Impact of Advanced Technology Use on Firm Performance in the Canadian Food Processing Sector

Abstract

This paper investigates the evolution of industrial structure in the Canadian food processing sector and its relationship to technological change. It does so by examining the impact of adopting advanced manufacturing technologies, amongst them information and communication technologies (ICTs), on plant performance. This study utilizes a linked dataset combining advanced technology use data from a 1998 special survey with firm performance data derived from administrative records covering the period 1988-1997. The data file contains information on advanced technology use (by type of technology), plant characteristics (size, nationality, emphasis given to training, nnovativeness) and plant performance (growth in productivity and market share). The paper first examines the characteristics of firms that adopt advanced technologies. It then asks how the use of these technologies is related to growth in productivity and market share. Plants that adopted advanced technologies were larger and foreign controlled. They tended to be more innovative along a number of dimensions other than just their technological orientation. They were the ones that adopted a number of advanced business production processes that made use of advanced technologies. They were plants that developed a human resource strategy that focused on developing a skilled workforce and emphasized training. Plants that adopted more advanced technologies enjoyed superior productivity growth. Process control and network communications technologies are particularly important to productivity growth in the food-processing sector. Those plants that increased their relative productivity growth and used more advanced technologies saw their market share increase. Once technology use was taken into account, few of the other characteristics of plants that were related to technology use contributed to increased relative productivity growth — except for the emphasis given to a human resource strategy that focused on the development of skilled labour and training. Similarly, apart from technology use, none of the plant characteristics that are related to the use of advanced technologies were related to the growth in market share.