Download Strategy Overview

Innovation, Competitiveness and Prosperity
BC Biotech/BCTIA Distinguished Speaker Series
September 27, 2001
Roger L. Martin, Dean
Rotman School of Management
University of Toronto
Copyright © 2001 by Roger L. Martin
Falling Relative Prosperity for Canada
Canada’s GDP/Capita
$28,133
$26,424
Differential:
US$1709
GDP/Capita
($US at
Purchasing
Power
Parity)
$18,452
1990
Third in the
World
1999
Fifth in
the World
1999
As if
Third
Source: OECD Main Accounts, 2000
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Copyright © 2001 Roger L. Martin
The Crux of the Issue
Replication
RLM-RSM-BCB/TIA-9-27-01
Versus
3
Innovation
Copyright © 2001 Roger L. Martin
A Tale of Two Industries: 1991-2000
Newsprint
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Versus
4
Central Office
Switching
Copyright © 2001 Roger L. Martin
Newsprint in 1991

A major Canadian export industry

Seven substantial Canadian players
– Canadian Pacific Forest Products
– Abitibi-Price
– Fletcher Challenge Canada
– Stone Consolidated
– QUNO
– Kruger
– MacMillan Bloedel

Leading the world in export market share

However, some key vulnerabilities
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Copyright © 2001 Roger L. Martin
A Slowly Declining Canadian Market Share
Canadian Exports as a Share of World Exports
75
62
58
60
62
59
58
53
53
1996
1997
50
%
Canadian
Share
25
0
1990
1991
1992
1993
1994
1995
SOURCE: UN SITC TRADE STATISTICS, REVISION 2; CLUSTER MAPPING PROJECT AT THE INSTITUTE
FOR STRATEGY AND COMPETITIVENESS, HARVARD BUSINESS SCHOOL.
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Copyright © 2001 Roger L. Martin
A Slowly Declining Real Value of the Product
Newsprint (30 lb), US$ per metric ton
900
Forecast
800
700
600
(1.1%)
per
year
500
400
Nominal
300
Real
(4Q2000)
Real Linear
Trend
200
100
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
0
Source: Jaakko Poyry Consulting
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Copyright © 2001 Roger L. Martin
Cost Position Supported by a Falling Canadian Dollar
Canadian Newsprint Mill Cost Competitiveness:
Canadian Dollar at US$.66
Manufacturing Cost (US/metric ton)
600
500
400
300
200
100
0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Cumulative Annual Capacity (000 metric tons)
SOURCE: Jaakko Poyry Consulting. Cost curve and Canadian dollar as of December 2000.
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Copyright © 2001 Roger L. Martin
Cost Position Supported by a Falling Canadian Dollar
Canadian Newsprint Mill Cost Competitiveness:
Canadian Dollar at US$.85
Manufacturing Cost (US/metric ton)
600
500
400
300
200
100
0
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Cumulative Annual Capacity (000 metric tons)
SOURCE: Jaakko Poyry Consulting. Cost curve as of December 2000, Canadian dollar adjusted to US$.85
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Copyright © 2001 Roger L. Martin
Little Participation in the Globalization of the Industry

Stora Enso
– Consolidated Papers

Norske Skog
– Fletcher Challenge Canada
– Pacifica Papers

UPM- Kymenae
– Repap Canada

Bowater
– Avenor

Weyerhauser
– MacMillan Bloedel
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Copyright © 2001 Roger L. Martin
Central Office Switching in 1991
Share of Digital Local Lines Placed
in Service, 1989
Oki
5%
AG Communication
3%
Siemens
5%
Other
1%
Alcatel
15%
Northern Telecom
17%
AT&T
12%
Nokia
1%
NEC
7%
Ericsson
15%
Italtel
3% Hitachi
5% GEC Pleassey
8%
Fujitsu
3%
Source: BlueStone Capital Market Analysis, November 2000, Northern Business Information, 1990 Edition
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Copyright © 2001 Roger L. Martin
Nortel Networks: A Radical Change in Business Mix
Distribution of Sales by Product Segment,
1991 to 1998
100%
90%
14%
14%
12%
80%
7%
28%
23%
25%
34%
33%
25%
28%
27%
Other
70%
60%
10%
15%
15%
17%
50%
6%
40%
22%
17%
20%
26%
Enterprise Segment
Broadband Networks
10%
13%
18%
Wireless Networks
22%
21%
30%
Public Networks
49%
20%
43%
41%
38%
31%
27%
26%
23%
1996
1997
1998
10%
0%
1991
1992
1993
1994
1995
Source: Various Nortel Networks Annual Reports.
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Copyright © 2001 Roger L. Martin
Greater Leadership in the New Business
Share of Digital Local Lines Placed
in Service, 1989
Oki
5%
Siemens
5%
Other
1%
Share of Optical Systems Market,
2000E
Juniper
2%
AG Communication
3%
ONI
2%
Other
7%
Sycamore
1%
Alcatel
15%
Marconi
4%
Siemens
4%
Northern Telecom
17%
Nortel
35%
ADC Telecom
4%
AT&T
12%
Tellabs
7%
Nokia
1%
NEC
7%
Ericsson
15%
Italtel
3% Hitachi
5% GEC Pleassey
8%
Fujitsu
7%
Fujitsu
3%
Lucent
12%
Alcatel
9%
Ciena
3%
Cisco
3%
Source: BlueStone Capital Market Analysis, November 2000, Northern Business Information, 1990 Edition
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Copyright © 2001 Roger L. Martin
Canadian Depth in Optical Networking

Dominant player in Optical Networking
– Nortel Networks

Dominant player in Optical Components
– JDS-Uniphase

Dominant player in Optical Outsourced Manufacturing
– Celestica

Strong Optical Cluster Taking Shape in Ottawa-Kanata
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Copyright © 2001 Roger L. Martin
The Crux of the Issue
Replication
RLM-RSM-BCB/TIA-9-27-01
Versus
15
Innovation
Copyright © 2001 Roger L. Martin
Relentless Downward Pressure on Commodity Prices
Commodity Price Index in Real US Dollars: 1801-1999
160
140
120
100
80
60
40
20
0
1800
1820
1840
1860
1900
1880
1920
1940
1960
1980
2000
Note: Index of 1801 = 100
Source: Nesbitt Burns Economic Research
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Copyright © 2001 Roger L. Martin
Position on Cost Curve Determines Competitiveness
Market
Demand

Market
Price
Price
Firm E
Firm A’s
Profit
Margin
Firm D
Firm C

Firm B
Marginal Cost
of Production
for Firm A
Firm A
Capacity of
Firm A
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Firms survive in this
market as long as the
market price exceeds
their marginal cost of
production
– Firms A, B, C, and
D remain in market
– Firm E must
reduce its cost or
exit
Efficient firms earn
healthy profits despite
the intense competition
– E.g., Firm A
Quantity
Actually Sold
Quantity
17
Copyright © 2001 Roger L. Martin
Industry Cash Cost Supply Curve
Example Cost Curve: North American Uncoated Freesheet
1200
Avenor Mills
UCFS Capacity
Demand = 11.5MM
960
1996 Average Price = $820
Trend Price = $805
720
Dryden
ADCC
(US$ /
tonne)
480
240
0
0
3.6
7.2
10.8
Cumulative Capacity (MM Tonnes)
Source: Monitor Company Analysis
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Copyright © 2001 Roger L. Martin
Cash Costs versus Total Costs
1200
Example Cost Curve: North American Uncoated Freesheet
Avenor Mills
Fixed Costs
UCFS Capacity
ADCC
Demand
Demand==11.5MM
11.5MM
960
1996 Average Price = $820
ADCC
(US$/
tonne)
720
Trend Price = $805
Price = $805
Dryden
480
240
0
B
A
C
Cumulative Capacity (MM Tonnes)
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Copyright © 2001 Roger L. Martin
Evolution of Commodity Markets
Market
Demand
Old
Market
Price
Price
Firm E
Firm D
New
Market
Price
Firm C
Firm B
Firm Z
New Entrant
Firm A
Old Quantity Actually
New Quantity
Sold
Actually Sold
Quantity
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Copyright © 2001 Roger L. Martin
The Increased Importance of Innovation
The Largest Market Capitalization Firms
1969
1928
Rank
Company
Market Value
(Billions*)
Rank
Company
$22
1
IBM
18
2
AT&T
2001
Market Value
(Billions*)
Rank
Company
Market Value
(Billions)
$159
1
GE
102
2
Microsoft
335
General Motors
76
3
Citigroup
314
4
Eastman Kodak
51
4
Cisco
306
9
5
Exxon
51
5
Exxon Mobil
284
DuPont
8
6
Sears, Roebuck
40
6
Pfizer
271
7
F.W. Woolworth
7
7
Texaco
32
7
Intel
244
8
S.H. Kress
7
8
Xerox
31
8
AOL
241
9
Standard Oil Co. of California
6
9
GE
27
9
WalMart
239
10
New York Central Railroad
6
10
Gulf Oil
24
10
Vodafone
226
11
Pennsylvania Railroad
6
11
3M
23
11
AIG
205
12
Canadian Pacific Railway
6
12
DuPont
19
12
IBM
194
13
Consolidated Gas of New York
5
13
Avon Products
19
13
Nokia
187
14
Standard Oil Co. of New York
5
14
Coca-Cola
18
14
Merck
182
15
R.J. Reynolds Tobacco
5
15
Mobil Oil
18
15
BP Amoco
175
1
General Motors
2
AT&T
3
U.S. Steel
9
3
4
Standard Oil (New Jersey)
9
5
General Electric
6
$459
Note: *1928 and 1969 market value inflated to 1999 $ using US GDP inflator
Source: Center for Research in Security Prices, University of Chicago
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Copyright © 2001 Roger L. Martin
Maximizing Profit from a Unique Product

Demand
(price)
Profit maximizing
price and quantity
Price
per
Unit


Marginal
cost
Marginal
revenue
Quantity
Total
Profit
Demand
too low


Price too
low
Quantity
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
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A firm with a unique product
can set price for maximum
profit
– It lowers price and
stimulates demand so long
as the revenue from an
incremental unit exceeds its
marginal cost
At the optimum, marginal cost
matches marginal value
– This maximizes profit, cash
flow, shareholder value
At any price above this,
demand is too low
Any further lowering of price
stimulates too little new
demand to justify the price
decrease
Copyright © 2001 Roger L. Martin
Assessing Canada’s Competitiveness
Political, Legal, and Macroeconomic Context
Sophistication of
Company
Operations and
Strategy
Quality of the
Microeconomic
Business
Environment
Microeconomic Foundations
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Copyright © 2001 Roger L. Martin
Quality of the Microeconomic Business Environment
Context for
Firm
Strategy
and Rivalry

The context shaping the
types of strategies
employed and the nature of
local rivalry
Factor
(Input)
Conditions

The underlying inputs firms
draw on in competing
– natural (physical) resources
– human resources
– capital resources
– physical infrastructure
– administrative infrastructure
– information infrastructure
– scientific and technological
infrastructure
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Demand
Conditions

Related and
Supporting
Industries

The nature of home
demand for products and
services
The availability and quality of
local suppliers and related
industries
24
Copyright © 2001 Roger L. Martin
Sophistication of Company Operations and Strategy
Choices Compatible with Global Competitiveness
Aspirations and Goals
• Global
competitiveness
• Sustainable
advantage over
global competition
Where to Play
• Globally in focused
here
product niche
to Play
• Serving demanding
customers at home
and abroad
How to Win
• Unique
product/process
• High R&D
• Global distribution
• Branding
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Copyright © 2001 Roger L. Martin
Clusters of Competitive US Industries
Boise
Wisconsin / Iowa / Illinois
Minneapolis
Sawmills
Boston
Agricultural Equipment
West Michigan
Western Massachusetts
Cardio-vascular Office and Institutional
Farm Machinery
Mutual Funds
Polymers
Omaha
Equipment
Biotechnology
Furniture
Seattle
Rochester
Telemarketing
and Services
Software and
Aircraft Equipment and Design
Imaging
Hotel Reservations
Michigan
Networking
Boat and Ship Building
Equipment
Credit Card Processing
Warsaw, Indiana Clocks
Venture Capital
Metal Fabrication
Detroit
Orthopedic Devices
Auto Equipment
Hartford
and Parts
Insurance
Oregon
Electrical Measuring
Providence
Equipment
Jewelry
Woodworking Equipment
Marine Equipment
Logging / Lumber Supplies
New York City
Financial Services
Silicon Valley
Advertising
Microelectronics
Publishing
Biotechnology
Multimedia
Venture Capital
Pennsylvania / New Jersey
Pharmaceuticals
Las Vegas
Pittsburgh
Amusement /
Advanced Materials
Casinos
Energy
Small Airlines
North Carolina
Household Furniture
Los Angeles Area
Synthetic Fibers
Defense Aerospace
Hosiery
Entertainment
Wichita
Cleveland / Louisville
Carlsbad
Light Aircraft
Paints & Coatings
Golf Equipment
Farm Equipment
Baton Rouge /
Phoenix
New Orleans
Dalton, Georgia
Dallas
Helicopters
Specialty Foods
Carpets
Real Estate
Semiconductors
Southeast Texas /
Development
Electronic Testing Labs
Nashville / Louisville
South Florida
Louisiana
Colorado
Hospital Management
Health Technology
Chemicals
Computer Integrated Systems / Programming
Computers
Engineering Services
Mining / Oil and Gas Exploration
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Copyright © 2001 Roger L. Martin
US Clusters of Traded Industries
Upstream Materials and
Products
Industrial and Supporting
Functions
Final Consumption
Goods and Services
Metals and Materials
Multiple Business
Food/Beverages
• Construction Materials
• Education and Knowledge Creation
• Agricultural Products
• Heavy Machinery
• Processed Foods
• Financial Services
• Fishing and Fish Products
• Metal Manufacturing
Forest Products
• Motor-Driven Products
• Forest Products
• Prefabricated Enclosures
Petroleum/Chemicals
• Production Technology
• Oil and Gas
• Analytical Instruments
• Chemical Products
• Plastics
Semiconductors/Computer
• Information Technology
• Heavy Construction Services
Transportation and Logistics
• Automotive
• Motor Driven Products
• Transportation and Logistical Services
Housing/Household
• Building Fixtures, Equipment & Services
• Lighting and Electrical Equipment
• Furniture
Textiles/Apparel
• Textiles
• Apparel
• Footwear
Power
Health Care
• Power Generation
• Medical Devices
• Power Transmission and Distribution
• Pharmaceuticals/Biotech
Office
Personal
• Publishing and Printing
• Sporting and Leather Goods
Telecommunications
• Jewelry and Precious Metals
• Communications Equipment
• Tobacco
Defense
Entertainment/Leisure
• Aerospace Engines
• Entertainment
• Aerospace Vehicles and Defense
• Hospitality and Tourism
Source: Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2001 Roger L. Martin
Traded Cluster versus Non-Traded Cluster Economics
U.S. Cluster Economics, 1997
Share of Employment
Average Wage
($000)
Productivity
(Average = 100)
$37
Patents Per 10,000
Employees
126
16
67%
33%
88
$24
Share of Income
44%
56%
1
Traded Clusters
Local Clusters
Source: Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School
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Copyright © 2001 Roger L. Martin
The Information Technology Cluster
San Francisco-Oakland-San Jose, CA
Boise City, ID-OR
Knoxville, TN
Boston, MA
Denver-Boulder, CO
San Diego, CA
Raleigh-Durham, NC
Albquerque, NM-AZ
Location Quotient*
Huntsville, AL
3-2
Austin, TX
2-1
Note: *Measure of a cluster’s concentration in a region relative to a cluster’s concentration in the nation
Source: Porter, Cluster Mapping Project, Institute for Competitiveness and Strategy, Harvard Business School
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1-0
Copyright © 2001 Roger L. Martin
Information Technology Cluster
Computer
Rental and
Leasing
Information
Retrieval
Services
0.310**
Computer
Related
Services nec
0.554**
0.610**
Data
Processing
and
Preparation
Computer
Facilities
Management
0.579**
0.681**
Computer
Programming
Services
Computer
Integrated
Systems
Design
0.613**
0..505**
Computer
Maintenance
and Repair
Prepackaged
Software
Commercial
Physical
Research
0.699**
0.725**
0.667**
Noncommercial
Research
Orgs.
0.416**
Radio and TV
Communication Equip.
nec
Communications
Equipment
nec
Telephone &
Telegraph
Apparatus
Electronic
Computers
Computer
Terminals
Storage
Devices
Computer
Peripherals
Calculating /
Accounting
Machines
0.534**
0.536**
0.773**
1.000
0.642**
0.595**
0.498**
0.328**
Instruments to
Measure
Electricity
Optical
Instruments
and Lenses
Measuring
and
Controlling
Devices
Analytical
Instruments
Magnetic and
Optical
Recording
Media
Electronic
Components
0.684**
0.777**
0.860**
0.669**
0.651**
Printed Circuit
Boards
0.645**
Semiconductors and
Related
Devices
0.765**
Electronic
Connectors
Plating and
Polishing
0.569**
0.353**
Electronic
Resistors
0.695**
Note: **Number denotes locational correlation of employment with the
core industry in U.S. states. Correlations statistically significant at the
95% level.
Source: Porter, Cluster Mapping Project
RLM-RSM-BCB/TIA-9-27-01
0.752**
Electrical
Industrial
Apparatus
nec
0.573**
30
Electronic
Coils &
Transformers
0.416**
Electron
Tubes
0.342**
Copyright © 2001 Roger L. Martin
Canada’s Microeconomic Competitiveness Index is Falling
Microeconomic
Competitiveness
Index
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Finland
United States
Germany
Netherlands
Switzerland
Denmark
Sweden
United Kingdom
Singapore
Australia
Canada
Belgium
Austria
Japan
France
Hong Kong
Microeconomic
Business
Environment
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Finland
United States
Netherlands
Denmark
Singapore
Germany
Australia
Canada
United Kingdom
Switzerland
Sweden
Austria
Belgium
Hong Kong
France
Iceland
Company Operations
and Strategy
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Germany
United States
Finland
Japan
Switzerland
Sweden
Netherlands
Denmark
France
Belgium
United Kingdom
Austria
Israel
Iceland
Singapore
Canada
Source: MICHAEL PORTER, MEASURING THE MICROECONOMIC FOUNDATIONS OF ECONOMIC
DEVELOPMENT, IN GLOBAL COMPETITIVENESS REPORT, WORLD ECONOMIC FORUM, 2000.
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Copyright © 2001 Roger L. Martin
Canada’s Microeconomic Competitiveness Index is Falling
Microeconomic
Competitiveness
Index
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Canada (1998)
Canada (1999)
Canada (2000)
Microeconomic
Business
Environment
1.
2.
3. Canada (1998)
4. Canada (1999)
5.
6.
7.
8
Canada (2000)
9.
10.
11.
12
13.
14
15.
16.
Company Operations
and Strategy
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Canada (1999)
Canada (1998)
Canada (2000)
Source: MICHAEL PORTER, MEASURING THE MICROECONOMIC FOUNDATIONS OF ECONOMIC
DEVELOPMENT, IN GLOBAL COMPETITIVENESS REPORT, WORLD ECONOMIC FORUM, 1998, 1999, 2000
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Copyright © 2001 Roger L. Martin
Weaknesses in Company Operations and Strategy
Nature of
Competitive
Advantage
Capacity for
Innovation
Company
Investment in R&D
Extent of Branding
1. Germany
1. Finland
1. Switzerland
1. Japan
2. Israel
2. United States
2. Japan
2. Germany
3. Switzerland
3. Israel
3. Finland
3. Switzerland
4. Japan
4. Germany
4. United States
4.
5. Denmark
5. Sweden
5. Germany
5. Finland
6. Sweden
6. Switzerland
6. Sweden
6. France
7. United States
7. Japan
7. Israel
7. United States
8. Finland
8. France
8. Netherlands
8. Netherlands
9. Belgium
9. Denmark
9. France
9. Denmark
10. France
10. Austria
10. Belgium
10. United Kingdom
11. Austria
11. Netherlands
11. Denmark
11. Italy
12. Netherlands
12. United Kingdom
12. Singapore
12. Belgium
13. Italy
13. Iceland
13. Korea
13. Iceland
14. Taiwan
14. Belgium
14. United Kingdom
14. Austria
15. United Kingdom
15. Norway
15. Taiwan
15. Israel
16. Singapore
16. New Zealand
16. Austria
16. Spain
17. Hong Kong
17. Italy
17. Canada
17. New Zealand
18. Iceland
18. Russia
18. Iceland
18. Ireland
19. Norway
19. Korea
19. Ireland
19. Korea
20. Ireland
20. Canada
20. Norway
20. Canada
21. Korea
21. Australia
21. Russia
21. Singapore
22. Spain
22. Ireland
22. Slovakia
22. Taiwan
23. Canada
23. Spain
23. Australia
23. Norway
24. Costa Rica
24. Taiwan
24. South Africa
24. Russia
25. New Zealand
25. Singapore
25. Spain
25. Egypt
SOURCE:
RLM-RSM-BCB/TIA-9-27-01
Sweden
MICHAEL PORTER, MEASURING THE MICROECONOMIC FOUNDATIONS OF ECONOMIC
DEVELOPMENT, IN GLOBAL COMPETITIVENESS REPORT, WORLD ECONOMIC FORUM, 2000
33
Copyright © 2001 Roger L. Martin
Sophistication of Company Operations and Strategy
Choices Incompatible with Global Competitiveness
Aspirations and Goals
• National
competitiveness
• Sustainable
advantage over
local competition
Where to Play
• Primarily in home
here
country
to Play
• Broad participation
• Serving most easily
satisfied customers
How to Win
• Replication with
low cost labour
/raw materials
• Minimal R&D
• Weak branding
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The Local Peak Problem
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The Local Peak Problem
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What Can Canadian Businesses Do?

Strategy
– Focus on the global peak
– Set aspirations and goals accordingly
– Compete globally, serving the most sophisticated and demanding
customers
– Compete on the basis of unique products and processes

Cluster Building
– Be a demanding and sophisticated customer...
– But, encourage local suppliers to meet global standards and follow you
globally
– Collaborate with competitors and governments to create specialized
infrastructure and education...
– But, compete vigorously with the same competitors
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What Can Canadian Governments Do?

Encourage an Environment of Pressure...
– Create an environment in which customer sophistication can flourish

Where possible, act as a sophisticated and demanding buyer
– Maintain an environment that features intense rivalry

While Balancing it with Critical Elements of Support
– Invest heavily in the university research infrastructure

Scientific research

Business research
– Invest in the key pieces of infrastructure
– Encourage and celebrate innovation
– Encourage and celebrate global competitiveness
– Promote clustering rather than dispersion
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What Can Canadian Universities Do?

Aspirations
– Focus on the global peak and set goals accordingly
– Compete globally for faculty and students
– Seek unique and differentiated positioning

Connectedness
– Seek to collaborate with proximate businesses
– Be guided in part by their needs
– And seek to guide them with your research-based insights
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Back up
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Market Forces
Demand
Price
per
Unit
Supply
P
Q
Quantity
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Demand for a Unique Product

High price,
low demand


Price
per
Unit
Low price,
high demand

Demand
curve
In contrast, a firm providing
a unique product is a pricesetter, not a price-taker
The demand for the unique
product depends upon the
price the firm sets
– The higher the price, the
lower the demand
Quantity
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Weaknesses in Canadian Microeconomic Environment
Context for
Firm
Strategy
and Rivalry
Factor
(Input)
Conditions
– Ease of access to loans
– Gov’t infrastructure
investment
– Bureaucratic “red tape”
– Quality of public schools
– Government subsidies
– Hidden trade barrier liberalization
– Effectiveness of Anti-trust policy
– Decentralization of corporate activity
Demand
Conditions
Related and
Supporting
Industries
– Regulatory impact on competition
– Consumer adoption of latest
products
– Openness of public sector
contracts
– Domestic supplier quality
– Cluster presence
Source: Porter, Michael E. “The Current Competitiveness Index: Measuring the Microeconomic Foundations of Prosperity,
“ The GlobalCompetitiveness Report 2000. New York: Oxford University Press, 2000.
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Weakening Relative Environment for Innovation
Comparative Innovation Indices: 1995
150
125
100
Index
Value
75
50
25
0
U.S.
Sw itz'ld
Japan
Sw eden Germ any
Finland
Denm ark
France
Canada
Norw ay
Neth'ld
Source: Michael E. Porter, Scott Stern, “The New Challenge to America’s Prosperity: Findings from the Innovation Index”,
Council on Competitiveness, Washington, DC, 1999
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Low Canadian National Investment In R&D
Total R&D Investment as Percent of GDP: 1985 versus 1998
4
1985
1998
R&D as % of GDP
3
2
1
0
Sweden
S. Korea
Japan
USA
Germany
France
Israel
Singapore
U.K.
Canada
Australia
Italy
Ireland
Source: US Competitiveness 2001: Strengths, Vulnerabilities, and Long-Term Priorities Report.
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Canadian Inventors Faring Well in US Patent Growth
Percent Growth in Patents Granted in the U.S., 1986-99
350
302
300
% Growth 1986-99
250
200
153
150
Growth in Patents Registered in the U.S. = 119%
100
50
123
135
84
40
48
51
53
63
0
Germany
Sweden
U.K.
Note;
Source
France
Italy
*
Canada
U.S.A.
Australia
Japan
Israel
Canada’s relatively high position in U.S. Patenting may be due in part to close proximity to the United States
US Competitiveness 2001: Strengths, Vulnerabilities, and Long-Term Priorities Report
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Proportion of Research Personnel is Growing
Total Researchers Per Ten Thousand Workers
100
Number of Researchers Per 10,000 Workers
1985
1998
75
50
25
0
Japan
U.S.A.
Sweden
Germany
Australia
Singapore
France
Canada
S. Korea
U.K.
Ireland
Italy
Source: US Competitiveness 2001: Strengths, Vulnerabilities, and Long-Term Priorities Report.
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Dramatically Lower Priority for Higher Education
Four-Year Changes in Support for Higher Education 1995-96 to 1999-2000
Quebec
Quebec -16%
-16%
Canada
Canada-6%
-6%
Ontario
Ontario-8%
-8%
Albert
Albertaa 6%
6%
New
New York
York 10%
10%
Pennsylvania
Pennsylvania 15%
15%
Minnesota
Minnesota 20%
20%
Michigan
Michigan 24%
24%
United
UnitedStat
States
es28
28%%
Massachusett
Massachusettss 36%
36%
California
California 50%
50%
Florida
Florida 52%
52%
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
Source s: Sta tistics Ca nada ; Asso cia tion of Un iversities an d College s of Cana da; State High er Educa tion Executive Off ice rs; Chro nicle for Hig her Edu cation
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Net Result: Strikingly Low Productivity Growth
3.5
Average Percent Growth in Multifactor Productivity
Avg. % Growth in Multifactor Productivity
1981-89
3.0
1990-95
1996-99
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
Italy
Canada
Japan
U.K.
Germany
France
Sweden
U.S.A.
Source: US Competitiveness 2001: Strengths, Vulnerabilities, and Long-Term Priorities Report. Drawn from Gust,
Christopher and Jaime Marquez, “Productivity Developments Abroad,” Federal Reserve Bulletin, October 2000
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And a Widening Gap Relative to the US
Canadian Manufacturing Productivity as a Percentage of
US Manufacturing Productivity
100
87.0
86.3
84.6
80
69.9
60
% of US
Productivity
40
20
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
Source: Industry Canada, based on Statistics Canada and U.S. Bureau of Labor Statistics.
Labour productivity measured using $1999
GDP per hour
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And a Currency in Decline
Canada - US Exchange Rate: 1987-2000
100
87.3
80
75.4
72.8
67.3
US Cents
per
Canadian
Dollar
60
40
20
0
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Source: Bank of Canada Review
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Declining Growth in Canadian Capital Stock Per Worker
Percent of Change in Capital Stock Per Worker
2.0
1981-89
% Change in Capital Stock Per Worker
1990-95
1996-99
1.5
1.0
0.5
0.0
-0.5
Ireland
France
U.K.
Sweden
Canada
Italy
Australia Germany
U.S.A.
Japan
Source: US Competitiveness 2001: Strengths, Vulnerabilities, and Long-Term Priorities Report.
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