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No. 33: R&D Propensity and Productivity Performance of Foreign-Controlled Firms in Canada

by Jianmin Tang and Someshwar Rao, Industry Canada, March 2001


Abstract

Using firm-level data, this paper examines the R&D propensity of Canadian-controlled and foreign-controlled firms in Canada. The empirical results suggest that foreign-controlled firms in Canada, after accounting for other factors, spend significantly less on R&D than Canadian-controlled firms. But, foreign-controlled firms increased their R&D propensity at the same pace as Canadian-controlled firms during the 1985–1994 period. In the two groups of firms, R&D propensity is higher in high-technology and export-orientedfirms, and lower in large and medium-size firms. In addition, the paper shows that foreign-controlled firms are actively adopting advanced technology (including other intangible assets) from their parents. This may explain why foreign-controlled firms are more productive than Canadian-controlled firms.

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