Understanding Canada's innovation paradox

Released: 2024-07-24

Labour productivity gains are integral to long-run improvements in living standards. However, productivity growth has been trending lower, suggesting innovation and advanced technology use have not translated into sustained improvements. This has resulted in what's called an innovation paradox: Despite substantial investments in innovation and technology, the payoffs have been modest.

The presentation "Research to Insights: Challenges and Opportunities in Innovation, Technology Adoption and Productivity," released today, uses findings from Statistics Canada's productivity research program and recent business surveys, as well as examining the relationship between competitive intensity and innovation, to inform on the pace at which technologies such as artificial intelligence (AI) are being integrated into the economy. It is also accompanied by the article "Understanding Canada's innovation paradox: Exploring linkages between innovation, technology adoption and productivity."

Lower capital investment weighs on labour productivity growth

Slower labour productivity growth over much of the past decade stems largely from weak capital investment, which has been pervasive across industries. Investment per worker in 2022 was nearly 20% below 2014 levels, reflecting in part the sizable decline in non-residential capital spending after the oil price shock in the mid-2010s.

Little boost to productivity from technological innovation

Over the past two decades, increases in multifactor productivity—improvements in business efficiency stemming from innovation and technology use—have not translated into sustained improvements in labour productivity. Multifactor productivity, on average, contributed negatively to labour productivity growth from 2000 to 2015, followed by small positive contributions from 2015 to 2022. This weaker multifactor productivity growth is not unique to Canada and has been observed in many other advanced economies.

Comparatively low capital spending on advanced technologies

Advances in AI technologies are widely touted as game-changers, potentially reshaping business processes and fostering innovation-led increases in productivity. The adoption of AI and other disruptive technologies is still in its early stages; 6% of businesses reported using AI for producing goods or delivering services during the 12 months prior to the survey (Canadian Survey on Business Conditions, second quarter 2024) and overall capital spending on advanced technologies has been modest.

Impacts of artificial intelligence on the workforce are expected to be far-reaching

Canadian businesses are innovating, but there is little evidence that innovations have translated into productivity growth or higher standards of living. However, there are major opportunities on the horizon with the adoption of AI and emerging technologies, which have the potential to reshape how companies do business and create new jobs. Statistics Canada will continue to monitor these developments closely and provide information on their transformative nature and potential implications for Canada's workforce and productivity growth.

For information on the other articles released today in Economic and Social Reports, please see the Daily release "Economic and Social Reports, July 2024."

Products

The product "Research to Insights: Challenges and Opportunities in Innovation, Technology Adoption and Productivity" is now available as part of A Presentation Series from Statistics Canada About the Economy, Environment and Society (Catalogue number11-631-X).

The article "Understanding Canada's innovation paradox: Exploring linkages between innovation, technology adoption and productivity" is now available in the July 2024 issue of Economic and Social Reports, Vol. 4, no. 07 (Catalogue number36280001).

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).