Can technology help fix Canada's productivity problem?

“Canada is facing a productivity crisis.”

Dr. Vaarun Vijairaghavan doesn’t mince words.

“Canada's productivity growth has been declining for years, and economists across the country are raising the alarm. The Bank of Canada has called it an emergency.”

The assistant professor of business technology management at the Haskayne School of Business and his research team received an Insight Grant from the Social Sciences and Humanities Research Council to see if technology can help fix the problem. And if so, how?

While most people assume investing in technology should make businesses more efficient, Vijairaghavan says there is surprisingly limited evidence about exactly where or how that value is created in terms of a firm’s accounts.

“We know IT spending has exploded over the past few decades, but businesses and policymakers still lack precise answers about how this IT spending affects firm costs, and the quality of a firm’s financial reports.” 

Dr. Vaarun Vijairaghavan, PhD

The team’s research examines two critical ways information technology may improve business performance.  

First, they study whether technology helps companies reduce the costs of producing goods and managing day-to-day operations.  

Second, they investigate whether technology improves the quality and reliability of financial reporting, allowing investors to make better-informed decisions.  

An interdisciplinary approach

Vijairaghavan’s primary area of research is in information systems, but a PhD minor in accounting allows him to work at the intersection of two disciplines that rarely intersect. Vijairaghavan’s background and the complementary expertise of his collaborators — Dr. Barrie Nault, one of the world's leading scholars in IT productivity, and Dr. Rahat Jafri, an expert in financial reporting — make this truly interdisciplinary work possible.

Drawing on both fields allows the team to examine how technology investments affect not only business operations but also the financial information that guides investment decisions. By bringing together ideas from different disciplines, the team can answer questions that neither field has fully explored on its own.

“The idea that the same IT investment that helps a manufacturer run a leaner supply chain also makes their earnings reports more useful to investors — and that we can actually measure both effects — is exciting to me as a researcher,” says Vijairaghavan.    

A national challenge

The research comes at a particularly important moment. Canada is grappling with declining productivity growth, the government is actively debating major digital legislation, and governments and businesses alike are searching for practical solutions.    

The kind of evidence Vijairaghavan and his team are searching for matters enormously. Falling behind our international counterparts in terms of productivity affects wages, living standards and the country's long-term economic prosperity.

According to Vijairaghavan, faithfully and transparently reported earnings are critical because these reports by firms are widely used by investors to make investment decisions. And superior resource allocation in terms of investments is a key determinant of a country’s economic performance. In addition, decreasing firm costs are an important driver of productivity.  

“Improved resource allocation is a critical pillar of economic wellbeing," says Vijairaghavan. "At a time when Canada's productivity is lagging behind nearly every other advanced economy, understanding how technology can support that is more urgent than ever.” 

Ultimately, Vijairaghavan’s research speaks directly to Canada’s productivity challenge by generating rigorous evidence about technology investments, one of the most powerful tools available to Canadian businesses.