Canada's Digital Imperative
This report examines the technology adoption trends in Canada prior to, and throughout the pandemic.
Prior to the pandemic, Canadian firms tended to be laggards in the adoption and use of technologies and, as a result, have been less productive and slower to grow than global peers.
Canada’s low technology equilibrium is largely explained by weak incentives and limited capacity to change. Many firms across a range of sectors have been able to maintain above-average profits for decades with minimal technology adoption, while others who recognize the potential benefits of adopting new technologies face resource, knowledge, and skills constraints.
For the past 15 years, some sectors and firms have made a gradual shift toward more intangible digital technology and service investments, such as cloud computing and software as a service. Intangible digital technologies effectively eliminate key capabilities challenges and lower technology investment risks for firms.
The COVID-19 pandemic and accompanying restrictions on mobility and proximity dramatically altered the technology incentive structure for firms in retail, professional services, and other key sectors prompting investment in e-commerce, remote work, and other technologies to maintain business operations and sales.
Whether or not the pre-pandemic shift to intangibles and pandemic era technology investments marks the emergence of a permanently higher technology equilibrium will depend on developments in labour and skills, digital infrastructure and security, and the use of intangibles by competitors in the coming years.
To support further technology adoption—and the productivity and other benefits it offers—policy-makers should consider not only strategies that address barriers to technology adoption—a common focus—but also strategies that are focused on the incentives firms’ face in their decision-making.
This report was made possible thanks to a generous contribution from Google Canada.