OTTAWA — Fears about foreign takeovers and the “hollowing out” of corporate Canada are vastly overstated, a new report says.
The report released by the Conference Board of Canada Tuesday found that the number of head offices in Canada has been growing in recent years, despite a string of high-profile acquisitions of Canadian companies such as Hiram Walker, Hudson's Bay Co., and more recently, Inco and Falconbridge.
Over all, the number of head offices in Canada jumped by 100 to 4,161 between 1999 and 2005, the Conference Board found. According to Statistics Canada data, head office employment in Canada also grew by 11 per cent during that same period, despite challenges such as a more valuable Canadian currency and the rapid rise of China, India and other low-cost economies.
The results, however, weren't evenly spread throughout the country.
Head-office employment grew in Calgary by 64 per cent during that six-year period, by 28 per cent in Ottawa, and by 19 per cent in Toronto, the report found, while falling by 7 per cent in Winnipeg and 29 per cent in Vancouver.
But a head office's orientation is critical, the report says, in determining its ability to do well and grow. “For Canadian-owned multinational enterprises to prosper in a global economy and increase their head-office presence here, they must be oriented towards international markets.”
Glen Hodgson, the Conference Board's chief economist, said foreign acquisitions of Canadian companies and other types of foreign investment shouldn't be feared, although the subject is too complex to be seen in either entirely positive or negative light.
There is a dramatic difference, for example, between the Canadian operations of European-based and U.S.-based companies, the report found. For many of the U.S.-based companies in the study, the Canadian operations are often among the prized assets, while the European-owned Canadian operations often saw themselves as weaker than their most important local competitors and the company's other subsidiaries.
“EU-owned subsidiaries appear to be predominantly implementers.”
The Canadian arms of the U.S.-based companies were also more likely to have been able to make a difference by developing unique areas of expertise. These subsidiaries, however, were less likely to have the autonomy to develop new products and processes than Canadian-based companies.
“You really do have to peel the onion and look beneath the layers,” Mr. Hodgson said.
The results were based on data compiled from 13 EU-based and 37 U.S.-based Canadian operations, and 12 Canadian-based companies.
The report also modifies recent concerns about Canadian manufacturing. Although the lucrative sector has been in decline and has shed about 200,000 jobs over the past couple of years, the report says, total employment in manufacturing remains at about the same level that it was in 1998. In contrast, the U.S. sector is about 20 per cent smaller.
Although at odds with what many Canadians may believe about the “hollowing out” of corporate Canada, the report is consistent with other recent research.
A December, 2006, report by the University of Toronto business school, for example, found that Canada's world-class companies are significantly larger and more numerous than they were 20 years ago.
In 1985, that report found, Canada claimed 33 companies that ranked among the top five in the world in their particular business, but that that number has since more than doubled to 72.
The university report also found that average annual revenue for Canada's leading companies is $3.7-billion, up from $2-billion in 1985, after adjusting for inflation. That growth has come despite the fact large companies today tend to focus on smaller niches than they did a couple of decades ago.
Twenty years ago, Canadian companies led in easy-to-understand fields such as wines and spirits, nickel, asbestos, solid-waste management and real estate. Today, according to the university study, Canadians are big winners in environmental compliance technology, postage stamps, gastrointestinal products and wollastonite, a mineral fibre used in ceramics, auto parts and concrete
