David Olive gets things wrong in his column today.
- Foreign ownership is not to blame for low levels of productivity and innovation in Canada. A 2005 StatsCan study (pdf) found that "foreign-controlled plants are more productive than domestic-controlled plants" and "are also more innovative, more R&D intensive and use more advanced technologies."
- Protecting domestic managers from the threat of foreign takeover removes incentives to innovate.
- The 'branch plant' mentality is a direct effect of generations of protecting Canadian industries from global markets.
(See also this post.)
And I cannot resist reproducing this line (h/t John Palmer):
"Protecting failing industries is like peeing in your pants. It feels warm and nice at first, but it stays cold for a long time"
Worthwhile Canadian Initiative 
I agree that low productivity growth and low levels of innovation are problems. But low innovation isn’t caused by foreign ownership; the causality runs the other way.
More generally can we simply say that protection against foreign takeover stifles competition, and stifling competition – regardless of the form it takes – creates a disincentive to innovate. Why bother to do better is if nobody is threatening to eat your lunch?
Now, about the CRTC and the telcos … 🙂
What? branch plants aren’t innovative because they take direction from HQ?
So all the local process improvements that the engineers and other skilled and non-skilled workers work out and considered innovation? Just because we don’t produce a patent doesn’t mean that a lot of work done at branch plants and offices isn’t innovative.
There is more to innovation than big science projects.
The point of the StatsCan study is that ‘branch plants’ are typically more productive and innovative than domestically-oriented Canadian firms. But it’s the international orientation that’s the key thing. Canadian firms with an international outlook do just as well, if not better.
I don’t see how restricting foreign ownership is going to promote an international outlook.
Michael, as an ex-pat engineer I can confirm that, within BC tech, levels of innovation are low compared to elsewhere (anecdotally and within my professional network). Or rather, innovation that can be translated to commercial technology. As I mentioned earlier, the main outcome is transfer of investor capital to executives and many firms ultimately fail.
There is absolutely no question the line of causality runs from low-innovation to foreign ownership and not the other way around. Just try to look for a graduate-level job in Canada to find out how backwards and old-fashioned Canadian management is compared to the of other countries, like the US.
Could it be that Mark Carney (or more likely his staff) read WCI?
http://www.theglobeandmail.com/report-on-business/economy/carney-blames-business-for-low-productivity/article1511074/
Of course, Canadian ‘girly-men’ executives are insulted, the poor dears.
If Carney was asked: “Can non competitive corporations also become addicted, so to speak, with the continuing lowering of tax rates, looking to improve returns through the tax system as opposed to becoming innovative and more productive internally?” it seems he would have answered yes.
Could it be that Mark Carney (or more likely his staff) read WCI?
Could be, could be. Several Bank staffers have said nice things to Nick and me about WCI, and I was invited to participate on a bloggers panel at a Bank conference last fall.
But here, it’s more likely that they were looking at the same material I was, and coming to similar conclusions.