Foreign Investment Has Been Good for Canada
Toro @ Mon Dec 12, 2005 8:07 pm
From StatsCan
$1:
Study: Impact of foreign ownership on growth in productivity
1980 to 1999
Foreign-controlled plants accounted for most of the growth in labour productivity in the Canadian manufacturing sector during the 1980s and 1990s, a new research report shows.
The study examined the contribution that foreign-controlled plants made to the growth of labour productivity in manufacturing by analyzing whether foreign-controlled producers exhibited superior performance, and whether their productivity growth spilled over to domestic plants.
It found that foreign-controlled plants accounted for roughly two-thirds of labour productivity growth in Canadian manufacturing from 1980 to 1990 and the subsequent decade from 1990 to 1999.
US-controlled plants made a larger contribution than other foreign-controlled plants to productivity growth. During the 1990s, US-controlled plants accounted for about 45% of growth in labour productivity.
Other foreign-controlled plants accounted for about 22% of productivity growth during the period, and domestic plants the remainder.
Concerns had been expressed in some quarters that the contribution of foreign firms to the Canadian economy would decline during the 1990s, if firms moved production to the larger U.S. market, as well as the lower-cost Mexican market, in the wake of the two free trade agreements: the Canada-U.S. Free Trade Agreement and the North American Free Trade Agreement.
Data from the analysis came from the 1993 Survey of Innovation and Advanced Technology (SIAT) and a longitudinal file that was constructed from the Annual Survey of Manufactures (ASM).
The SIAT collected data on research and development, innovation activities and the use of advanced technologies for a random sample of all plants in the Canadian manufacturing sector. The ASM collected information on shipments, value added, inventories and employment for all plants in the Canadian manufacturing sector.
Yet, between 1987 and 1999, the share of foreign-controlled plants in total output in the manufacturing sector increased from 40.5% to 52.2%.
International orientation also associated with superior performance of domestic-controlled plants
Foreign-controlled plants are more productive than domestic-controlled plants in general. This is because foreign-controlled plants and firms are also more innovative, more technologically advanced, and more likely to perform research and development.
Not all domestic-controlled plants were less productive or less innovative. The study found there was little difference between foreign-controlled plants and domestic-controlled plants whose parent had an international orientation.
The study showed that domestic producers with foreign operations (referred to as domestic multinational enterprises) were equally productive and had a slightly better performance than foreign-controlled plants with respect to research and development and innovation.
Spillover benefits from foreign-controlled plants to domestic-controlled plants
The high productivity growth of foreign-controlled firms had a spillover effect on companies in the domestic sector.
The productivity performance of domestic-controlled plants was higher in industries with a larger presence of foreign-controlled plants, according to the report.
This productivity-spillover benefit of foreign-controlled plants was not distributed equally among domestic producers. The paper found that smaller and younger domestic plants captured larger positive spillover benefits than did older and larger domestic plants in industries where the share of foreign-controlled plants was higher.
The study also found that the presence of foreign-controlled plants increased the intensity of competition faced by the domestic sector and the number of advanced technologies used in the domestic sector.
This suggests that the spillover benefits of foreign-controlled plants received by domestic plants arose from increased competition and the increased use of advanced technologies in domestic plants.
1980 to 1999
Foreign-controlled plants accounted for most of the growth in labour productivity in the Canadian manufacturing sector during the 1980s and 1990s, a new research report shows.
The study examined the contribution that foreign-controlled plants made to the growth of labour productivity in manufacturing by analyzing whether foreign-controlled producers exhibited superior performance, and whether their productivity growth spilled over to domestic plants.
It found that foreign-controlled plants accounted for roughly two-thirds of labour productivity growth in Canadian manufacturing from 1980 to 1990 and the subsequent decade from 1990 to 1999.
US-controlled plants made a larger contribution than other foreign-controlled plants to productivity growth. During the 1990s, US-controlled plants accounted for about 45% of growth in labour productivity.
Other foreign-controlled plants accounted for about 22% of productivity growth during the period, and domestic plants the remainder.
Concerns had been expressed in some quarters that the contribution of foreign firms to the Canadian economy would decline during the 1990s, if firms moved production to the larger U.S. market, as well as the lower-cost Mexican market, in the wake of the two free trade agreements: the Canada-U.S. Free Trade Agreement and the North American Free Trade Agreement.
Data from the analysis came from the 1993 Survey of Innovation and Advanced Technology (SIAT) and a longitudinal file that was constructed from the Annual Survey of Manufactures (ASM).
The SIAT collected data on research and development, innovation activities and the use of advanced technologies for a random sample of all plants in the Canadian manufacturing sector. The ASM collected information on shipments, value added, inventories and employment for all plants in the Canadian manufacturing sector.
Yet, between 1987 and 1999, the share of foreign-controlled plants in total output in the manufacturing sector increased from 40.5% to 52.2%.
International orientation also associated with superior performance of domestic-controlled plants
Foreign-controlled plants are more productive than domestic-controlled plants in general. This is because foreign-controlled plants and firms are also more innovative, more technologically advanced, and more likely to perform research and development.
Not all domestic-controlled plants were less productive or less innovative. The study found there was little difference between foreign-controlled plants and domestic-controlled plants whose parent had an international orientation.
The study showed that domestic producers with foreign operations (referred to as domestic multinational enterprises) were equally productive and had a slightly better performance than foreign-controlled plants with respect to research and development and innovation.
Spillover benefits from foreign-controlled plants to domestic-controlled plants
The high productivity growth of foreign-controlled firms had a spillover effect on companies in the domestic sector.
The productivity performance of domestic-controlled plants was higher in industries with a larger presence of foreign-controlled plants, according to the report.
This productivity-spillover benefit of foreign-controlled plants was not distributed equally among domestic producers. The paper found that smaller and younger domestic plants captured larger positive spillover benefits than did older and larger domestic plants in industries where the share of foreign-controlled plants was higher.
The study also found that the presence of foreign-controlled plants increased the intensity of competition faced by the domestic sector and the number of advanced technologies used in the domestic sector.
This suggests that the spillover benefits of foreign-controlled plants received by domestic plants arose from increased competition and the increased use of advanced technologies in domestic plants.
Link
The Paper
cdncutie @ Mon Dec 12, 2005 8:19 pm
Interesting study. Thanks Toro
Toro @ Mon Dec 12, 2005 8:21 pm
cdncutie cdncutie:
Interesting study. Thanks Toro
My pleasure.
USCAdad @ Fri Dec 16, 2005 11:32 am
No doubt about it. Canadians in general and the business community specifically need to get out there and be more inovative and agressive.
Another main component would be educational reform. I'm a big fan of the arts and classical education, but I'd like to see more integration between the university and Canadian industries. Industries could help students actually prepare for their chosen fields. Schools could help focus creative energy and provide a place for the training and advancement of skills. I would also like to see some government leadership in forming an e learning program with other nations. With the net and simple camera equipment a base level of education could be afforded to the world. Schools could then focus on other direct aspects of education... labs, tutorials, etc. It's time for Canada to step up their game.