The Intangible Shift: Changing gears to compete in the new economy

Executive Summary

Canada’s economy is undergoing a fundamental shift. A rising share of economic growth and prosperity is being driven by intangible assets and investments, such as data, digital services, brands, design, marketing, and firm-specific training, while the share of tangible assets, like buildings, machinery, equipment, and product inventories, is declining. Between 1976 and 2008, business sector investment in intangibles grew from 5 to 13 percent as a share of GDP in Canada. Meanwhile, investments in tangible assets fell from 27 to 16 percent as a share of GDP. By 2018, investment in just one slice of intangibles, including data, databases, and data science, reached an estimated $29 to $40 billion.

The intangible shift in Canada’s economy is significant and expanding. Firms and countries that invest in intangibles are experiencing faster growth and substantial productivity improvements, a critical development at a time when long-term growth prospects are stagnating. Canada cannot afford to miss this opportunity. Although intangibles are on the rise in Canada, we are falling behind many peer countries in the pace and scale of our intangible shift. Canadian businesses in all sectors would benefit from greater investment in a variety of intangibles, but too few are seizing the opportunities. Firms face a variety of barriers to making intangible investments, including financing, unclear data governance, intellectual property challenges, and competition, trade, and foreign investment policies ill-suited to an increasingly intangible economy. At the same time, a rapid shift to intangibles puts many firms and workers at risk of being displaced or left behind. A key challenge is to find ways to enable firms and workers across all sectors in the Canadian economy to compete and share in the productivity and growth benefits of intangibles.