1 September 2008

Flourishing in the global competitiveness gameWORKING PAPER 11, SEPTEMBER 2008

Presentation byRoger MartinSeptember 18, 2008

2 September 2008

What is the impact of head offices, especially Canadian ones, on local economies?

Should Canada pursue a public policy that deliberately creates national champions?

Competition Policy Review Panel Asked Us Two Questions

3 September 2008

Flourishing in the global competitiveness game

Assessing the economic impact of head offices in city regions

Assessing the potential impact of a national champions policy on Canada’s competitiveness

Today’s Discussion

4 September 2008

Canada has 77 Global Leaders

5 September 2008

Number of Global Leaders has Increased Significantly

33

7783

1985 April 20082003

6 September 2008

17 of Canada’s 75 Wealthiest People Were Builders of Global Leaders

7 September 2008

Few Companies Acquired Since 2002 Were Innovating Global Leaders

8 September 2008

29 Companies Had Less Than 50% of businesses internationally

AIM PowerGenAlgoma SteelBCE’s Telesat holdingCalpine Power Income FundDeer Creek EnergyDofascoDollaramaE.D. Smith & SonsEntertainment One Income FundGale Force EnergyGateway CasinosHalterm Income FundHarris SteelHudson’s Bay CompanyID Biomedical

IncoLaSenzaLakeport BrewingPetrofund Energy TrustPrime West Energy TrustPrudential SteelSleeman BreweriesSteeplejackStelcoSummit REITTerasenUE WaterheaterVancouver WharvesVincor

9 September 2008

15 Had Significant International Business, But Were Not Global Leaders

Axcan PharmaCognosCo-SteelFranco NevadaGEAC ComputerIpsco SteelKCP Income FundLeitch Technology

LionOre MiningMiramar MiningNelson ResourcesNorcast Income FundPetro-KazakhstanStandard Aero HoldingsTIR Systems

10 September 2008

3 Were Global Leaders, But Taken Over by Private Equity Players

Four Seasons

Intrawest

Masonite

11 September 2008

5 Global Leaders Had Ceased to Innovate

Domtar

Falconbridge

GEAC

GSW

Moore Wallace

12 September 2008

5 Innovating Global Leaders Have Been Taken Over Since 2002

ATI

Alcan

Creo

VersaCold

Zenon

13 September 2008

Firms Taken Over by Foreigners Had Much Less Global Presence

14 September 2008

Flourishing in the global competitiveness game

Assessing the economic impact of head offices in city regions

Assessing the potential impact of a national champions policy on Canada’s competitiveness

Today’s Discussion

15 September 2008

Does Head Office City Influence R&D Location for Largest R&D Spender?

16 September 2008

Or For the 5 Largest Spenders?

17 September 2008

VolkswagenRoche, BaselNovartisNokiaMerckBoschSonyHondaBMW, MunichMotorolaMatsushitaCisco

PfizerFordJ&JMicrosoftDaimler ChryslerToyotaGSK, New YorkSiemensGMSamsung, SeoulIBMIntelSanofi-Aventis

Head Office Location Affects Only 4 of 25 Largest R&D Spenders

25 Largest R&D performers, 2007

18 September 2008

Head Office City Doesn’t Influence R&D Location for 4 of 5 Largest Canadian Spenders

19 September 2008

Canadian R&D Performers Lag Foreign-owned Counterparts

2003 results

20 September 2008

Canadian Companies Based in Toronto Important Contributors to United Way

Large Corporate Donations to United Way of Greater Toronto

21 September 2008

Big 5 Banks Contribute the Most

Large Corporate Donations to United Way of Greater Toronto

22 September 2008

Big 5 Bank Employees Important Contributors to Toronto United Way

Large Employee Donations to United Way of Greater Toronto

23 September 2008

Charitable Giving Is Becoming More Strategic

Interviews at 18 of Canada’s largest corporate donors –12 Canadian, 6 foreign-ownedCommunity involvement and charitable giving aligning with business strategies; CEOs less likely to support local initiatives that are off strategyCompany operations across Canada becoming more important –where the employees and the customers areGreater employee involvement in community and charitable giving strategiesForeign HQ expects Canadian subsidiary to have a strategy –but typically geared to Canadian marketBut, head offices do matter – CEOs and senior managers are still part of a local community

24 September 2008

Compensation is Higher in Foreign-owned Head Offices

25 September 2008

Foreign-owned Head Offices Outspend Canadian Ones, Except in Business Services

26 September 2008

More Head Offices Mean More Spillovers to Business Services

27 September 2008

But Bigger Cities Also Mean More Business Services

28 September 2008

And Bigger Cities Mean More Head Offices

29 September 2008

Is There a Statistical Relationship Between …

30 September 2008

Is There a Statistical Relationship Between …

31 September 2008

Flourishing in the global competitiveness game

Assessing the economic impact of head offices in city regions

Assessing the potential impact of a national champions policy on Canada’s competitiveness

Today’s Discussion

32 September 2008

Many Ways to Target Support for National Champions

Targeted subsidies

Public support for R&D

Preferential government procurement

Export promotion

Trade barriers

Prohibition of foreign takeovers

Protection from domestic and foreign competition

33 September 2008

The Pros and Cons of National Champions Policy

Help infant industries

Neutralize established foreign players

Anchor industry clusters

Overcome disadvantage of small markets

Create and sustain jobs

Help firms in sunset industries

Develop strategic sectors

Correct market failures

Reinforce patriotism

ARGUMENTS IN FAVOUR ARGUMENTS AGAINST

Shielding companies from competition does not build national champions

Governments have rarely succeeded in creating successful national champions

34 September 2008

Canada Should Pursue Inspired Competitiveness Policy

Lower the cost of investment

Reduce barriers to competition

Define and support innovation more broadly

Improve our understanding of the needs of existing and aspiring global leaders

35 September 2008

Flourishing in the global competitiveness gameWORKING PAPER 11, SEPTEMBER 2008

Presentation byRoger MartinSeptember 18, 2008