Statistics Canada - Statistique Canada
Skip main navigation menuSkip secondary navigation menuHomeFrançaisContact UsHelpSearch the websiteCanada Site
The DailyCanadian StatisticsCommunity ProfilesProducts and servicesHome
CensusCanadian StatisticsCommunity ProfilesProducts and servicesOther links

Warning View the most recent version.

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

Media Room Search The Daily View or print The Daily in PDF format. Requires Adobe Acrobat Reader The Daily archives Latest release from the Labour Force Survey Latest release from the Consumer Price Index Recently released products Latest economic indicators Release dates Get a FREE subscription to The Daily Information about The Daily The Daily
Monday, December 5, 2005

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.

Note to readers

This release is based on the research paper Global links: Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing, available today. It investigates the contribution that foreign-controlled plants make to labour productivity growth in the Canadian manufacturing sector.

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.

The research paper Global Links: Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing (11-622-MIE2005009, free) is now available online. From Our products and services page, under Browse our Internet publications, choose Free, then National accounts.

More studies on multinationals are available free of charge in the analytical series Update on Economic Analysis (11-623-XIE) on our Web site.

For more information, or to enquire about the concepts, methods or data quality of this release, contact John Baldwin (613-951-8588) or Wulong Gu (613-951-0754) of the Micro-economic Analysis Division.

Home | Search | Contact Us | Français Return to top of page
Date Modified: 2005-12-05 Important Notices