Canadian manufacturing, US R&D spillovers, and communication infrastructure

Canada is highly integrated with the U.S. economy. This north-south link, c oupled with its east-west dimension, also renders Canadian production depen dent on communication infrastructure. We investigate the influence of resea rch and development (R&D) spillovers from U.S. manufacturing and Canadian c ommunication infrastructure on Canadian manufacturing. Canadian production becomes relatively more R&D-intensive from communication spillovers. Howeve r, manufacturers substitute knowledge from U.S. spillovers for domestic R&D . U.S. spillovers cause production to become more plant- and equipment-inte nsive. Spillovers also enhance productivity. Communication infrastructure a ccounted for 8.5% of the growth, with the major source emanating from U.S. spillovers. They contributed 76% of the gains.