Technology and the Canadian Forest-Product Industries ... - ArtSites

Foreign-Ownership and In-House R&DThe low level of in-house forest-product R&D in Canada and therelative strength of efforts by the federal government, at least until1979, both stem from American ownership and control of much ofCanada's forest sector.'? Overwhelmingly, American forest-productcompanies operating in Canada have centralized their R&D investmentsin the United States. On occasion this has involved closingdown large Canadian facilities," In only three cases have Americanforest-product subsidiaries invested in important R&D facilities inCanada in recent decades. In all instances the circumstances wereunusual.'?In Canada, foreign-owned subsidiaries usually rely on parent companiesfor R&D. This seriously erodes indigenous technological capabilityin these industries. Although subsidiaries have ready access totheir parent's technological expertise, such intracorporate ties, accordingto the Gray Report." have left subsidiaries technologically "truncated"and have contributed substantially to the low level ofindustrial R&D in the Canadian forest-product industries. Similarly,the numerous joint ventures that involve foreign partners typicallyenjoy access to the foreign partner's company laboratory and have nomandate to undertake their own R& D.There has been some controversy regarding the Gray Report'sclaim of "truncation" in the forest-product sector. Pearse and Kates etal. found no differences in the R&D performances of foreign subsidiariesand Canadian firms in the B.C. and Ontario forest industries,which led them to believe that being a foreign subsidiary does noterode a firm's technological capability per se." However, the methodsemployed in their studies are open to question. Pearse did not revealany details about "the nature of his investigations" and Kates et al.only sampled five firms. The studies are also too narrowly conceivedto assess properly the effect of foreign-ownership on a firm's technologicalcapability; they ignored international corporate affiliationsand the aggregate impacts of foreign investment on industrystructure as a whole.FOne way in which Canada's forest-product and related firms areinfluenced by foreign-ownership is in their technology strategies.Firms with a "dependent"23 technology strategy make no attempt toinitiate technical or product change except at the specific request of acustomer, or parent, who also provides the expertise to implement therequested changes. An "imitative" technology strategy means a firmseeks to copy the technological leaders. Predominantly, Canada'sforest-product firms and equipment suppliers are committed to one of74