Statistics Canada has released a study that affirms that the adoption of advanced information and communication technologies (ICTs) is one of the keys to growth for manufacturing plants. According to a new research paper, ICT adoption leads to growth in labour productivity, which in turn leads to growth in market share.
Titled Impact of the adoption of advanced information and communication technologies on firm performance in the Canadian manufacturing sector, the research paper investigates the relationship between the productivity performance of plants in the manufacturing sector and the adoption of advanced technologies, specifically advanced information and communication technologies (ICTs).
Although released on October 3, 2001, the study uses data on the adoption of advanced technology from the 1998 Survey of Advanced Technology in Canadian Manufacturing, and was done jointly with Industry Canada. It examines the extent to which the adoption of advanced technologies is driving the growth in productivity at the plant level. It finds that manufacturing plants that adopted advanced technologies by 1998 had seen higher productivity growth and had gained market share over the previous decade — at the expense of firms that did not adopt such technologies.
Twenty-three individual advanced technologies were used in the study, aggregated into three ICT groups: software, hardware, and network communications. Software includes such technologies as computer-aided design and engineering, and manufacturing resource planning. Hardware includes flexible manufacturing systems, robots and programmable logic controllers. Network communications includes both local-area and wide-area networks.
ICTs cover technologies ranging from network communications systems, which allows for rapid transmission of information between different parts of a firm, or between a firm and its suppliers, to computer-operated robots that do repetitive jobs such as spot-welding on an automobile assembly line. The ICT revolution has enabled plants to deliver customized products in small quantities, and to change product lines quickly to meet changing consumer demands, StatsCan notes.
Network communications technologies, either by themselves or in combination with the other two types of ICTs — software and hardware — played a key role in firm growth. However, the largest impact came from using jointly or comprehensively all three types of ICTs — software, hardware and network communications. In other words, the sophisticated technology users were those who gained the most, reports StatsCan.
The study divided manufacturing plants into two groups — those with high productivity growth and those with low productivity growth — based on their performance from 1988 to 1997. It found that high-growth plants were more likely to have used ICTs than low-growth plants.
The greatest differences were found for plants that had adopted all three types of technologies. Of the manufacturing plants that had high growth between 1988 and 1997, 54 per cent had adopted all three types of technology. Of the plants that had low growth, only 39 per cent had done so.
In addition to technology use, several other characteristics were related to higher productivity growth. Foreign control significantly increased the likelihood that a firm enjoyed higher productivity growth. Conducting research and development was found to contribute to higher levels of market share growth.
The research paper is now available free at www.statcan.ca. A paper version (11F0019MPE01174) is also available for $5.
Plant performance and information and communications technology use
Productivity growth
Low growth
High growth
Percentage of plants using an ICT
Software
63
73
Hardware
54
66
Network communications
58
69
All three
39
54