INTRODUCTION

Innovation is the dynamic force that changes the economy. It provides new products and processes. It generates productivity growth and leads to increases in the standard of living. It is at the heart of entrepreuneurship.

An analysis of innovation is a study in the economics of knowledge creation and application. Studies of innovation have not been as common as other types of studies in industrial organization – of scale economies, scope economies, sunk costs, multiplant economies, competition, and market structure. One of the reasons is that data allowing for broad descriptions of the innovation process have been lacking. Research has had to rely on case studies that are often unrepresentative of the innovation activity that takes place in the entire population. Case studies tend to focus on high-profile new products and processes. By definition, few firms are at the head of the class at any point in time, and focusing on them alone risks giving a distorted view of change.

This study makes use of the first comprehensive innovation survey to cover the Canadian manufacturing sector. The 1993 Innovation and Advanced Technology Survey, carried out by Statistics Canada, was uniquely designed for analytical purposes and differs in key respects from the standardized European Community Innovation Surveys (CIS). Conducted by Statistics Canada in 1993, the innovation survey used here provides an overview of the complex process that produces innovation in Canadian manufacturing.