Business adaptation and adjustment

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  • Articles and reports: 11F0019M2020005
    Description:

    Understanding intangible investments is essential for providing accurate measures of gross fixed capital formation (GFCF), gross domestic product (GDP) and productivity growth, and for understanding the innovation system. Statistical agencies need measures of intangible investment to produce economic statistics on aggregate activity that accurately measure concepts such as GDP, GFCF or savings. The levels of GDP, GFCF and savings will be underestimated to the extent that expenditures are incorrectly classified as intermediate inputs that are fully consumed during the period being measured—and not as investments that are not fully consumed during the period when the expenditures are incurred. Estimates for GDP and productivity growth rates may be similarly underestimated. This paper updates and expands upon the intangible capital estimates presented by Baldwin et al. (2009), who extended already measured intangibles (i.e., research and development [R&D], software, mineral exploration) to include additional asset classes consistent with international research on intangible capital measurement (see Corrado, Hulten and Sichel 2009).

    Release date: 2020-02-12

  • Articles and reports: 11F0019M2020001
    Description:

    Multifactor productivity (MFP) declined in Canada from 2000 to 2009 and then recovered after. The movements in productivity since 2000 have attracted great attention from researchers and policy makers because productivity is important both for economic growth and for improvements in living standards. This paper applies the stochastic frontier framework to decompose each firm’s MFP into two parts: its technological frontier and its technical efficiency. Change in the aggregate technological frontier refers to improvements in the productivity potential of an economy, i.e., the maximum productivity of an economy if all firms are fully efficient. Aggregate technical efficiency reflects the economy’s capacity to achieve that potential. The results of this decomposition can show whether the movements in productivity after 2000 in Canada were mainly the result of changes in the technological frontier and productivity potential or of changes in the technical efficiency.

    Release date: 2020-01-17

  • Articles and reports: 11F0019M2020002
    Description:

    Labour productivity growth in the business sector in Canada started to decline in 2000, from 2.3% per year in the period from 1991 to 2000 to 1.0% per year in the period from 2000 to 2015. This paper examines how innovation, innovation diffusion across firms, and business dynamism affected the productivity slowdown.

    Release date: 2020-01-17

  • Articles and reports: 11-622-M2012024
    Geography: Canada
    Description:

    This paper looks at annual changes in Canadian business sector employment from 2001 to 2009. This period encompasses an expansionary phase (2001 to 2008), followed by a recession (2008/2009). Firm-level data are used to decompose yearly net employment change into gross employment creation and destruction, which makes it possible to measure the size of total annual employment reallocation. These measures of employment turnover are compared across industries and firm size classes.

    Release date: 2012-06-27

  • Articles and reports: 11F0027M2012078
    Geography: Canada
    Description:

    This paper asks how market expansion contributes to productivity growth. It investigates whether entry to both new international markets and new domestic markets is associated with greater productivity growth. It also examines whether exit from export markets is necessarily associated with deteriorating performance or whether it too can lead to success when associated with movements to new markets. Finally, the paper examines the strategy of firms that move to new markets after they withdraw from export markets in order to examine the differences that set them apart from their counterparts that do not find themselves able to adapt because they simply withdraw to their home domestic markets.

    Release date: 2012-03-20

  • Articles and reports: 11F0027M2010063
    Geography: Canada
    Description:

    This paper examines how trade liberalization and fluctuations in real exchange rates affect export-market entry/exit and plant-level productivity. It uses the experience of Canadian manufacturing plants over three separate periods that featuring different rates of bilateral tariff reduction and differing movements in bilateral real exchange rates. The patterns of entry and exit responses as well as the productivity outcomes differ markedly in the three periods. Consistent with much of the recent literature, the paper finds that plants self-select into export markets-that is, more efficient plants are more likely to enter and less likely to exit export markets. The reverse also occurs: entrants to export markets improve their productivity performance relative to the population from which they originated and plants that stay in export markets do better than comparable plants that exited, lending support to the thesis that exporting boosts productivity. Finally, we find that overall market access conditions, including real exchange rate trends, significantly affect the extent of productivity gains to be derived from participating in export markets. In particular, the increase in the value of the Canadian dollar during the post-2002 period almost completely offset the productivity growth advantages that new export-market participants would otherwise have enjoyed.

    Release date: 2010-06-25

  • Articles and reports: 11F0027M2010061
    Geography: Canada
    Description:

    We examine the simultaneous effects of real-exchange-rate movements and of tariff reductions on plant death in Canadian manufacturing industries between 1979 and 1996. We find that both currency appreciation and tariff cuts increase the probability of plant death, but that tariff reductions have a much greater effect. Consistent with the implications of recent international-trade models involving heterogeneous firms, we further find that the effect of exchange-rate movements and tariff cuts on exit are heterogeneous across plants - particularly pronounced among least efficient plants. Our results reveal multi-dimensional heterogeneity that current models featuring one-dimensional heterogeneity (efficiency differences among plants) cannot fully explain. There are significant and substantial differences between exporters and non-exporters, and between domestic- and foreign- controlled plants. Exporters and foreign-owned plants have much lower failure rates; however, their survival is more sensitive to changes in tariffs and real exchange rates, whether differences in their efficiency levels are controlled or not.

    Release date: 2010-04-14

  • Articles and reports: 11-624-M2008020
    Geography: Canada
    Description:

    This paper presents the long-term trends in outsourcing and offshoring across Canadian industries.

    Release date: 2008-10-27

  • Articles and reports: 11F0027M2008055
    Geography: Canada
    Description:

    This paper has three main objectives. First, it presents the long-term trends in outsourcing and offshoring across Canadian industries. Second, it examines the relationship between offshoring and changes in trade patterns at the industry level. It focuses on two major drivers that some have suggested are behind the recent trends toward offshoring: globalization and technological changes associated with information and communications technologies. Third, the paper examines the economic impact of offshoring by investigating the relationship between the extent of offshoring and productivity growth, shifts to high value-added activities and changes in labour markets.

    Release date: 2008-05-23

  • Articles and reports: 11F0027M2008054
    Geography: Canada
    Description:

    The paper investigates how Canadian manufacturing plants adjust to an increase in low-wage import competition by changing their commodity portfolios. At the commodity level, we distinguish between 'core' versus 'peripheral' and differentiated versus homogeneous commodities. We also account for cost and technological complementarities using input-output linkages between commodities produced by a plant. We document large commodity turnover within plants over the period from 1988 to 1996. The largest changes happened in multi-commodity plants and involved peripheral commodities. The commodities that were affected the most were those commodities that are potentially used as inputs in production of the 'core' commodity; homogeneous (rather than differentiated) commodities; and, commodities with relatively weak input complementarities with the core product. Plants experiencing large import competition shifted their output toward production of their core commodity and away from production of unrelated peripheral commodities.

    Release date: 2008-05-16
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Analysis (30)

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  • Articles and reports: 11F0019M2020005
    Description:

    Understanding intangible investments is essential for providing accurate measures of gross fixed capital formation (GFCF), gross domestic product (GDP) and productivity growth, and for understanding the innovation system. Statistical agencies need measures of intangible investment to produce economic statistics on aggregate activity that accurately measure concepts such as GDP, GFCF or savings. The levels of GDP, GFCF and savings will be underestimated to the extent that expenditures are incorrectly classified as intermediate inputs that are fully consumed during the period being measured—and not as investments that are not fully consumed during the period when the expenditures are incurred. Estimates for GDP and productivity growth rates may be similarly underestimated. This paper updates and expands upon the intangible capital estimates presented by Baldwin et al. (2009), who extended already measured intangibles (i.e., research and development [R&D], software, mineral exploration) to include additional asset classes consistent with international research on intangible capital measurement (see Corrado, Hulten and Sichel 2009).

    Release date: 2020-02-12

  • Articles and reports: 11F0019M2020001
    Description:

    Multifactor productivity (MFP) declined in Canada from 2000 to 2009 and then recovered after. The movements in productivity since 2000 have attracted great attention from researchers and policy makers because productivity is important both for economic growth and for improvements in living standards. This paper applies the stochastic frontier framework to decompose each firm’s MFP into two parts: its technological frontier and its technical efficiency. Change in the aggregate technological frontier refers to improvements in the productivity potential of an economy, i.e., the maximum productivity of an economy if all firms are fully efficient. Aggregate technical efficiency reflects the economy’s capacity to achieve that potential. The results of this decomposition can show whether the movements in productivity after 2000 in Canada were mainly the result of changes in the technological frontier and productivity potential or of changes in the technical efficiency.

    Release date: 2020-01-17

  • Articles and reports: 11F0019M2020002
    Description:

    Labour productivity growth in the business sector in Canada started to decline in 2000, from 2.3% per year in the period from 1991 to 2000 to 1.0% per year in the period from 2000 to 2015. This paper examines how innovation, innovation diffusion across firms, and business dynamism affected the productivity slowdown.

    Release date: 2020-01-17

  • Articles and reports: 11-622-M2012024
    Geography: Canada
    Description:

    This paper looks at annual changes in Canadian business sector employment from 2001 to 2009. This period encompasses an expansionary phase (2001 to 2008), followed by a recession (2008/2009). Firm-level data are used to decompose yearly net employment change into gross employment creation and destruction, which makes it possible to measure the size of total annual employment reallocation. These measures of employment turnover are compared across industries and firm size classes.

    Release date: 2012-06-27

  • Articles and reports: 11F0027M2012078
    Geography: Canada
    Description:

    This paper asks how market expansion contributes to productivity growth. It investigates whether entry to both new international markets and new domestic markets is associated with greater productivity growth. It also examines whether exit from export markets is necessarily associated with deteriorating performance or whether it too can lead to success when associated with movements to new markets. Finally, the paper examines the strategy of firms that move to new markets after they withdraw from export markets in order to examine the differences that set them apart from their counterparts that do not find themselves able to adapt because they simply withdraw to their home domestic markets.

    Release date: 2012-03-20

  • Articles and reports: 11F0027M2010063
    Geography: Canada
    Description:

    This paper examines how trade liberalization and fluctuations in real exchange rates affect export-market entry/exit and plant-level productivity. It uses the experience of Canadian manufacturing plants over three separate periods that featuring different rates of bilateral tariff reduction and differing movements in bilateral real exchange rates. The patterns of entry and exit responses as well as the productivity outcomes differ markedly in the three periods. Consistent with much of the recent literature, the paper finds that plants self-select into export markets-that is, more efficient plants are more likely to enter and less likely to exit export markets. The reverse also occurs: entrants to export markets improve their productivity performance relative to the population from which they originated and plants that stay in export markets do better than comparable plants that exited, lending support to the thesis that exporting boosts productivity. Finally, we find that overall market access conditions, including real exchange rate trends, significantly affect the extent of productivity gains to be derived from participating in export markets. In particular, the increase in the value of the Canadian dollar during the post-2002 period almost completely offset the productivity growth advantages that new export-market participants would otherwise have enjoyed.

    Release date: 2010-06-25

  • Articles and reports: 11F0027M2010061
    Geography: Canada
    Description:

    We examine the simultaneous effects of real-exchange-rate movements and of tariff reductions on plant death in Canadian manufacturing industries between 1979 and 1996. We find that both currency appreciation and tariff cuts increase the probability of plant death, but that tariff reductions have a much greater effect. Consistent with the implications of recent international-trade models involving heterogeneous firms, we further find that the effect of exchange-rate movements and tariff cuts on exit are heterogeneous across plants - particularly pronounced among least efficient plants. Our results reveal multi-dimensional heterogeneity that current models featuring one-dimensional heterogeneity (efficiency differences among plants) cannot fully explain. There are significant and substantial differences between exporters and non-exporters, and between domestic- and foreign- controlled plants. Exporters and foreign-owned plants have much lower failure rates; however, their survival is more sensitive to changes in tariffs and real exchange rates, whether differences in their efficiency levels are controlled or not.

    Release date: 2010-04-14

  • Articles and reports: 11-624-M2008020
    Geography: Canada
    Description:

    This paper presents the long-term trends in outsourcing and offshoring across Canadian industries.

    Release date: 2008-10-27

  • Articles and reports: 11F0027M2008055
    Geography: Canada
    Description:

    This paper has three main objectives. First, it presents the long-term trends in outsourcing and offshoring across Canadian industries. Second, it examines the relationship between offshoring and changes in trade patterns at the industry level. It focuses on two major drivers that some have suggested are behind the recent trends toward offshoring: globalization and technological changes associated with information and communications technologies. Third, the paper examines the economic impact of offshoring by investigating the relationship between the extent of offshoring and productivity growth, shifts to high value-added activities and changes in labour markets.

    Release date: 2008-05-23

  • Articles and reports: 11F0027M2008054
    Geography: Canada
    Description:

    The paper investigates how Canadian manufacturing plants adjust to an increase in low-wage import competition by changing their commodity portfolios. At the commodity level, we distinguish between 'core' versus 'peripheral' and differentiated versus homogeneous commodities. We also account for cost and technological complementarities using input-output linkages between commodities produced by a plant. We document large commodity turnover within plants over the period from 1988 to 1996. The largest changes happened in multi-commodity plants and involved peripheral commodities. The commodities that were affected the most were those commodities that are potentially used as inputs in production of the 'core' commodity; homogeneous (rather than differentiated) commodities; and, commodities with relatively weak input complementarities with the core product. Plants experiencing large import competition shifted their output toward production of their core commodity and away from production of unrelated peripheral commodities.

    Release date: 2008-05-16
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