Canada’s Patent Productivity Paradox: Recent Trends and Implications for Future Productivity Growth

Canada’s slow productivity growth rate relative to peer countries has been the focus of considerable attention among academics and policymakers. In contrast to the relatively flat trajectory for total factor productivity, Canada’s production of patents has grown considerably in the last three decades. In this article, we examine changes in Canadian patenting over the past 30 years, with a view to understanding this “patent productivity paradox”: slower productivity growth than might be expected given significant increases in patenting. We draw on recent literature on patents as a measure of innovation as well as literature on the relationship between patents and productivity to study this paradox. We propose several explanations for the disconnect between TFP growth and patenting and examine the evidence. We find that the weaker relationship between productivity and patenting in Canada is not explained by the relative rate of invention in information and communications technology, nor by lower invention quality. However, we find suggestive evidence that foreign ownership of patents and inventor migration help to explain the weaker relationship between productivity and patenting in Canada.