Roger Hayter is professor emeritus at the department of geography at Simon Fraser University.
Mark Carney’s push for a more independent Canada, less vulnerable to U.S. shakedown politics, resonates with long-touted nationalist arguments for greater economic sovereignty to enhance innovation capabilities, diversify trade relations and address enduring productivity decline.
But how? One suggestion is that Canada needs more large- or mid-sized companies, especially in technologically sophisticated areas.
These companies combine selected attributes of small- and medium-sized enterprises (SMEs) with those of giants, in summary terms articulating the agile decision-making and specialized focus of the former with the economies of scale and global focus of the latter.
In the U.S. and elsewhere, including China where they are a priority, large companies are recognized for their innovation-driven dynamism and job creation. If Canada has examples – think of Blackberry that once employed around 10,000 people – their relative lack is a conundrum.
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Referencing Metro Vancouver’s high-tech sector offers insights into this conundrum. Its growth has been principally fuelled by thousands of small-scale, entrepreneurial initiatives across a remarkable diversity of activities. These have occurred from a very small base in the 1980s to an estimated 10,000 companies by 2020, accounting for about 8 per cent of the region’s employment and GDP.
If most companies are small – 95 per cent employ less than 100 – they have provided a dynamic seedbed from which larger domestic companies have emerged, albeit to a limited degree. Our recent study of Metro Vancouver’s innovation economy only identified 26 local startups between the 1960s and 2021/22 that had scaled up to at least 500 employees (Canada’s statistical limit on SMEs).
Among these companies, MDA (aerospace) and Creo (printing) employed the most, respectively more than 5,500 and 4,200 jobs globally. But Creo was closed after acquisition by Kodak in 2005 and MDA’s head office is now in Ontario, after its acquisition by a U.S. multinational corporation (MNC) and subsequent (unusual) repatriation to Canada. In 2023, the biggest local high-tech (biotech) company had around 2,000 jobs.
Over all, of these 26 local companies, by 2022, 14 had been acquired by MNCs, six had closed (two foreign owned), one relocated to the U.S. and seven remained Canadian controlled.
None became especially large or, as official reports note, reached core or anchor-company status. Why?
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Part of the answer is that the technological, managerial and financial uncertainties facing innovative-intensive activities pose continuing challenges to business growth and are particularly acute in Metro Vancouver, a periphery far from major markets and sources of inputs.
Moreover, Metro Vancouver’s high-tech entrepreneurs have been unusually thinly diversified in aerospace, renewable energy, life-sciences, film, video, telecommunications, finance, AI and software for myriad end uses, among other activities. This thin diversification has been further reinforced by the growing momentum of foreign direct investment (FDI) across the high-tech spectrum and a similar liberal spread of government support.
But thinness has meant a lack of deep local roots or clustering effects while the larger companies themselves are thinly spread.
Further, the search for global links has embraced foreign ownership, often by acquisition, which is deemed vital to local viability by providing finance, access to markets and organizational capabilities. Several subsidiaries have global mandates for particular products.
Yet FDI removes local strategic discretion over investments, product and geographic diversification and potentials for core companies. Local control of IP rights and their cumulative benefits are also lost.
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Even when new facilities are created, these concerns apply as MNCs both add to the local talent pool and provide career ladders elsewhere.
For Ballard Power, viability has depended on joint ventures with major American, European, Japanese and Chinese companies to obtain financing and markets for its patented hydrogen cells used in heavy transport vehicles.
An odd exemplar, given its lack of profitability, Ballard’s retention of control has nevertheless provided the wherewithal necessary to diversify global exports and support its 1,000-employee Burnaby head office and R&D operations.
In practice, the conundrum of large companies in Metro Vancouver is likely to remain. Diversification may be thin, but it offers insurance against specific company and industry failure, and there is little trust in Canadian governments picking winners. Similarly, limitations on FDI, beyond those well-established, is a barely mentionable idea across Canada, even given Donald Trump’s undermining of free-trade principles.
Yet, in national perspective, doesn’t the plea for a more independent Canada imply local control of key comparative advantages such as those pioneered in Metro Vancouver?
A nuanced navigation of local-autonomy implications would seem to be a central Canadian policy challenge across key sectors.
Is this what Mr. Carney has in mind?