"Canada's managers are under-achievers"

Dan Trefler gave the Innis Lecture at the meetings of the Canadian Economics Association in Vancouver a couple of weeks ago. The title of his talk was "Policies for Canadian Prosperity"; inevitably, one of the points he spent a lot of time on was the problem of Canada's slow rate of productivity growth.

One possible explanation might take the form of a cultural antipathy to innovation: Canadians don't innovate because it's considered to be bad manners or some such. But it's hard to reconcile that theory with the available evidence: opinion polling data suggest that attitudes towards entrepreneurship in Canada and the US are pretty much the same.

But there was one question where there was a significant difference. When asked what sort of education was required to do well in business, Canadian managers were far more likely than their US counterparts to say that a university degree wasn't necessary. Of course, that might be because 70% of Canadian managers don't have a degree, while that's the case for only 50% of US managers. As Trefler put it, "Canadian managers are under-achievers."

This is not the sort of explanation that is easy for an economist to get one's head around, but it's worth making the effort. Not only would it explain Canada's slow rate of productivity growth, it would also explain why

1. "[F]oreign-controlled plants are more productive than domestic-controlled plants. Foreign-controlled plants and firms are also more innovative, more R&D intensive and use more advanced technologies,"  and "that there is not much difference between foreign-controlled plants and domestic-controlled plants whose parent has an international orientation. For R&D and innovation, the results indicate that domestic producers with foreign operations ... actually have a slightly better performance." (From this post). The only occasions in which Canadian managers perform well are when they are obliged to deal directly with foreign competition.
2. "Canadian investors are selling their shares in Canadian companies and buying stocks in other countries. Since 2000, Canadian net purchases of foreign stocks were about $C 60b more than foreigners' purchases of Canadian stocks." (From this post.) Canadian investors are divesting themselves of badly-managed domestic firms.

Comments

[rogue]

This is not hard to believe. Canada's managers have historically had the advantage of a large, mature domestic market. This was good for as long as other countries' markets were less mature by comparison.Now with globalization, everyone is on par, traditional ways of doing business is not cutting it anymore. Smart Canadian investors probably realized this long ago.

[George Bailey]

True, but didn't the foreign content rules for ordinary investors change a few years back to allow higher foreign content? I'd think that would have some impact on that as well since Canadians were penalized for owning too much foreign stock and brokers would obviously follow these rules.