Canada’s High-tech Leaders Bypassing the U.S. for Success in Asia

The transformative Asia Pacific Economic Cooperation (APEC) represents 40 per cent of the global population and 50 per cent of world trade. Within the 21 member economies of the APEC region, micro-, small-, and medium-sized enterprises (MSMEs) are the drivers of growth of innovation. They account for 98 per cent of all businesses. They also provide 54 per cent of regional employment and 70 per cent of total export value. If Canada is serious about successfully engaging with partners in rising Asia, this is a good place to start.

Canadian companies, institutions, and organizations are starting to take notice and explore the opportunities inherent in enhancing the connectivity between Canada's MSMEs and those of the APEC region.

The Asia Pacific Foundation of Canada, for example, is spearheading the APEC-Canada Growing Business Partnership, an initiative with Global Affairs Canada to foster economic growth and reduce poverty in APEC developing economies by building the potential of MSMEs and aspiring entrepreneurs through its four-year, $4.49-million initiative.

Meanwhile, the Innovation Policy Lab at the University of Toronto's Munk School of Global Affairs is studying innovation and its impact on growth and society around the world—in particular, the role of public policy in nurturing innovation. The global research hub has sponsored some interesting new research on Canadian high-tech companies in Asia, zeroing in on about 200 Canadian firms that have locations in high-growth Asian markets, and including 120 so-called "micro-multinationals," which in addition to having a presence in Asia, also have locations in either the European Union or the United States, or both.

So, what does this research tell us? First, based on the location data in the Munk School's CanAsia Footprint map, of the 637 locations of Canadian tech firms in Asia that we studied, more than half (53 per cent) are services-related. Second, about two-thirds of the Canadian high-tech firms are MSMEs. And third, and perhaps most surprisingly, more than one-third of these high-tech micro-multinationals bypassed the U.S. entirely in their market expansion plans, and actually went to Asia first, especially in services and analytics, software, and telecom/wireless.

So, where do these high-tech Canadian firms locate in Asia? China and Hong Kong are the markets of choice for large and small companies; MSMEs also prefer countries in the Association of Southeast Asian Nations (ASEAN). For companies headquartered in British Columbia, our research found, there is a greater emphasis on the ASEAN, South Korea, and Taiwan. Ontario has a relatively greater proportion of locations in Japan, while Quebec has a greater proportion of companies in India.

More than 90 per cent of Canadian MSMEs in Asia are from Ontario, Quebec, and British Columbia. Half are headquartered in Ontario, in spite of the fact that Ontario is not the largest trader in Asia. Of these high-tech firms, Ontario has the largest proportion in services and analytics; B.C. in telecoms, clean tech, electronics, and peripherals; and, Quebec in digital media and software.

When we looked at Canada's global digital players, we found that some of the large mobile, web and cloud integration firms were in Asia as early as 1990, followed by advanced manufacturing. The MSMEs tended to arrive a few years later, starting with telecoms and wireless around 2004. And when we explored how Canada is participating in the growing high-tech and consumer markets in Asia, we saw that especially in ASEAN and China/Hong Kong, Canadian companies are present across the high-tech spectrum, indicating the compelling attraction of these far-away markets. We see manufacturing in China/ASEAN; more software in India; more digital and media in Japan; and, more mobile, web and cloud in South Korea.

Clearly, the Asia-Pacific region is at the forefront of modern technology and innovation, with businesses and governments looking for opportunities to establish healthy innovation ecosystems, learn how to catalyze entrepreneurship, and to create collaborative opportunities with trusted trading partners like Canada. Many of our tech companies have already upped their game in Asia. Now we need more Canadian companies to follow the opportunities in the region's growing and innovative markets—these companies represent the future of the Canadian economy, and Canada will only benefit from deepening its engagement with Asia.

This piece first appeared in The Hill Times on October 18, 2017.