This week I'm travelling to Toronto to join a group of Canada's top business, political and academic leaders for a daylong discussion about Canadian economic competitiveness and the steps Canadian businesses can take to succeed in the global marketplace.
With economies around the world showing tentative signs of recovery, it's an ideal time for this kind of discussion. After a period when global economic growth depended too much on private borrowing and personal consumption, we're entering an era in which growth will be fuelled by something much more substantial – innovation, productivity and hard work.
This raises a critical question for governments and businesses: What kind of investments will lead to sustainable growth that drives greater prosperity and expanded economic opportunity in local communities?
I believe the right answer is investment in innovation, particularly information technology innovation.
Why? Because information technology innovation is the key to improving productivity and productivity is the foundation for real economic growth.
The connection between information technology and productivity growth has been clear for some time. In the United States, the annual rate of productivity growth was a full percentage point higher after 1995 than it was before because of a surge in the adoption of IT. That one-point change is the difference between an economy that doubles in size every 30 years and one that doubles every 20 years.
Not only does information technology amplify economic growth across industries, the IT industry itself is a source of growth through the creation of high-wage jobs. Today, the IT industry employs more than 35 million people around the world, including more than 800,000 in Canada. According to a recent study from the technology research firm IDC, 1,000 new information technology companies will be created in Canada by 2013, generating 80,000 new jobs.
If anything, investment in information technology innovation is more important than ever. A wide range of technological advances that just now are reaching the marketplace is beginning to transform the way people interact with technology, use information and analyze data.
As a result, we're seeing the emergence of more natural ways to interact with technology. Cloud computing is changing the way we store information and use applications. Our ability to deliver experiences that extend across portable devices and screens is rapidly improving. Powerful new tools for collecting data and using computer simulations to understand the world are revolutionizing science.
The results will help us tackle global challenges in health care, education and the environment, and serve as the catalyst for the creation of new jobs and even new industries.
In many ways, Canada is ideally positioned to take advantage of these trends. With a well-educated work force, a sound financial system and a national economy that has fared better than many countries during the global economic downturn, Canada has the ingredients to become a global leader in bringing technology innovation to market.
With a stronger commitment to innovation and information technology, Canadian companies can realize their full potential. Research and development spending by Canadian companies has declined 20 per cent since 2001. As a result, average annual labour productivity growth is a full point lower after 2001, compared to the period before. Today, Canadian companies spend only 60 per cent as much on IT as their U.S. counterparts. If Canada truly aspires to be a global leader, its companies must do more.
Government also has a critical role to play, through investments in education programs at all levels to ensure that Canada continues to build on the strength of its trained and educated work force. Policies that encourage R&D investment are critical.
Microsoft is a strong believer in Canada's potential. That's why we have a strong presence here, including the Microsoft Canada Development Centre in Richmond, B.C., where some of the world's best software minds are designing, developing and testing some of Microsoft's most important products.
Today, Canada has a once-in-a-lifetime opportunity to strengthen its position in the global marketplace. Success will depend on whether Canadian companies take a long-term view of investment and innovation.
Steve Ballmer is CEO of Microsoft Corp.
