Archived — Business Innovation and Strategy: A Canadian Perspective

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Aussi offert en français sous le titre Innovation et stratégies d'entreprise : Perspective canadienne.

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Archived

Table of Contents


Survey of Innovation and Business Strategy

Executive Summary

Innovation is widely recognized as a key determinant of productivity performance, which is critical to the advancement of living standards over the long-term. For this reason, low levels of business innovation observed in Canada represent a significant concern as to the ability of domestic businesses to improve competitiveness and productivity. Further evidence for this concern is apparent in Canada's poor productivity performance relative to many of its counterparts in the OECD as well as the fact that the productivity gap with the United States continues to widen.

In November 2010, Industry Canada released the Survey of Innovation and Business Strategy (SIBS) in partnership with Foreign Affairs and International Trade Canada and Statistics Canada; it was sent to a sample of 6,233 enterprises across Canada spanning 67 industries. SIBS represents the first Canadian survey to cover a broad array of interrelated factors that influence an enterprise's decision to innovate such as strategic orientation, management practices, including global value chain management, the use of technology, ownership structure, and marketplace and competitive environments. Before SIBS, other surveys and reports assessed these factors in isolation, which did not provide comprehensive views of the issues involved from the perspective of the business.

This summary report presents some of the key findings from the initial analysis of the SIBS data. Specifically, it sets out to provide insight into the innovative activities of enterprises based in Canada by providing answers to the following set of questions:

  1. Why is innovation important for enterprises in Canada?
  2. How do enterprises in Canada position themselves in the marketplace?
  3. How are enterprises in Canada changing the way they are connected to the world economy?
  4. How do enterprises in Canada compete in the marketplace?
  5. How do enterprises in Canada innovate and adopt new technologies?

In attempting to answer these questions, the initial analysis of the SIBS results yielded a number of significant findings. The analysis provided support for the widely held view that innovation involves many factors and is a complex process. Furthermore, enterprises based in Canada have recognized the importance of innovation and have incorporated it into their business strategies to a large extent.

Highlights of the survey include:

The production of the SIBS has established an extensive dataset that will allow researchers and analysts to conduct relevant studies on the innovative activities and strategic decisions of enterprises in Canada. Further, it will assist the policy community in the development of evidence-based policy by addressing the drivers of and barriers to business innovation in Canada from the perspective of business themselves.

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Section 1

Why is innovation important for enterprises in Canada?

Business innovation is important to the sustained growth of the Canadian economy and of Canadian living standards. Economics literature links productivity growth and business investment in innovation — which is not restricted to traditional investment in research and development (R&D) and equipment, but also to other knowledge-generating activities such as management and organizational practices, and other "intangibles."

Moreover, with the advent of globalization via advanced information and communication technologies (ICTs) and reduced international trade barriers, there are fewer obstacles to relocating or outsourcing business activities to emerging countries such as China and India. With many Canadian enterprises competing globally, innovation and innovative strategies present avenues to get ahead of the competition.

The recent appreciation of the Canadian dollar against most major currencies places further competitive pressure on enterprises in Canada to innovate and invest, while at the same time making it cheaper for domestic producers to purchase state-of-the-art machinery and equipment.

Several intertwined factors can influence the decision to choose an innovative business strategy — characteristics such as ownership structure, the state of competition, public policy incentives and the degree of entrepreneurship of enterprises. A number of recent surveys and reports assess the different factors affecting innovation and business strategy,Footnote 1, Footnote 2 but there has been no comprehensive view of the issues involved from the perspective of business.

What is the Survey of Innovation and Business Strategy?

The Survey of Innovation and Business Strategy (SIBS) is a comprehensive new survey that covers the factors that influence enterprise strategies — not only explicitly related to innovation, but also to other strategies. It is a joint project, initiated in 2007–08 by Industry Canada, Foreign Affairs and International Trade Canada and Statistics Canada, to better understand the market and policy factors that encourage or discourage the adoption of growth and innovation-oriented business strategies.

SIBS provides detailed information about various business strategies and practices that determine business innovation, such as an enterprise's strategic orientation, its management practices, its use of advanced technology and its marketplace and competitive environment. The survey also provides detailed information about global value chain management practices and activities in Canada, such as which activities an enterprise will relocate to other countries and which it will outsource to external suppliers.

A sample of 6,233 enterprises in Canada, each with more than 20 employees and revenues above $250,000, were surveyed. These enterprises spanned 67 industries.

Structure of the report

Section 2 identifies enterprises' most important long-term business strategies and the strategic focus of their products and activities. Then, to provide a better understanding of the scope of business activities in Canada, the section describes the various activities that enterprises perform. It focuses on how an enterprise positions itself in the marketplace by looking at its main product and principal market, the type and location of business activities it performs, as well as its decision structure.

Section 3 looks at how enterprises in Canada have integrated global value chains (GVC) and international markets. This is seen as an important business strategy for enterprises in Canada as they seek new markets for their products and expand the scale of their domestic market segments.

Section 4 assesses whether enterprises in Canada operate in a competitive environment. By asking enterprises to define their own markets, SIBS findings overcome the important problem of market definition by directly measuring the competition intensity that enterprises perceive.

Section 5 looks at enterprises' technology adoption and innovation strategies. Concepts of complementarity in innovation and co-innovation are discussed to highlight the complexity of bringing new ideas to the market.

Section 6 presents the conclusions. Additionally, a survey description and more detailed tables (by industry and size of the enterprise) are provided in the appendices.


Key Findings of the Report

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Section 2

How do enterprises in Canada position themselves in the marketplace?


Key Findings of this Section


A majority of enterprises in Canada focus on product positioning rather than cost leadership.

Innovative strategies come in many different forms and will likely be influenced by the enterprise's long-term market strategy. For example, an enterprise could introduce product and marketing innovations to differentiate its main product(s), or introduce process and organizational innovations to lower costs.

A long-standing hypothesis is that enterprises in Canada derive most of their productivity gains by mass-producing commodities or low value-added goods and services. This would imply that they mainly try to innovate by minimizing their input costs to take advantage of scale economies. However, contrary to this hypothesis, SIBS results (Figure 2.1 below and Table A1 in Appendix 2) show that most enterprises report product positioning (e.g., product leadership, market segmentation, product diversification, improving quality) as the focus of their long-term strategy rather than cost leadership.

Figure 2.1: Enterprise long-term business strategy in 2009 – Percentage of enterprises
Graph of Enterprise long-term business strategy in 2009 – Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy 2009
Description of Figure 2.1
Enterprise long-term business strategy in 2009 – Percentage of enterprises
Size of enterprise Product positioning Cost leadership
Small enterprises 76.3 23.7
Medium enterprises 90.9 9.1
Large enterprises 85.3 14.7
All enterprises 78.6 21.4
Source: Survey of Innovation and Business Strategy, 2009.

However, the observed focus on product positioning over cost leadership may be a recent development. Most enterprises in both the manufacturing and non-manufacturing sectors report that they had implemented their current long-term strategy within the last seven years (Figure 2.2). While this does not necessarily imply a shift from cost minimization to product differentiation, it is consistent with the hypothesis that enterprises in Canada have recently aligned their strategic focus towards product positioning to face external factors such as currency appreciation or increased pressures from globalization.

Figure 2.2: Enterprise current long-term business strategy by year of implementation – Percentage of enterprises

Graph of Enterprise current long-term business strategy by year of implementation – Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy 2009
Description of Figure 2.2
Enterprise current long-term business strategy by year of implementation – Percentage of enterprises
Type of enterprise In 2009 or 2010 Between 2004 and 2008 Between 1980 and 2003 Before 1980
All except manufacturing 25.9 34.2 35.1 4.8
Manufacturing 19.1 43.6 33.5 3.8
Source: Survey of Innovation and Business Strategy 2009

Enterprises' main strategic focus is on existing products or activities rather than on new ones.

While the long-term strategy of most enterprises is more geared toward product positioning than cost leadership, the strategic focus of the majority of enterprises in Canada is oriented toward exploiting current products and activities rather than developing new or significantly improved ones (Figure 2.3 below and Table A2 in Appendix 2).

A majority of enterprises report that their strategic focus is to maintain or expand the sales of existing products (77 percent), maintain or intensify existing marketing practices (55 percent), maintain or optimize current operations and business activities (59 percent) and maintain or optimize current organizational and management practices (60 percent).

Figure 2.3: Enterprise main strategic focus for different activities in 2009Footnote a - Percentage of enterprises
Graph of Enterprise main strategic focus for different activities in 2009 - Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy 2009
Description of Figure 2.3
Enterprise main strategic focus for different activities in 2009Footnote a - Percentage of enterprises
activity Outsourced in Canada Performed within the enterprise in Canada
Provisions of services 10.1 98.1
Human resources management 7.1 94.7
Financial management 6.4 92.9
Marketing, sales and after sales services 13.2 92.1
Production of goods 20.5 90.0
Distribution and logistics 18.0 89.4
Accounting and book keeping 22.6 86.0
Data processing 20.7 84.4
ICT services 29.6 78.7
R&D 22.0 78.4
Call centers and help centers 23.0 76.7
Engineering and related technical services 29.5 72.5
Software development 48.4 54.9
Legal services 63.1 34.5

Source: Survey of Innovation and Business Strategy, 2009.

The percentage of enterprises reporting a strategic focus on new or significantly improved products varies by industry (Figure 2.4). Enterprises in the manufacturing sector are more likely to focus on new or significantly improved products than enterprises outside the sector. Further, a strategic focus on new or improved products is more prevalent among enterprises in high-tech industries relative to other manufacturing and non-manufacturing industries.

Figure 2.4: Enterprises with a main strategic focus on new or significantly improved products in selected industries in 2009 – Percentage of enterprises
Graph of  Enterprises with a main strategic focus on new or significantly improved products in selected industries in 2009 – Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy 2009
Description of Figure 2.4
Enterprises with a main strategic focus on new or significantly improved products in selected industries in 2009 – Percentage of enterprises
Selected Industry %
Scientific research and development services 37.8
Aerospace product and parts manufacturing 41.3
Data processing, hosting and related services 45.6
Semiconductor and other electronic components manufacturing 49.6
Computers and peripheral equipment manufacturing 50.0
Pharmaceutical manufacturing 52.1
Navigational and guidance instruments manufacturing 57.2
Computer systems design and related services 58.0
Software publishers 58.5
Communications equipment manufacturing 69.6
All except manufacturing 14.9
Manufacturing 35.8
Source: Survey of Innovation and Business Strategy, 2009.

The principal market of a majority of enterprises is local.

SIBS asked questions concerning an enterprise's highest-selling goods or services (henceforth referred to as main product), to collect information on the variety of products offered by enterprises in Canada, to define their principal market, and to acquire information on their competitive environment.

The principal market for an enterprise's main product is defined as the geographic region from which the enterprise derives the highest percentage of its main product total sales revenueFootnote 3. Figure 2.5 (and Table A3 in Appendix 2) shows that, the principal market for enterprises in both the manufacturing and non-manufacturing sectors was domestic in 2009, with a high share of non-manufacturing enterprises principally serving local markets (70 percent).

Figure 2.5: Sales from enterprise's main product by region in 2009 – Percentage of sales
Graph of Sales from enterprise's main product by region in 2009
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 2.5
Sales from enterprise's main product by region in 2009
Industry Local market Rest of the province Rest of Canada United States Rest of the world
All except manufacturing 70.2 17 7.7 3.3 1.8
Manufacturing 33.1 21.6 17.5 21.2 6.5

However, international markets are more important for manufacturing enterprises. On average, across manufacturing industries, 28 percent of revenues from main products come from abroad, of which 77 percent of revenues are from the U.S. This share is higher for large (45 percent) and medium-sized (39 percent) manufacturing enterprises compared to small (24 percent) ones.

SIBS also reveals that 60 percent of all enterprises consider their main product to be a product line (78 percent and 56 percent in the manufacturing and non-manufacturing sectors, respectively). This suggests that a majority of enterprises in many Canadian industries respond to different market segment demands by producing differentiated products.

Domestic outsourcing is limited to a small number of business activities.

Depending on the nature of the enterprises and the strategy they pursue, enterprises will perform different kinds of business activities. Figure 2.6 shows that for enterprises undertaking a given business activity, that activity was performed in-house by at least 70 percent of enterprises in 2009, with the exception of legal services and software development.

Put differently, Figure 2.6 shows that activities more likely to be outsourced outside of the enterprise but still within Canada are legal services (63 percent), software development (48 percent), information and communication technology services (30 percent) and engineering and related technical services (30 percent). Section 4 presents more detail on how enterprises integrate activities into global markets.

Figure 2.6: Business activities undertaken in Canada in 2009Footnote c
Figure 2.6: Business activities undertaken in Canada in 2009 (the long description is located below the image)
Source: Survey of Innovation and Business Strategy 2009
Description of Figure 2.6
Business activities undertaken in Canada in 2009Footnote c
Activity Outsourced in Canada Performed within the enterprise in Canada
Provisions of services 10.1 98.1
Human resources management 7.1 94.7
Financial management 6.4 92.9
Marketing, sales and after sales services 13.2 92.1
Production of goods 20.5 90.0
Distribution and logistics 18.0 89.4
Accounting and book keeping 22.6 86.0
Data processing 20.7 84.4
ICT services 29.6 78.7
R&D 22.0 78.4
Call centers and help centers 23.0 76.7
Engineering and related technical services 29.5 72.5
Software development 48.4 54.9
Legal services 63.1 34.5

Source: Survey of Innovation and Business Strategy, 2009.

Business Activities not Performed by Enterprises

The percentages in Figure 2.6 represent enterprises reporting that they undertook a given business activity, either by themselves or by outsourcing it. The SIBS questionnaire also asked which activities were not relevant for the enterprise. For instance, a majority of enterprises reported that they do not perform: engineering and related technical services (51 percent); software development (54 percent); R&D activities (57 percent); or operate call and help centres (62 percent). Figure 2.6 data points have been recalculated to exclude enterprises that do not perform a given activity.

Overall, decisions about business activities are usually made in Canada, but the picture is more blurred for large enterprises with foreign headquarters.

Although they generally represent a small percentage of enterprises in Canada, evidence suggests that large multinational enterprises invest more in innovation and are more productive than Canadian-owned enterprises.Footnote 4 The Competition Policy Review Panel (CPRP 2008) highlighted the importance of head offices being located in Canada because they are a source of high-skilled, high-paid jobs and can attract high-value business services. In contrast, the Expert Panel on Business Innovation (CCA 2009) suggested that Canada benefits from the presence of large enterprises, irrespective of their country of control, since there is no guarantee that Canada would generate enough large Canadian enterprises to replace them.

Results from SIBS show that 41 percent of large enterprises in the manufacturing sector report that their head office is located abroad, primarily in the U.S., followed by Europe (Figure 2.7). For non-manufacturing enterprises, the share of large enterprises with a head office located abroad is lower at 17 percent, with most of those located in the U.S.

Figure 2.7: Location of enterprise head office in 2009 – Percentage of large enterprises
Graph of Location of enterprise head office in 2009 – Percentage of large enterprises
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 2.7
Location of enterprise head office in 2009 — Percentage of large enterprises
Enterprise United States Europe All other countries
All except manufacturing 14.6 2 0.3
Manufacturing 27.7 9.2 4
Source: Survey of Innovation and Business Strategy, 2009

SIBS results also reveal that large enterprises report that most decisions about their business activities are taken in Canada. Overall, at least 65 percent of large enterprises report that decisions about business activities are primarily made in Canada, either at the Canadian head office or at the establishment level..Footnote 5 In comparison, between 90 percent and 95 percent of all enterprises (for all sizes and locations of head offices) report that decisions regarding business activities are made in Canada. Decisions more likely to be made primarily by foreign parents are: location of and focus on R&D; location of production facilities; and financial arrangements (Figure 2.8).

Figure 2.8: Location of decision-making for business activities in 2009Footnote d – Percentage of large enterprises that made that type of decision
Graph of Location of decision-making for business activities in 2009 – Percentage of large enterprises that made that type of decision
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 2.8
Location of decision-making for business activities in 2009Footnote d – Percentage of large enterprises that made that type of decision
Activity Primarily in Canada Joint between the Canadian head office and foreign parent Primarily foreign parent
Location of R&D facilities 66.2 14.2 19.6
Adoption and implementation of major advanced technologies 66.5 19.6 14.0
Source and types of financial arrangements 67.1 13.4 19.5
Focus on R&D activities 67.3 18.6 14.2
Location of production of services facilities 78.1 7.5 14.5
Support services 81.1 10.9 8.0
Distribution and logistics 82.7 9.6 7.7
Suppliers to use 85.0 10.5 4.5

Source: Survey of Innovation and Business Strategy, 2009

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Section 3

How are enterprises in Canada changing the way they are connected to the world economy?


Key Findings of this Section


Almost 50 percent of manufacturing enterprises had business activities outside of Canada, 5 percent relocated and 10 percent outsourced business activities outside of Canada between 2007 and 2009.

Although they typically perform their business activities in Canada, integration into the global value chain is important for enterprises in Canada. Figure 3.1 (and Table A4 in Appendix 2) shows that 48 percent of manufacturing enterprises report they had conducted business activities outside of Canada between 2007 and 2009. The figure also shows that the percentage of enterprises with activities abroad varies significantly by industry.

SIBS also collected information on changes implemented by enterprises in the location of their business activities between 2007 and 2009. Questions distinguished between the relocation and outsourcing of business activities. An enterprise that relocated business activities abroad kept the activities within the enterprise (e.g., through a foreign subsidiary), while an enterprise that outsourced or contracted out an activity abroad moved the activity outside of the enterprise (e.g., to a third-party supplier).

Figure 3.1: Enterprises with activities outside of Canada in selected industries in 2007–09 – Percentage of manufacturing enterprises
Graph of  Enterprises with activities outside of Canada in selected industries in 2007–09 – Percentage of manufacturing enterprises
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.1
Figure 3.1: Enterprises with activities outside of Canada in selected industries in 2007–09 — Percentage of manufacturing enterprises
Selected industries %
Railroad rolling stock manufacturing 81.8
Basic chemical manufacturing 76.8
Resin synthetic rubber and artificial synthetic fibres and filaments manufacturing 76.5
Manufacturing 47.5
Meat product manufacturing 22.4
Sawmills and wood preserving 21.4
Dairy product manufacturing 11.9
Source: Survey of Innovation and Business Strategy, 2009

Figure 3.2 (and Table A4 in Appendix 2) shows that about 70 percent of large and medium-sized manufacturing enterprises exported or attempted to export products between 2007 and 2009. Fewer non-manufacturing enterprises did so, although the numbers vary by industry. For example, 54 percent of software publishers exported or attempted to export goods or services.

Figure 3.2: Enterprises that exported or attempted to export products in 2007–09 — Percentage of enterprises
Graph of Enterprises that exported or attempted to export products in 2007–09 — Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.2
Enterprises that exported or attempted to export products in 2007–09 — Percentage of enterprises
Type of activity Large enterprises Medium enterprises Small enterprises
Manufacturing 69.8 71.3 48.8
All except manufacturing 12.3 20.6 13.8
Source: Survey of Innovation and Business Strategy, 2009

Overall, 5 percent of manufacturing enterprises relocated business activities that were initially performed in Canada to another country, and 10 percent of manufacturing enterprises reported outsourcing activities abroad between 2007 and 2009. Figure 3.3 (and Table A4 in Appendix 2) shows that large manufacturing enterprises (19 percent) were more likely to outsource business activities outside of Canada compared to medium-sized (16 percent) and small enterprises (8 percent).

Figure 3.3: Enterprises that relocated or outsourced business activities abroad in 2007–09 – Percentage of manufacturing enterprises
Graph of Enterprises that relocated or outsourced business activities abroad in 2007–09 – Percentage of manufacturing enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.3
Figure 3.3: Enterprises that relocated or outsourced business activities abroad in 2007–09 — Percentage of manufacturing enterprises
Relocated or outsourced Large enterprises Medium enterprises Small enterprises
Activities relocated outside of Canada 17.6 9.4 3.1
Activities outsourced outside of Canada 19.1 15.5 8.2
Source: Survey of Innovation and Business Strategy, 2009

Business activities were mainly outsourced to the United States and China between 2007 and 2009, and the most frequently displaced business activity was the production of goods.

The production of goods was by far the most frequently relocated or outsourced activity by manufacturing enterprises between 2007 and 2009 (Figure 3.4). It was displaced by about 80 percent of manufacturing enterprises that relocated or outsourced business activities. Distribution and logistics, marketing, sales and after-sales service and the provision of services are also among the most frequently displaced business activities, although the incidence of displacing these activities (around 20 percent of manufacturing enterprises) is much lower than for the production of goods.

Figure 3.4: Business activities relocated or outsourced abroad in 2007–09 — Percentage of manufacturing enterprisesFootnote e
Graph of Business activities relocated or outsourced abroad in 2007–09 — Percentage of manufacturing enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.4
Business activities relocated or outsourced abroad in 2007–09 — Percentage of manufacturing enterprisesFootnote e
Activity Outsourced outside of Canada Relocated outside of Canada
Production of goods 80.5 79.9
Distribution and logistics 19.3 22.2
Marketing, sales and after sales services 16.1 20.4
Provisions of services 21.9 18.7
Accounting and book keeping 3.8 16.5
Engineering and related technical services 10.9 16
Financial management 2.3 14.8
R&D 6.9 13.1
ICT services 4.4 12.2
Data processing 3.6 12
Human resources management 2.2 10.8
Call centers and help centers 3.8 8.5
Software development 7.1 7.1
Legal services 7.1 5.5

Source: Survey of Innovation and Business Strategy, 2009

The most often cited (39 percent) destination for outsourced business activities by manufacturing enterprises is the U.S. (Figure 3.5). China is another important destination for outsourced activities, as 31 percent of manufacturing enterprises displaced their activities abroad to that country. India and Mexico were third and fourth respectively.

Figure 3.5: Country of destination of business activities outsourced abroad in 2007–09Footnote f — Percentage of manufacturing enterprises that outsourced business activities abroad
Graph of country of destination of business activities outsourced abroad in 2007–09 — Percentage of manufacturing enterprises that outsourced business activities abroad (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.5
Country of destination of business activities outsourced abroad in 2007–09Footnote f — Percentage of manufacturing enterprises that outsourced business activities abroad
Country %
United States 39.3
China 31.4
India 12.2
Mexico 4.3
Not specified 27.1

Source: Survey of Innovation and Business Strategy, 2009

Lower labour costs in emerging economies are often cited as the main reason for enterprises to outsource their business activities. This is supported by SIBS evidence, as 50 percent of manufacturing enterprises cited the reduction of labour and other costs as the most important reasons for relocating or outsourcing business activities (Figure 3.6). Access to new markets is the third most frequently cited reason for enterprises to outsource their business activities, as reported by nearly 30 percent of manufacturing enterprises.

Figure 3.6: Reasons for relocating or outsourcing business activities abroad in 2007–09 — Percentage of manufacturing enterprises that relocated or outsourced business activities abroad and reported the importance of the reason as high
Graph of reasons  for relocating or outsourcing business activities abroad in 2007–09 — Percentage of manufacturing enterprises that relocated or outsourced business activities abroad and reported the importance of the reason as high (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.6
Reasons for relocating or outsourcing business activities abroad in 2007–09 — Percentage of manufacturing enterprises that relocated or outsourced business activities abroad and reported the importance of the reason as high
Reasons for relocating or outsourcing business activities abroad %
Reduction of costs other than labour costs 52.8
Reduction of labour costs 51.3
Access to new markets 28.5
Reduced delivery times 19.5
Access to specialized knowledge or technologies 19
Improved logistics 18.9
Focus on core business 15.3
Improved quality or introduction of new goods or services 14.7
Following the behaviour or example of competitors or clients 14.1
Tax or other financial incentives 12
Lack of available labour 9.8
Source: Survey of Innovation and Business Strategy, 2009

Enterprises in Canada face different obstacles to exporting compared to relocating or outsourcing business activities.

A comparison of Figures 3.7 and 3.8 suggests that relocating or outsourcing business activities to another country is a different process compared to exporting goods. The lack of financing, Canadian legal or administrative obstacles, and linguistic and cultural obstacles are important impediments to relocating and outsourcing business activities (Figure 3.7), but are among the least frequently cited obstacles to exporting goods (Figure 3.8). In contrast, meeting the cost requirements of customers, the distance to customers, foreign tariffs and trade barriers, and border security issues are among the most frequently reported obstacles for manufacturing exporters.

Figure 3.7: Obstacles to relocating or outsourcing business activities abroad in 2007–09 — Percentage of manufacturing enterprises that reported the importance of the obstacle as highFootnote g
Graph of Obstacles to relocating or outsourcing business activities abroad in 2007–09 — Percentage of manufacturing enterprises that reported the importance of the obstacle as high (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.7
Obstacles to relocating or outsourcing business activities abroad in 2007–09 — Percentage of manufacturing enterprises that reported the importance of the obstacle as highFootnote g
Obstacles to relocating or outsourcing business activities abroad %
Distance to producers 35.5
Trade tariffs 30.2
Difficulties in identifying suitable or potential providers 25.8
Lack of financing 24.4
Foreign legal or administrative obstacles 20
Canadian legal or administrative obstacles 19.8
Linguistic or cultural 17.4
Lack of management expertise 16.1
Uncertainty of international standards 14.2
Distance to customers 13.5
Taxation 13.1
Concerns of violation of patents and/or IP rights 5.8

Source: Survey of Innovation and Business Strategy, 2009

Figure 3.8: Obstacles to exporting in 2007–09 —Percentage of manufacturing enterprises that exported or attempted to export products and reported the importance of the obstacle as high
Graph of obstacles to exporting in 2007–09 —Percentage of manufacturing enterprises that exported or attempted to export products and reported the importance of the obstacle as high (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.8
Obstacles to exporting in 2007–09 —Percentage of manufacturing enterprises that exported or attempted to export products and reported the importance of the obstacle as high
Obstacles to exporting %
Meeting cost requirements of customers 35.2
Distance to customers 22.4
Foreign tariffs or trade barriers 18.9
Border security issues 18.5
Meeting quality requirements of customers 16.4
Canadian export taxes or trade 13.6
Access to financing 12.1
Canadian legal or administrative 9.7
Concern of violation of patents and/or IP rights 5.5
Linguistic or cultural 4.2
Source: Survey of Innovation and Business Strategy, 2009

About 5 percent of manufacturing enterprises relocated business activities from another country into Canada between 2007 and 2009, primarily from the U.S.

In contrast with the perception that relocation or outsourcing are mainly focused abroad, 5 percent of enterprises operating in Canada returned business activities from other countries into Canada between 2007 and 2009. Figure 3.9 (and Table A4 in Appendix 2) presents the percentage of manufacturing enterprises that relocated business activities into Canada for a number of industries with the highest incidences of relocation. These are typically high-tech industries such as telecommunications, aerospace and pharmaceutical manufacturing.

Figure 3.9: Enterprises that relocated business activities from abroad into Canada in selected manufacturing industries in 2007–09 — Percentage of manufacturing enterprises
Graph of enterprises that relocated business activities from abroad into Canada in selected manufacturing industries in 2007–09 — Percentage of manufacturing enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.9
Enterprises that relocated business activities from abroad into Canada in selected manufacturing industries in 2007–09 — Percentage of manufacturing enterprises
Enterprises that relocated business activities from abroad into Canada in selected manufacturing industries %
Radio and television broadcasting and wireless communications equipment 22.1
Communications equipment manufacturing 16.0
Rubber and plastics industry machinery manufacturing 15.5
Resin synthetic rubber and artificial synthetic fibres and filaments manufacturing 14.5
Aerospace product and parts manufacturing 13.8
Pharmaceutical manufacturing 12.7
Source: Survey of Innovation and Business Strategy, 2009

About 85 percent of manufacturing enterprises that relocated business activities into Canada between 2007 and 2009 relocated the production of goods (Figure 3.10). Similar to the business activities that were relocated or outsourced from Canada abroad (Figure 3.4), distribution and logistics, marketing, sales and after-sales service and the provision of services are the next three most frequently reported business activities relocated into Canada.

Figure 3.10: Business activities relocated from abroad into Canada in 2007–09 — Percentage of manufacturing enterprises that relocated business activities into Canada
Graph of  business activities relocated from abroad into Canada in 2007–09 — Percentage of manufacturing enterprises that relocated business activities into Canada (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.10
Business activities relocated from abroad into Canada in 2007–09 — Percentage of manufacturing enterprises that relocated business activities into Canada
Business activities relocated from abroad into Canada in 2007–09 Percentage of manufacturing enterprises that relocated business activities into Canada
Production of goods 85.4
Distribution and logistics 34
Provisions of services 28.4
Marketing, sales and after sales services 22.4
Engineering and related technical services 15.3
R&D 15.2
Accounting and book keeping 14
Financial management 12.9
Call centers and help centers 11.4
Human resources management 10.2
ICT services 8.4
Data processing 6.2
Software development 3.1
Legal services 2.6
Source: Survey of Innovation and Business Strategy, 2009

Finally, Figure 3.11 shows that almost half of manufacturing enterprises that relocated business activities into Canada report that they moved these activities from the U.S. followed by China, the United Kingdom, and Mexico with shares lower than 5 percent each.

Figure 3.11: Country of origin of business activities relocated from abroad into Canada in 2007–09 — Percentage of manufacturing enterprises that relocated business activities into CanadaFootnote h
Graph of country of origin of business activities relocated from abroad into Canada in 2007–09 — Percentage of manufacturing enterprises that relocated business activities into Canada (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 3.11
Country of origin of business activities relocated from abroad into Canada in 2007–09 — Percentage of manufacturing enterprises that relocated business activities into CanadaFootnote h
Country of origin of business activities relocated from abroad into Canada in 2007–09 Percentage of manufacturing enterprises that relocated business activities into Canada
United States 46.8
China 4.6
United Kingdom 3.6
Mexico 2.9
Not Specified 28.7

Source: Survey of Innovation and Business Strategy, 2009

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Section 4

How do enterprises in Canada compete in the marketplace?


Key Findings of this Section


Economics literature suggests that competition often plays an important role as a driver of productivity growth and strategic business innovation. "Weak" competition intensity and "business complacency" are often prominently featured as drivers of lagging business innovation in Canada.Footnote 6 "Weak" competition intensity in Canada is often attributed to the concentrated nature of Canadian industries and regulations governing sectors such as telecommunications or banking.

Evidence suggests that competition among enterprises is high in Canada.

Figure 4.1 shows that Canadian manufacturing enterprises reported holding, on average, 35 percent market share for their highest selling product in its principal market (note that for most enterprises, their principal market is local). Industries with enterprises reporting the highest market share are in the construction industry and in some utilities and transportation industries (e.g., rail transportation). Small enterprises in non-manufacturing industries report holding a relatively high market share, which is consistent with another SIBS finding that the reported principal market of small enterprises is usually smaller and local.

Figure 4.1: Enterprise market share for their main product in their principal market in 2009—Market share
Graph of enterprise market share for their main product in their principal market in 2009 — Market share (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 4.1
Enterprise market share for their main product in their principal market in 2009 - Market share
market All enterprises Large enterprises Medium enterprises Small enterprises
Manufacturing 35.5 37.3 35.5 35.3
All industries 37.5 32.2 28.6 39.2
Source: Survey of Innovation and Business Strategy, 2009

Enterprises also reported that they face a large number of competitors in their principal market (Figure 4.2 and Table A5 in Appendix 2). Over 20 percent of manufacturing and non-manufacturing enterprises reported that they competed against at least 20 competitors in 2009, and around 80 percent reported competing against at least four competitors.Footnote 7 This result extends to industries that are generally seen as highly concentrated or non-competitive due to public policy and regulations. Wired and wireless telecommunication carriers, for example, follow the overall pattern with more than 75 percent of all enterprises reporting more than four competitors.

Figure 4.2: Number of competitors reported by the enterprise in their principal market for their main product in 2009—Percentage of enterprises
Graph of competitors reported by the enterprise in their principal market for their main product in 2009—Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 4.2
Number of competitors reported by the enterprise in their principal market for their main product in 2009—Percentage of enterprises
Number of Competitors Manufacturing All except
manufacturing
1–3 17.8 22.9
4–20 57.4 56.1
+20 24.8 21.1
Source: Survey of Innovation and Business Strategy, 2009

Following a number of free trade agreements, such as the North American Free Trade Agreement, Canada is considered to be an open economy that is highly integrated into the global value chain (as shown in Section 3). Enterprises in Canada face competition from foreign enterprises, which in turn, will affect the degree of competition intensity they experience.

A majority of Canadian manufacturing enterprises reported that they competed against multinational enterprises (MNEs) in their principal market in 2009. Specifically, 67 percent of manufacturing and 46 percent of non-manufacturing enterprises reported competing against MNEs. This result also holds across all enterprise sizes for manufacturing sector enterprises (Figure 4.3 and Table A6 in Appendix 2). Over 60 percent of small manufacturing enterprises reported facing an MNE, even though they primarily operate domestically. Exceptions to the overall trends included industries that are protected from foreign competition and industries that are highly localized — utilities, construction, and some transportation industries (not shown in figures).

Figure 4.3: Enterprises that competed against multinational enterprises in their principal market for their main product in 2009 — Percentage of manufacturing enterprises
Graph of enterprises that competed against multinational enterprises in their principal market for their main product in 2009 — Percentage of manufacturing enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 4.3
Enterprises that competed against multinational enterprises in their principal market for their main product in 2009 — Percentage of manufacturing enterprises
Type of enterprise %
All enterprises 66.9
Large enterprises 85.1
Medium enterprises 74.1
Small enterprises 63.7
Source: Survey of Innovation and Business Strategy, 2009

One third of manufacturing enterprises in Canada faced a new entrant in their principal market in 2009 (Figure 4.4). This was less pronounced for large enterprises (26 percent) than medium (29 percent) and small (32 percent) enterprises.

Figure 4.4: Enterprises that faced entry of new competitors in their principal market for their main product in 2009
Graph of enterprises that faced entry of new competitors in their principal market for their main product in 2009 (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 4.4
Enterprises that faced entry of new competitors in their principal market for their main product in 2009
size of enterprise %
All enterprises 31.1
Large enterprises 25.5
Medium enterprises 29.0
Small enterprises 32.1
Source: Survey of Innovation and Business Strategy, 2009

The main response of enterprises to the entry of new competitors in their principal market is to change the price of their products.

The way in which enterprises respond to new competition could be an important indicator of their innovativeness. An element of the Canadian "business complacency" argument is that enterprises in Canada do not adapt best practices under competitive pressure.

SIBS results show that, for the manufacturing sector as a whole, the majority of enterprises responded to new competitors by adjusting product prices (Figure 4.5 and Table A7 in Appendix 2). The figure also shows that the response of enterprises to new competition varied by industry. In industries where quality or perceived quality plays a role in gaining market share (e.g., aerospace, computer and electronic parts), enterprises responded in more innovative ways. For instance, nearly 70 percent of aerospace-related enterprises adopted a new technology or process in response to the entry of a new competitor, and over 70 percent of computer and electronic product manufacturing enterprises introduced a new good or service when facing a new entry.

Figure 4.5: Response of enterprises to the entry of new competitors in their principal market for their main product in 2009 — Percentage of manufacturing enterprises that faced entry
Graph of response of enterprises to the entry of new competitors in their principal market for their main product in 2009 — Percentage of manufacturing enterprises that faced entry (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 4.5
Response of enterprises to the entry of new competitors in their principal market for their main product in 2009 — Percentage of manufacturing enterprises that faced entry
Innovation type Aerospace product and parts manufacturing Computer and electronic product manufacturing Manufacturing
Change price of product 44.5 53 64.8
Speed up introduction of good or service 17.8 57.2 28.6
Introduce a new good or service 28.3 71.4 37.4
Change marketing expenditures 53.5 43 38.6
Adopt a new technology or process 66.1 47.1 39.2
Change quality of good or service 54.9 48 35.7
Source: Survey of Innovation and Business Strategy, 2009

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Section 5

How do enterprises in Canada innovate and adopt new technologies?


Key Findings of this Section


About two out of three enterprises in Canada introduced innovation between 2007 and 2009.

SIBS classifies innovation into four categories: process, organizational, product and marketing innovationFootnote 8. These categories are based on the Oslo Manual to allow proper international comparisonFootnote 9. They have been designed to capture the contribution of intangible economic activities to innovation such as branding, marketing and organizational changes, in particular in the non-manufacturing sector.

Using this broad concept of innovation, 67 percent of all enterprises in Canada introduced at least one innovation between 2007 and 2009. For the manufacturing sector, this proportion increases to 81 percent. Enterprises are as likely to introduce product or process innovations as they are to introduce marketing or organizational innovations (Figure 5.1). Manufacturing enterprises reported higher incidences of introducing any type of innovation than the other enterprises in Canada.Footnote 10

Figure 5.1: Type of innovation introduced by enterprises in 2007–09 — Percentage of enterprises
Graph of type of innovation introduced by enterprises in 2007–09 — Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.1
Type of innovation introduced by enterprises in 2007–09 — Percentage of enterprises
Type of industry Process Organizational Product Marketing
Manufacturing 58 54 49 40
All industries 33 35 35 35
Source: Survey of Innovation and Business Strategy, 2009

Further investigation suggests that innovation is a complex process and the types of innovations are interrelated. The introduction of a new production process might involve changes in the enterprise's support activities, such as organizational activities (complementarity). Moreover, the introduction of a given innovation might also require the introduction of another type of innovation (co-innovation). Using evidence from SIBS, the next subsections will illustrate these two concepts and assess their incidence within enterprises in Canada.

Evidence shows that complementarity is common in Canada.

Figure 5.2 illustrates complementarities between innovation types and required changes in other support activities between 2007 and 2009. For instance, 80 percent of all process innovators reported that introducing process innovations within their enterprises required changes to their operational activities; 27 percent reported changes in their marketing activities; and 55 percent needed to modify some organizational activities. In the same way, the figure also shows the presence of complementarities between product and marketing innovations and support activities.

Figure 5.2: Complementarity between innovation and business activities in 2007-09 - Percentage of process, product or organizational innovators
Graph of complementarity between innovation and business activities in 2007–09 — Percentage of process, product or organizational innovators (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.2
Complementarity between innovation and business activities in 2007–09 — Percentage of process, product or organizational innovators
type of activity Process Product Organizational Marketing
Marketing activities 27.2 59.5 28.9  
Operational activities 80.0 67.7 82.1  
Organizational activities 55.0 50.3    
Process innovation   49.9    
Product Innovation       83.3
Organizational innovation       33.5
Source: Survey of Innovation and Business Strategy, 2009

Although not shown, the complementarities in the manufacturing and non-manufacturing sector are similar to the ones presented for all enterprises in Figure 5.2.

Co-innovation is a more demanding condition than complementarity.

When the introduction of an innovation involves changes to other business activities that are significant enough, it can lead to another innovation. Figure 5.3 (and Table A10 in Appendix 2) shows that co-innovation regularly occurs in Canada. Overall, 34 percent of marketing innovators reported that their marketing innovations involved a new product. Likewise, 50 percent of product innovators indicated that their product innovations required the introduction of new processes. The product–process co-innovation is more prevalent than marketing–product in both manufacturing and non-manufacturing sectors, although co-innovation incidence is far from uniform across industries, as illustrated in Figure 5.3.

Figure 5.3: Co-innovation between types of innovation in 2007–09 — Percentage of marketing or product innovatorsFootnote i
Graph of co-innovation between types of innovation in 2007–09 — Percentage of marketing or product innovators (the long description is located below the image)
Source: Survey of Innovation and Business Strategy 2009
Description of Figure 5.3
Co-innovation between types of innovation in 2007–09 — Percentage of marketing or product innovatorsFootnote i
industry Co-innovation between marketing and product innovations Co-innovation between product and process innovations
All industries 34 50
Manufacturing 57 67
All except manufacturing 27 44
Aerospace product and parts manufacturing 48 83
Communications equipment manufacturing 77 50
Wired telecommunications carriers 74 32

Source: Survey of Innovation and Business Strategy, 2009.

New products and services introduced in Canada have innovative features.

Different questions were posed in SIBS to better understand product innovation. One of those questions related to the "uniqueness" of an enterprise's most innovative product. The concept of "uniqueness" refers to the innovative features of the product and the presence, or not, of full or partial substitutes for this innovative feature.

Figure 5.4 shows that for product innovators in the manufacturing sector, 27 percent had at least one highly innovative product (unique innovative features with no or few substitutes), while the remaining 73 percent of product innovations had some unique features and substitutes (50 percent) or features that can be widely available in the market (23 percent).

Results from Figure 5.4 (and Table A11 in Appendix 2) also suggest that innovative enterprises in the manufacturing industries were slightly more unique than the selected services industries for their most innovative product.Footnote 11

Figure 5.4: Enterprise's most innovative product by degree of novelty in selected industries in 2007–09 — Percentage of enterprises
Graph of Enterprise's most innovative product by degree of novelty in selected industries in 2007–09 — Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.4
Enterprise's most innovative product by degree of novelty in selected industries in 2007–09 — Percentage of enterprises
Industry Unique innovative features with no or few substitutes Unique innovative features with several substitutes Similar innovative features or innovative goods or services widely available on the market
Selected services industriesFootnote j 18.3 54.7 27.0
Manufacturing 26.6 50.3 23.1

Source: Survey of Innovation and Business Strategy, 2009.

Although purchasing off-the-shelf technology is the most used mode of acquisition, customizing and developing advanced technologies are also important.

SIBS defined advanced technologies as new technologies (equipment or software) that perform a new function or improve some function significantly better than commonly used technologies in the industry or by competitors. This aspect of "above industry standards," combined with the information on types of advanced technologies used, allows better identification of an advanced technology because a new technology in one industry can be common practice in another one.

Figure 5.5 shows that manufacturing enterprises were more likely than non-manufacturing enterprises to adopt advanced technologies in 2009. One exception is advanced communication technologies where a higher percentage of non-manufacturing enterprises used these advanced technologies compared to manufacturing enterprises.

Figure 5.5: Use of selected advanced technologies in 2009 – Percentage of enterprises
Graph of  use of selected advanced technologies in 2009 – Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.5
Use of selected advanced technologies in 2009 – Percentage of enterprises
Technology Manufacturing All except
manufacturing
Computerized design & engineering 42.2 17.7
Computerized processing, fabrication, and assembly 36.1 11.3
Communication 23.7 29
Information integration and control 19.7 12
Automated material handling 15.7 5
Computerized inspection 14.8 6.6
Green 8.7 8.3

Source: Survey of Innovation and Business Strategy, 2009.

Enterprises acquire new technologies by different means (e.g., purchasing them, leasing them or through licences). Those advanced technologies would then be integrated in the production of goods and services. Enterprises can go a step further and transform these new technologies by customizing them or developing new ones to better reflect their production needs.

About 75 percent of manufacturing enterprises using at least one advanced technology reported purchasing it off-the-shelf (Figure 5.6 and Table A12 in Appendix 2). Customizing and developing new technologies are also pervasive among manufacturing enterprises, more so for large ones compared to small and medium-sized enterprises.

Figure 5.6: Mode of acquisition of advanced technologies in 2009 – Percentage of manufacturing enterprises that used advanced technologies
Graph of mode of acquisition of advanced technologies in 2009 – Percentage of manufacturing enterprises that used advanced technologies (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.6
Mode of acquisition of advanced technologies in 2009 – Percentage of manufacturing enterprises that used advanced technologies
Size of enterprise Purchase off-the-shelf Customizing Developing Licensing Leasing off-the-shelf Merger and acquisition
Large enterprises 75 46.2 35.5 28.6 14.1 3.9
Medium enterprises 76.3 37.8 24.7 18 9.4 1.4
Small enterprises 74.5 31.2 17.6 16 11.1 2.2

Source: Survey of Innovation and Business Strategy, 2009.

The main government programs used by enterprises in Canada to support their innovation-related activities are tax credits, grants and training programs.

Government programs support innovation activities in Canada both directly and indirectly in order to stimulate private investments in innovation.

Tax credits, grants and training programs were the most commonly used government support programs in 2009 (Figure 5.7)Footnote 12. When combining federal, provincial and municipal program supports, 51 percent of manufacturing enterprises reported using tax credits, 25 percent grants and 22 percent training programs. The use of the other government support programs for innovation-related activities was markedly smaller, especially in non-manufacturing industries.

Figure 5.7: Use of government support programs for innovation-related activities in 2007–09 — Percentage of enterprises
Graph of  the use of government support programs for innovation-related activities in 2007–09 — Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.7
Use of government support programs for innovation-related activities in 2007–09 — Percentage of enterprises
program Manufacturing All except
manufacturing
Tax credits 51 15
Grants 25 19
Training programs for recent graduates 22 19
Hiring programs 10 2
Export incentives and services 9 1
Market information services 7 2
Information and technical assistance programs 7 3
Acess to research facilities 5 1
Procurements 4 4
Source: Survey of Innovation and Business Strategy, 2009.

The main obstacles to innovation faced by enterprises in Canada are uncertainty and risk, lack of skills and internal financing. Only a few enterprises use government programs to mitigate obstacles to innovation.

In their effort to innovate, enterprises reported a range of obstacles. Some were financial; others were related to the structure of the market or to the enterprise's level of risk aversion. Overall, the three main obstacles to innovation were: risk and uncertainty (37 percent), lack of skills within the enterprise (26 percent) and internal financing (23 percent). In contrast, intellectual property protection (5 percent) and government competition policy (4 percent) were the two least reported obstacles to innovation as reported by all enterprises (Figure 5.8 and Table A13 in Appendix 2).

Figure 5.8: Obstacles to innovation faced by enterprises in 2009 — Percentage of enterprises
Graph of obstacles to innovation faced by enterprises in 2009 — Percentage of enterprises (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.8
Obstacles to innovation faced by enterprises in 2009 — Percentage of enterprises
obstacle Manufacturing All except manufacturing
Uncertainty and risk 47 34
Internal financing 35 20
Lack of skills 28 26
Market size 26 15
External financing 25 14
Regulatory issues 18 16
Agreement with external collaborators 10 11
Intellectual property 8 4
Government competition policy 5 4
Source: Survey of Innovation and Business Strategy, 2009.

Once enterprises have recognized the obstacles to innovation, SIBS asked whether they try to overcome them by their own means or by taking advantage of government support programs. The percentage of enterprises taking measures to mitigate obstacles to innovation is high.

About 90 percent of manufacturing enterprises reported that they have taken measures to mitigate the effects of identified obstacles to innovation. Among these enterprises, the success rate of these measures ranges from 35 percent to 60 percent depending on the obstacle (Figure 5.9). While few enterprises identified intellectual property (IP) protection as an obstacle, more than 60 percent of enterprises facing IP-related obstacles reported being successful in mitigating this particular issue. In contrast, enterprises facing market size obstacles were less likely (35 percent) to report being successful in mitigating this obstacle. Figure 5.9 also shows that between 10 percent and 30 percent of manufacturing enterprises that took measures to mitigate obstacles to innovation used government programs.

It is noteworthy that the success rate of measures to mitigate uncertainty and risk, which is the most important obstacle to innovation, is among the lowest, but that the success rates for lack of skills and internal financial obstacles are among the highest.

Figure 5.9: Success rate of measures taken and use of government support programs to mitigate the obstacles to innovation in 2009 — Percentage of manufacturing enterprises that faced that type of obstacle and took measures to mitigate it
Graph of success rate of measures taken and use of government support programs to mitigate the obstacles to innovation in 2009 — Percentage of manufacturing enterprises that faced that type of obstacle and took measures to mitigate it (the long description is located below the image)
Source: Survey of Innovation and Business Strategy, 2009
Description of Figure 5.9
Success rate of measures taken and use of government support programs to mitigate the obstacles to innovation in 2009 — Percentage of manufacturing enterprises that faced that type of obstacle and took measures to mitigate it
Obstacle Measures taken
were successful
Used government programs
Intellectual property 60.5 10.0
Lack of skills 52.2 19.0
Agreement with external collaborators 52.1 14.8
Internal financing 45.6 31.3
External financing 45.4 25.3
Government competition policy 39.5 8.1
Uncertainty and risk 38.7 18.5
Regulatory issues 35.7 11.4
Market size 35.0 28.9
Source: Survey of Innovation and Business Strategy, 2009.

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Section 6

Conclusion

SIBS provides a rich environment for the analysis of different factors that influence the innovative behaviour and performance of enterprises in Canada, including business strategies and activities, enterprise structure, and the competitiveness of the market environment. A better understanding of the drivers of business innovation and enterprise growth will inform policy design in Canada.

Enterprises report that they are more likely to focus on product positioning than cost leadership for their long-term business strategies. Many enterprises also report adjusting their strategic focus in the late 2000s, when external pressures on businesses included currency appreciation and increased pressure from globalization.

The report also shows that innovation is a complex process. Over 2007–09, many enterprises in Canada introduced different forms of innovation (product, process, marketing or organizational), which often required significant changes to other business and innovation-related activities within the enterprise. Moreover, enterprises — in particular, those in the high-tech sector — reported introducing a product innovation or adopting a new technology to face increased competition, suggesting that technology and innovation are important strategic assets that enterprises in Canada employ to remain competitive in the changing marketplace.

The production of the SIBS has established an extensive dataset that will allow researchers and academics to conduct relevant studies on the innovative activities and strategic decisions of enterprises in Canada. Further, it will assist the policy community in the development of evidence-based policy by addressing critical data gaps in our understanding of the drivers and barriers of business innovation in Canada.

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