Archived — Growing the Information and Communications Technology Industry

Archived Information

Archived information 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.


Canada's information and communications technology (ICT) sector is an important part of the Canadian economy. The 31 500 Canadian ICT firms that create and supply goods and services contribute to a more productive, competitive, and innovative society. The ICT sector currently represents 5 % of Canada's gross domestic product (GDP) and accounted for 11.5 % of all real GDP growth since 2002. Employees in the ICT sector are well educated and earn on average $62 000 or 47 % more than the national average.14

The performance of this industry sector is heavily influenced by global trends and major global firms. Competition from emerging economies is increasing and Indian and Chinese firms have now become world leaders and innovators. In the face of global competition, Canada needs to strengthen its ICT sector. The size of the Canadian industry sector falls below the OECD average, ranking 14th out of 23 countries measured as a share of total business sector GDP, well behind a number of our key competitors.15

As the global economy becomes increasingly digital, demand for digital products and services will grow, including in areas of Canadian strength. Canada has solid strengths in communications technologies (wireless and wired equipment, fibre optics and communications software), new media (e-gaming, animation and special effects software) and microelectronics. Other areas of potential technology and market opportunity for the ICT sector include cloud computing, microsystems, e-health applications and software as a service (SaaS).

To capitalize on these strengths and opportunities, Canadian firms will have to focus on high value-added activities and be especially innovative and agile to compete globally. Our goal is to increase the global competitiveness of Canada's ICT sector and grow its share of the Canadian economy and the global marketplace. But for Canada to succeed some key challenges will need to be addressed as we move forward.

top of page



R&D and technology innovation are crucial to the continued growth and competitiveness of the ICT sector. The sector is the largest performer of private sector R&D in Canada, accounting for 39 % of the total in 2009. However, the sector experienced slower R&D growth than other industry sectors over the 2002-09 period — 2.4 % vs. 2.7 %. 16 Internationally, Canada is a middling performer, ranking 10th among 21 OECD countries in ICT manufacturing R&D as a percentage of GDP and 7th in ICT services R&D.17 Moreover, ICT R&D growth over the 2002-07 period was 2.1 % in Canada, versus 8.7 % in the United States. Part of the reason is that the sector relies on a small core of key companies and industries for its R&D and innovation efforts. There are too few large R&D performers in Canada that are well positioned to develop new technologies and products for emerging global markets. With some of the most successful ICT companies in the world spinning out of universities, some have urged for increased collaboration between industry, universities and governments to spur innovation and R&D efforts.

The Government of Canada identified the ICT sector as one of four priority sectors in its 2007 Science and Technology Strategy, and has increased funding for research and innovation through the federal granting councils, the Institute for Quantum Computing, the National Optics Institute, the Industrial Research Assistance Program (IRAP), the Microelectronics Innovation Centre, CANARIE, the Canadian Digital Media Network and the Graphics, Animation and New Media Canada Network. These investments are in addition to the Scientific Research and Experimental Development (SR&ED) tax credit, reductions in corporate income taxes, and the export-related support of the Department of Foreign Affairs and International Trade and Export Development Canada.

Other countries are taking aggressive steps to help position their ICT sectors for longer term growth by investing in R&D and innovation. Some Canadian stakeholders have been advocating for further support to R&D. There is wide recognition that Canada's small domestic market itself will not sustain the growth of Canada's ICT sector that is required to remain competitive, and that primary growth comes by increasing exports of goods and services. Some stakeholders would like to see more efforts directed at growing domestic ICT firms and are keen for new government innovation frameworks, including market-led innovation policies, public-private sector partnerships and robust IP protection, particularly to support new emerging technology products and services that could provide opportunities for Canada. It has also been suggested that the government should consider undertaking analysis to identify the conditions that would help foster "communities of innovation" in Canada. Others suggest that existing measures preventing foreign companies from sponsoring R&D should be removed to increase their R&D activities in Canada.

Nonetheless, it is important to recognize that federal expenditures in science and technology are at historically high levels: currently $10.7 billion a year. With Advantage Canada, the Science and Technology Strategy and Canada's Economic Action Plan, the Government of Canada has taken significant steps to put in place the foundations for research, development and innovation. To further ensure that federal research funding is yielding maximum benefits for Canadians, the government will conduct a comprehensive review of all federal support for R&D to improve its contribution to innovation and economic opportunities for business. This review will inform future decisions regarding federal support for R&D. The ICT sector must rise to these challenges, and increase business investment in innovation and the successful commercialization of new products and services.

Venture Capital Financing

Venture capital (VC) is crucial to the ability of promising ICT companies to innovate, commercialize technologies and fulfill their growth potential. In 2009, VC investments in ICT were 25 % less than in 2008, and 50 % less than in 2007.18 Since 2003, the number of ICT companies receiving VC funding has also decreased by half.

In 2009, the Government of Canada invested $400 million in the Business Development Bank of Canada (BDC) to increase VC investment in promising Canadian-based technology companies. In addition, the government has provided $75 million to BDC for the Tandem Expansion Fund for VC investment in late-stage firms. Some provincial governments have also taken action in recent years with the creation of investment funds in partnership with the private sector to invest in strategic sectors, such as ICT.

The government will continue to build on these efforts to address issues related to VC financing, particularly those affecting SMEs. Some stakeholders have identified the reporting requirements under section 116 of the Canadian Income Tax Act as a barrier to foreign VC investments in Canada. Budget 2010 proposed to narrow the definition of "taxable Canadian property" in the Income Tax Act, thereby eliminating tax reporting under section 116 of the Income Tax Act for many investments such as those by non-resident venture capital funds in Canadian high-technology firms.


In order for Canadian companies to innovate and grow, they must be able to attract and retain highly qualified professionals. The digital sector is increasingly challenged to seek out and aggressively compete for these professionals. There are some indications of a shrinking talent base due to decreasing university enrolment in the areas of computer and information sciences, applied mathematics and computer software engineering. Between 2001 and 2007, information technology undergraduate enrolment in Canadian universities dropped by 45 %, resulting in a 35 % decline in graduates by 2007. Similarly, enrolment in graduate programs has declined by 21 % since 2003, leading to a 16 % drop in graduates by 2007.19 Moreover, there has been a decline in immigrants, as fewer IT professionals in emerging countries seek employment in developed countries such as Canada, due to growing opportunities in their home countries. Overall, the growth and viability of the ICT sector is put at risk, including Canadian and foreign direct investment in R&D in Canada. It also undermines the entire economy, as 45 % of all IT professionals work in other sectors.20

The Government of Canada has made it easier for employers to obtain the talent they need to remain competitive through improvements to foreign credential recognition. Leading suppliers and users of ICT, including key universities, have also formed the Canadian Coalition for Tomorrow's ICT Skills, aimed at ensuring that Canadian organizations can hire the ICT professionals they need to meet the changing and diverse needs of the 21st century workforce.

It will be important for governments and the private sector to identify ways to attract more students to university ICT degree programs and attract more foreign ICT professionals to immigrate to Canada. Canada must be seen as a destination of choice and must retain its graduates, building a talent pool of individuals with strong technical, management and soft skills if Canadian ICT companies are to grow and Canada's economy is to increase its development and use of ICT. As such, the Government of Canada will explore how to better attract international students and permanent immigrants along sectoral needs, such as ICT.

Government as a Model User

Governments can promote private sector innovation by being a smart and demanding purchaser and a model user of advanced technologies and services. The Government of Canada purchases approximately $2.5 billion per year of ICT goods and services. The Council of Canadian Academies notes that the "prospect of government procurement contracts for ICT firms that established a substantial presence in Canada provided in some cases an initial attraction that grew into major activities with global product mandates."21

Governments in some other countries set aside a percentage of their procurement budgets for small and medium-sized enterprises. Others are identifying their future technology needs and contracting out pre-commercial R&D work to the private sector to support the development of products and services to meet these needs. By being an early adopter of emerging and next generation technologies (e.g., Green IT and cloud computing models), governments can help drive ICT uptake in the private sector. This approach also helps SMEs to develop global sales and provides them with a powerful and credible client reference. Some Canadian stakeholders are advocating for changes to government procurement to better support private sector innovation. Recognizing this, Budget 2010 announced $40 million for the Small and Medium-sized Enterprise Innovation Commercialization Program, a two-year pilot initiative through which federal departments and agencies will adopt and demonstrate the use of innovative prototype products and technologies developed by SMEs.

top of page

Discussion Questions

Governments have a role to play in putting in place the policies and programs that encourage businesses to innovate and compete. As well, governments must ensure that Canada has an investment climate that attracts and retains strategic investments. At the same time, the private sector has the primary role in growing the ICT sector.

The Government of Canada would like your feedback on the following key issues to help grow the digital industry in Canada:

  • Do our current investments in R&D effectively lead to innovation, and the creation of new businesses, products and services? Would changes to existing programs better expand our innovation capacity?
  • What is needed to innovate and grow the size of the ICT industry including the number of large ICT firms headquartered in Canada?
  • What would best position Canada as a destination of choice for venture capital and investments in global R&D and product mandates?
  • What efforts are needed to address the talent needs in the coming years?
top of page


The public consultation period ended on July 13, 2010, at which time this website was closed to additional comments and submissions.

Between May 10 and July 13, more than 2010 Canadian individuals and organizations registered to share their ideas and submissions. You can read their contributions—and the comments from other users—in the Submissions Area and the Idea Forum.