AI Adoption Doubles to 12.2% of Canadian Firms in 2025, But Productivity Gains Disappear When Complementary Skills Are Accounted For

AI adoption among Canadian firms doubled in 2025, reaching 12.2% of businesses. However, analysis shows that AI's direct impact on productivity largely disappears when firms' existing complementary capabilities are considered.

Artificial intelligence (AI) offers a transformative potential for business operations and economic growth. Canada faces persistent productivity challenges, including weak business investment and declining research and development expenditures. Understanding AI's real impact on firm performance is crucial for economic strategy.

Canadian firms are rapidly integrating AI into their operations. In 2025, 12.2% of Canadian firms utilized AI to produce goods or deliver services, effectively doubling the adoption rate from the previous year. This rapid uptake suggests strong business interest in AI's perceived benefits.

However, the direct link between AI adoption and increased productivity shows a different picture. When researchers accounted for firms' complementary capabilities—such as strong data analytics practices, R&D investments, or employee training—the observed productivity premium from AI adoption dropped to 5.1%. At this level, the link becomes statistically insignificant, indicating AI alone does not drive standalone productivity gains without existing foundational skills.

Firms possessing these complementary capabilities are significantly more likely to adopt AI. Businesses that already use data analytics, for instance, are 15 percentage points more likely to integrate AI compared to those that do not. This highlights the importance of a broader digital foundation for effective AI implementation.

The doubling of AI adoption signals Canadian businesses recognize AI's potential. Yet, the data suggests that AI acts as a magnifier for existing strengths rather than a standalone productivity engine. Firms with robust digital infrastructure, skilled workforces, and strong data capabilities are not only more likely to adopt AI, but also better positioned to realize any associated benefits.

Policymakers and businesses must consider that AI integration requires concurrent investments in complementary skills and technologies. A focus solely on AI deployment without addressing underlying capabilities may not yield expected productivity improvements. Watching how firms develop these foundational skills alongside AI adoption will be key to Canada's future economic performance.