Research and development scientist at Interface Biologics Ian Parrag, works on development of an innovative drug delivery system.Kevin Van Paassen/The Globe and Mail
Economically, Alberta is commonly compared to the other provinces with a host of superlatives – lowest unemployment, fastest population growth, strongest investment markets, etc. – and normally, these comparisons place Alberta at the head of the parade. But new research reveals one area where Alberta is, at best, in the middle of the pack. This may have serious implications for the province's future economic prospects.
A recent report from Statistics Canada on business innovation suggests that companies in Alberta are well behind the national average on investments in advanced technology. The types of advanced technology identified in the survey include computerized design and engineering, automated material handling, information integration and control technologies, biotechnologies and green technologies, to name a few.
Quebec topped the regional rankings – 44.2 per cent of its companies have made investments in advanced technology. Ontario was close behind with 42.2 per cent. Nationally, the figure is 36.5 per cent. But in Alberta, a province that prides itself in entrepreneurial vigour and forward-looking business sense, only 30.1 per cent of companies made such investments.
On the surface, this presents a bit of a paradox. Why would companies in the most vibrant corridor of the Canadian economy be laggards in investments in advanced technology? One would expect Alberta to be a leader.
Part of the answer starts to be revealed when you peel back the layers of data and look more specifically at business investments by sector.
Alberta is above the national average in a few sectors. In manufacturing, 57.8 per cent of its companies made investments, the highest among all sectors in the province, and above the national rate. That makes sense, because many manufacturers in Central Canada are struggling simply to stay afloat. Spending money on new technology may not be financially possible for them. But most Alberta manufacturers – many of which provide inputs into the energy sector – are making money. However, they're facing crushing competition from Asia and elsewhere, leaving them no choice but to invest and remain in the game.
Alberta is also above the national average in technology investments in oil and gas extraction (42.6 per cent vs. 40.8 per cent nationally), and information and culture (48.3 per cent vs. 45.5 per cent nationally).
Where Alberta's average is brought down significantly is in the low rate of investments by businesses in the construction sector. Nationally, nearly 30 per cent are investing in technology, but only 12.5 per cent of Alberta construction companies reported doing so. Alberta's professional, scientific and technical services companies (45.9 per cent) are also far behind the national average (58.9 per cent).
This poses perhaps the greatest paradox of all, given that Alberta's residential and non-residential construction levels have been among the strongest in the country, and earnings in professional, scientific and technical jobs in Alberta are 16.3 per cent greater than the national average. Business operators in both of these sectors should have ample financial capacity to invest in technology.
But the paradox is perhaps less vexing than it may seem. It is precisely because Alberta construction companies have been so busy that they've been slow to make investments in advanced technology. When a company is turning down as many projects as it accepts, it is difficult to find the time to examine new products and process innovations, analyze their expected improvements to the operations, and train staff to use them.
This, however, poses troubling prospects for the future. Investing in new systems and harnessing all of the potential of advanced technology cannot constantly be put off until later. When a period of weaker growth strikes Alberta's economy, it may be too late to start playing catch-up with the rest of the country (and world) that has been making these essential investments all along.
Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.