Investment in Information Technology (IT) is having a rising impact on Canada’s economy, says the first Canadian study of its kind.

The boost to growth and productivity from investment in IT capital is now almost as much as that from investment in non-IT capital, says the Conference Board of Canada report. This is significant because investment in IT accounts for only about five per cent of overall investment in capital stock, and non-IT capital the other 95 per cent, the board says.

“The recent surge in IT investment is phenomenal,” said Jim Frank, vice-president and chief economist of the Conference Board. “The stock of IT capital has been growing by about 30 per cent a year for 20 years. We’ve never seen this kind of growth for so long and it’s transforming how business is carried out in Canada.”

The board found that IT investment increased its contribution to the Gross Domestic Product (GDP) growth rate from virtually nothing in the 1980s to about 0.4 percentage points in the late 1990s. In 1999, IT capital stock amounted to 5.7 per cent ($80.4 billion) of total capital stock, up from 4.4 per cent just a year earlier.

“This is an important and accelerating change,” said Frank.

Canada lags behind the United States, however, in IT’s share of total capital stock. Where Canada’s IT capital had increased to 4.4 per cent in 1998, it had increased to 13.5 per cent in the U.S. in the same year.

“It seems clear that Canadians have started investing in IT later and are still well behind the situation in the United States,” Frank said. “One way we could look at this is to say that IT capital as a share of capital stock in Canada is about where the U.S. was 20 years ago.”

The study, prepared for the Information Technology Association of Canada, IBM Canada and Microsoft Canada, confirms the findings of similar studies in the U.S. showing that the surge in IT investment is having a growing impact on productivity and output growth.

Together with its partner organizations across the country, ITAC represents 1,300 companies in the computing and telecommunications hardware, software, services and electronic content sectors.