In the past few years, entrepreneurs in downtown Toronto have created a host of smart phone apps for sale or use globally. A sample includes Crowdreel (which categorizes photos on Twitter), Sudoku3D (a 3D take on the classic Sudoku puzzle), and Dictionary.com. Most have been working out of innovation incubators such as Extreme Venture Partners or Ryerson’s University’s Digital Media Zone.
Similar examples abound. And it is not surprising to find these examples on university campuses—particularly those that have invested in digital media—and in digital media incubators. But how widespread are these examples? Are Canadian businesses as a whole adopting digital technologies? Are they using such technologies to access global markets to sell both digital and non-digital goods and services?
We have little solid data to answer this question. So we need to take a step backward and ask first what we know about where Canada as a whole stands in the digital economy. Let’s broadly define the digital economy to include all economic activities that digitization of information permits. This broad definition includes all business activities, not just digital media-related activities, and not just the Internet but all digital technologies, including mobile technologies.
The evidence is mixed. The Economist Intelligence Unit’s (EIU) “digital economy rankings” (see Table) placed Canada at 11 out of 70 countries in 2010. Those rankings reflect both the quality of our technology infrastructure and the abililty of consumers, businesses, and governments to use that infrastructure to their benefit.
So let’s look first at the quality of our infrastructure. According to this study, Canada was once a world leader in broadband infrastructure. But the EIU notes that all countries have steadily worked to improve their broadband, mobile, and Internet connectivity levels. Many Scandinavian and Asian countries in particular now rank higher than both Canada and the US in terms of connectivity and technology infrastructure. And in terms of “broadband quality”, the EIU analysis shows Japan and South Korea as the clear leaders, due to their widespread adoption of fibre-optic access. Those countries have invested heavily in the next generation of Internet infrastructure. Moreover, Canada is one of the few countries that rank in the top 20 of the EIU digital economy rankings that have mobile penetration rates of less than 100%.
Next, how well are Canadians using our technology infrastructure? Canadian consumers are actively using the Internet relative to their global peers. Still, compared with the US—one of the world’s leading technology adopting countries—Canadians are less likely to buy items online or to browse the Internet for information, largely because of better educational attainment.1 And in terms of digital skills and literacy, the EIU report gives Canada only a mediocre ranking.
On the business side, businesses as a whole do not appear to be adopting leading-edge technology practices. The Institute for Competitiveness and Prosperity finds that, on average, Canadian companies only invest in about two-thirds the amount of information and communications technologies in which US companies invest.2 This lag partly accounts for the Canada-US productivity gap. In addition, peers in Northern Europe and parts of Asia appear to be leaders in terms of e-payments and e-invoicing systems (instead of cheques and paper invoicing). On the bright side, Canada ranks well—even better than the US—in terms of creating a solid business environment, according to the EIU.
According to Wolfe and Bramwell’s recent study, Canada was one of the first countries to develop an information economy strategy in the 1990s. But most countries now have digital economy strategies, and Canada has “failed to update this strategy in response to dramatic technological and market changes.” The good news is that Ottawa is now in the midst of putting together a new digital economy strategy.
In short, this brief snapshot suggests that Canada has a relatively solid foundation in terms of both its technology infrastructure and ability to use it. However, concerted investments by others mean this country has lost its role as a clear global leader. And technologies continue to change rapidly. Moreover, examples of digital tech-savvy Canadian entrepreneurs do not necessarily reflect widespread company practices. Upcoming commentary will consider what this might mean and what we might do about it.
This series on “Trading Digitally” comes from the Conference Board’s International Trade and Investment Centre. The comment period on this series is now closed. The series will be revised based on comments received and published by the Conference Board in spring 2011.
1 Goldfarb, Avi. Understanding differences between Canadian and American Internet Use: Geography and education. February 2009.
2 Institute for Competitiveness and Prosperity. Today’s innovation, tomorrow’s prosperity. Task Force on Competitiveness, Productivity and Economic Progress. Ninth annual report, November 2010. pg. 38.
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