Flourishing in the global competitiveness game

Released September 2008

Foreign takeovers have risen to prominence over the past few years with the buyouts of Canadian icons like Alcan, Dofasco, Falconbridge, and Inco. While these takeovers have been highly visible, the Institute’s research shows that, over the past two decades, the number of global leaders in Canada has actually increased. In 1985, Canada had 33 global leaders; the number has grown to 77 this year. These global leaders, like McCain, Open Text, and Research In Motion, have competed on the basis of innovation, globally significant capabilities, and global expansion to generate prosperity. 

Although foreign takeovers usually mean that a Canadian head office becomes a foreign branch office, there is no solid evidence that such “downgrades” have a negative impact on Canada’s prosperity. In fact, such foreign investment in Canada contributes to our productivity and prosperity. Head offices, whether Canadian- or foreign-owned, are important sources of high-value jobs, and public policy should not discourage foreign takeovers in order to preserve Canadian head offices.

But if Canadians are worried about hollowing out, then the best solution is to create an environment in Canada that stimulates the growth and development of globally competitive firms. Management teams have to focus on global expansion of the successful business models they have developed here in Canada – or risk being taken over by more capable management teams from abroad.

The Working Paper applauds the conclusions of the federally appointed Competition Policy Review Panel, headed by Lynton “Red” Wilson. The Panel, which released its report Compete to Win in June, advanced the overall theme that the best defense for Canadian companies is a good offense. It acknowledged that it is difficult for them to win in the increasingly competitive world, but they cannot wait to begin taking on the challenge. Trying to shield our firms from global competition will only delay the challenge and make it more difficult to face.

The Working Paper and the Competition Policy Review Panel conclude that more competitive pressure placed on our businesses will lead to the benefits of more innovation and higher productivity. In turn, this will raise our economic performance and prosperity for us and future generations.

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Topics: Economic policy, growth, and strategy