As Canadians prepare to vote in another federal election, the country's economy faces a sobering reality. As the Organization for Economic Co-operation and Development (OECD) notes, productivity is stagnating, our innovation performance lags global peers and high-potential startups often fail to scale.
Author
- Andrew Maxwell
Bergeron Chair in Technology Entrepreneurship, Lassonde School of Engineering, York University, Canada
Despite these warning signs, innovation policy remains largely absent from political discourse. Canadians hear a great deal about how political parties are going to spend money, but little about where the money is going to come from .
This is a critical oversight. Canada's enduring productivity gap is more than an economic statistic - it's why the country is struggling to sustain the social programs, such as health care and education, that Canadians value.
If Canadians want to maintain their standard of living, Canada must close that gap through a more deliberate, strategic approach to innovation.
Innovation is economic strategy
In today's knowledge-based economy, as business executive and innovator Jim Balsillie observes , power flows to countries that own digital data and their "value-added applications" (like apps or platforms) and intellectual property.
Countries like the United States , China and South Korea have embedded innovation into national strategy, investing in sectors like artificial intelligence (AI), clean technology and biotech to drive growth and resilience. Canada, by contrast, has taken a fragmented, reactive approach.
Canada's over-reliance on research and development (R&D) spending and patent counts has failed to translate into commercial success. According to the OECD, Canada ranks among the highest in public R&D investment but among the lowest in innovation outcomes such as productivity growth and technology adoption.
Canada also often conflates research with innovation. While both are vital, innovation is about turning knowledge into use through deployment, adoption, commercialization and scaling. Much of today's transformative innovation, particularly in AI and software, depends on the transfer of tacit knowledge (related to things like user insights, execution experience and expertise in a particular domain) not just codified knowledge (for example, patents, technical drawings and licenses).
Why innovation policy fails
Governments struggle with innovation because it defies conventional policymaking:
It requires failure tolerance. Innovation is iterative. But political systems fear failure.
It demands long-term vision. Results may take years, beyond typical electoral cycles.
It's technically complex. Few policymakers have deep expertise in emerging technologies or understand the research and development process.
It's often misunderstood. Funding research is not the same as building innovation capacity or developing innovation processes.
It's hard to quantify. Quantifying innovation outcomes is complex and challenging to measure, making it also difficult to measure return.
As economist and innovation policy expert Mariana Mazzucato argued in The Entrepreneurial State: Debunking Public vs. Private Sector Myths, innovation success depends on bold missions, cross-sector collaboration and a willingness to learn from failure. Canada's current model lacks these ingredients.
Breaking the cycle of failure
To break this cycle, Canada needs a non-partisan national innovation institution - an agency empowered to advise on strategy, evaluate outcomes and embed technical expertise into policy at the federal, provincial and municipal levels.
Models like DARPA from the U.S., Vinnova from Sweden and the Israel Innovation Authority show how long-term, high-impact innovation can be achieved with the right institutional scaffolding and appropriate knowledge.
Canadians have created a number of innovation organizations with national implications, such as the Council of Canadian Academies , the CD Howe Institute , Canada Foundation for Innovation and the Institute for Competitiveness and Prosperity (ICP) , which closed in 2019.
Yet none have been national organizations that addressed the broad proposed mandate to explicitly advise governments on technology and policy strategy, evaluate innovation outcomes and embed technical expertise into recommendations.
A non-partisan national innovation institution must:
Track outcomes more than inputs. Innovation success can be measured by a number of project- or industry-specific outcomes, such as productivity, firm growth and export revenue. The ICP proposed measuring the "prosperity gap," comparing innovation performance to peer jurisdictions.
Support long-term strategic objectives, focusing on Canada's strengths in critical areas like AI, clean technology, energy health-care technology, and leveraging expertise and experience in these and other areas.
Embed technology experts alongside health-care and education experts in the decision-making process. Recruit scientists, engineers and entrepreneurs to anticipate technology and market trends, guiding both implementation and policy development.
Differentiate innovation from research. Support both, but recognize the differences and explicitly link innovation to adoption and new use cases.
Promote value capture. Ensure Canadian firms and the country benefit from and retain control of key technologies that enable them to scale domestically.
Recognize the inherent risks in innovation and the potential for failure. Evaluate and build on impact and learn from failure to enhance innovation processes and improve future outcomes.
Align our educational institutions with innovation goals revising programs, creating more flexible learning options and enhancing entrepreneurship so that more research outcomes are commercialized .
These steps aren't hypothetical. They're backed by evidence from countries that have succeeded in turning innovation into sustained economic performance .
Why now?
Canada's economy is heavily dependent on resource exports and vulnerable to technological disruption. Meanwhile, the global AI and clean tech races are accelerating. Canada is at risk of falling further behind - not just economically, but geopolitically.
But Canada also has strengths: world-class researchers, diverse entrepreneurial talent and global partnerships. What's missing is a cohesive national strategy to harness this potential. Creating a non-partisan innovation institution would be a powerful first step.
If Canadians want to provide revenue for governments decide how to fund education, health care and climate adaptation, they must grow their economy. And to do that, Canada needs smarter innovation policy.
It's time to stop celebrating activity and start rewarding outcomes. Let's build the structures that allow Canadian ingenuity to thrive - not in theory, but in practice.
Andrew Maxwell works for York University, but received no direct benefit from comments in this article. He receives funding from various research agencies for his work in the area, but none of which creates the potential for conflict. He is a member of the Academy of Management, the International Society for Professional Innovation Management and Professional Engineers Ontario..
