However, some of the funds being disbursed are tangential at best to actually addressing Canada’s declining productivity and supporting Canada’s innovation ecosystem.

A recent working paper found that firms that had low multifactor productivity (MFP) to start with experienced higher MFP growth, and that firms with more intangible assets also had higher MFP growth.

A report by the Economic Innovation Group (EIG) concludes that declining knowledge diffusion is the underlying cause of declining business dynamism. However, its theoretical model is based on flawed assumptions, while its mathematical model has methodological issues.

A December 2023 working paper found that China’s technology capital would decrease by about 36 percent in the absence of production and knowledge spillovers from multinationals.