May 2010 5

Innovation and Investment Needed in Canadian Businesses

Posted by
My Bulb by Hannah
Canadian companies
must ?innovate or perish?
photo by Hannah

Canadian companies must ?innovate or perish?, as the country?s lagging productivity becomes an increasing challenge in a world in which foreign competition is intensifying at a furious pace, TD Economics said in a report Monday.

As the global economy starts up again, every businessman will agree that world competition is quickly becoming fierce, and Canadians cannot afford to be left behind and surpassed by other emerging economies of the world. Innovation and investments are needed greatly.

The root of innovation must come in the form of increased labour productivity growth brought about by a strong capital investment track record. TD Economics say that there is a direct correlation between generating higher output for each hour worked and a rising standard of living.

From 2000 to 2007, Canadian productivity grew at an annual average rate of 0.8% a year, compared with 2.3% a year in the United States. Productivity growth is the main factor of the economic growth. Innovation drives productivity and creates the wealth for a successful society.

Canadian firms are also severely underutilizing information and communication technologies (ICT). ICT is revolutionizing business and and drives the profits up significantly, but the stock of ICT capital per worker in Canada in 2008 was only 45% of that in the United States.

However, the opportunity to save the day is still here. While in the midst of a global economic recovery, the time is ideal for business investment and innovation. Government has been wise to cut corporate income tax rates, to eliminate capital taxes and to maintain low borrowing costs. With these maneuvers, Canada stands to become the most desired location for capital investment in the industrialized world.

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