Canada’s got research talent

Canada has invested heavily in building one of the world’s strongest research ecosystems. Canadian universities, colleges, research hospitals and public laboratories consistently produce internationally recognized research and highly skilled talent. Yet despite these strengths, Canada’s productivity performance has remained largely stagnant for more than three decades. Business investment in R&D continues to lag, technology adoption remains uneven and too few Canadian firms successfully scale innovations into globally competitive businesses.

Knowledge is not being converted into widespread economic value.

Recent economic developments have made this challenge increasingly urgent. Growing global competition, changing trade dynamics, rapid technological change, demographic pressures and constrained public finances require Canada to generate stronger productivity growth without relying on increased public spending. Improving the return on Canada’s existing investments in research has therefore become both an economic and fiscal imperative.

Importantly, the challenge is not simply one of increasing research funding. Canada already possesses many of the components needed to build a world-leading innovation economy, including a network of colleges and polytechnics conducting applied research, successful commercialization organizations, experienced entrepreneurs, and a range of federal and provincial innovation programs.

On May 6, 2026, senior leaders from business, academia, government and the innovation community gathered at George Brown Polytechnic’s Limberlost Place to discuss how can Canada can translate its world-class research into stronger productivity and prosperity.

While participants represented diverse sectors and perspectives, there was broad agreement that Canada’s challenge is no longer one of scientific excellence. The opportunity lies in connecting strengths more effectively and aligning them around a common objective: helping Canadian firms innovate, adopt technology, commercialize at scale and expand internationally.

What’s causing Canada’s innovation gap

The discussion at the Leadership Table closely reflected the findings of the Council of Canadian Academies’ The State of Science, Technology and Innovation in Canada 2025. As identified in that report and by the Leadership Table, several factors contribute to Canada’s persistent innovation gap.

Business innovation and scale-up: Canadian businesses invest less in research and development than many international competitors, and many SMEs (<500 employees) face challenges accessing the capital, expertise and management capacity needed to commercialize innovations and scale their operations. Although Canada has developed a robust applied research ecosystem supporting SMEs in areas such as artificial intelligence, advanced manufacturing, clean technology and digital transformation, many promising firms struggle to move beyond early-stage growth.

Commercialization and intellectual property: Intellectual property developed through publicly funded research is frequently commercialized outside Canada, while highly skilled researchers and entrepreneurs are often attracted to larger international markets offering greater access to capital and commercialization opportunities.

Technology adoption: Canada’s productivity challenge increasingly reflects the slow diffusion of existing technologies rather than a lack of invention. Many SMEs face barriers adopting AI, automation, advanced manufacturing technologies and digital systems that could significantly improve operational competitiveness.

Capital and competition: Innovation depends upon firms that are prepared to invest, compete and grow. Participants noted that Canada’s investment environment has historically favoured lower-risk investments, while many innovative firms face difficulties accessing patient capital required to scale globally. Stronger competition, greater availability of growth capital, and improved commercialization support would encourage more firms to pursue innovation-led growth.

Regulatory complexity: Businesses continue to identify regulatory complexity across various levels of governments, lengthy approval processes and barriers to interprovincial trade as constraints on innovation and expansion. Modernizing regulatory systems can accelerate technology adoption and improve Canada’s attractiveness as a place to invest and grow..

Incentives focused on research rather than outcomes: Canada’s innovation system has traditionally rewarded research activity and knowledge generation more than commercialization and business outcomes. Funding programs frequently measure success through research expenditures, publications or patents rather than productivity improvements, technology adoption, business growth or export performance. Similarly, academic incentives often prioritize scholarly outputs over industry partnerships and applied problem solving.

Industrial structure: Canada’s economy is dominated by small and medium-sized enterprises. While SMEs are an important source of innovation, relatively few Canadian firms achieve the scale necessary to anchor globally competitive industrial ecosystems. Strengthening Canada’s strategic anchor firms while improving the capacity of SMEs to innovate and grow would create stronger domestic supply chains and increase Canada’s global competitiveness.

An underutilized competitive advantage: One of Canada’s greatest but often overlooked strengths is its network of colleges and polytechnics. These institutions work directly with thousands of businesses each year to solve practical challenges involving technology adoption, advanced manufacturing, AI, clean technology, health innovation and process improvement. Acting as innovation intermediaries, they help firms de-risk new technologies, access specialized expertise and accelerate commercialization.

Expanding these applied research partnerships represents one of Canada’s most immediate opportunities to improve productivity without creating entirely new structures or programs.

Solutions: From discovery to deployment

Canada does not need to reinvent its innovation system. It must better align existing research investments, commercialization supports, industrial policy and business development programs around a common objective: increasing productivity and creating globally competitive Canadian firms.

The solutions below outline practical actions to strengthen Canada’s innovation ecosystem.

1. Align incentives to build innovation systems within SMEs

Most SMEs do not have the financial capacity to maintain dedicated corporate R&D laboratories. Instead, successful Canadian firms build innovation capacity through project-based research teams, partnerships with post-secondary institutions, incubators, accelerators and applied research organizations.

Public policy should therefore focus on expanding access to these innovation ecosystems rather than encouraging every SME to establish standalone research facilities. Building stronger innovation systems around SMEs will enable more Canadian firms to adopt new technologies, improve productivity, commercialize research and compete successfully in global markets. To strengthen Canada’s innovation performance, governments should prioritize policies that:

• Encourage firms to establish structured innovation processes that reward employee-led improvements and continuous productivity gains.
• Expand access to commercialization-focused programs that combine technical expertise, management support and market development.
• Increase support for technology adoption and applied research partnerships, particularly through Canada’s college and polytechnic network.
• Strengthen regional innovation ecosystems that connect SMEs with capital, talent, customers and research partners.
• Shift innovation policy from funding research alone toward supporting commercialization, business growth and productivity improvements.

Canada has developed a number of successful innovation support organizations that help SMEs build internal innovation capability while reducing the risks associated with commercialization, including Mitacs, Invest Ottawa and MaRS Discovery District.

2. Align incentives to reward innovation, commercialization and productivity

Public funding and support programs should be designed to reward behaviours that lead to innovation and commercialization outcomes rather than simply subsidizing activity. The most successful innovation programs create incentives for firms to invest their own resources, collaborate with external partners, adopt new technologies and focus on measurable business outcomes.

Research from the OECD, as well as Innovation, Science and Economic Development Canada (ISED) and international innovation agencies consistently demonstrates that programs generate stronger economic outcomes when they encourage collaboration, co-investment, commercialization and management capability development. Programs that merely fund research activity often have weaker impacts on growth than those that require businesses to actively participate in innovation processes and share in the risks and rewards.

Policy Considerations

Future innovation programs should increasingly focus on rewarding behaviours that contribute to productivity growth, including:

• Collaboration between industry and research organizations.
• Adoption of advanced technologies such as artificial intelligence, automation, and digital systems.
• Commercialization of Canadian intellectual property.
• Private-sector co-investment.
• Export development and scale-up.
• Management and leadership capability development.

Existing examples include the Global Innovation Clusters, National Research Council – Industrial Research Assistance Program, Canada Foundation for Innovation and Strategic Innovation Fund.

3. Embed applied research capacity within companies

Canada should strengthen mechanisms that embed applied research capacity directly within businesses to help solve practical operational, productivity and commercialization challenges. Many firms—particularly SMEs—lack the internal capacity to identify, test and implement new technologies and business processes.

Applied research partnerships offer a cost-effective way to bridge this gap by connecting businesses with researchers, technical experts and specialized facilities. Strengthening applied research capacity within firms would improve Canada’s ability to translate research excellence into productivity growth, business expansion and global competitiveness.

Rather than creating entirely new programs, governments should focus on scaling proven approaches that embed researchers within firms, support technology adoption and address productivity challenges identified by industry.

Canada should prioritize applied research initiatives that:

• Place researchers and highly qualified personnel directly within businesses.
• Focus on solving defined productivity and commercialization challenges.
• Support adoption of advanced technologies and digital systems.
• Encourage long-term partnerships between industry and post-secondary institutions.
• Measure success through business outcomes, productivity gains and commercialization results.

Several Canadian institutions are demonstrating innovative approaches that embed research capacity within firms and support technology adoption, including Algonquin College’s AI Accelerator Hub and the Carleton University ARISE Institute

4. Develop sector-based industrial policies Canada should adopt industrial policies that strengthen strategically important sectors rather than attempting to identify and subsidize individual companies.

Modern industrial policy focuses on building competitive ecosystems by addressing common barriers to growth — including skills shortages, fragmented supply chains, weak commercialization pathways, limited access to capital and inadequate research infrastructure.

Governments can play an important role in creating the conditions that enable many firms within a strategic sector to innovate, scale, compete internationally and attract private investment.

Sector-based industrial policies also align more effectively with Canada’s trade and export strategies by supporting industries where the country has existing strengths, strategic advantages, or long-term global market opportunities.

Evidence from Canada and other advanced economies demonstrates that this produces stronger and more resilient economic outcomes than policies focused on supporting individual firms. Aligning industrial policy with export development will strengthen Canada’s participation in global value chains while improving economic resilience and national security.Effective industrial policy:

• Builds competitive ecosystems rather than creating dependence on government support.
• Encourages competition among firms while strengthening the broader supply chain.
• Attracts private investment by providing long-term policy certainty.
• Addresses common constraints facing entire industries, including labour shortages, infrastructure gaps, access to technology and commercialization challenges.
• Creates lasting economic capacity that remains even when individual firms succeed, fail or are acquired.
• Supports sectors that advance national priorities such as economic security, defence, clean energy, food security and critical minerals.

Canada should identify sectors where it possesses long-term competitive advantages and concentrate resources on strengthening their global competitiveness.

Priority sectors may include:

• aerospace; (Canada’s Aerospace Strategy has been a successful example of industrial policy rather than focussing on select a few companies)
• defence and security;
• artificial intelligence;
• quantum technologies;
• life sciences;
• critical minerals;
• advanced manufacturing;
• clean technologies;
• agri-food innovation; and
• ocean technologies.

5. Strengthen business leadership and strategic management capacity

The OECD’s Leveraging Business Development Services for SME Productivity Growth concludes that business development services are among the most effective policy tools for improving SME productivity when they combine advisory support with access to financing.

The World Bank has reached similar conclusions, finding that firms receiving both financial assistance and advisory support consistently outperform those receiving financing alone. Business development programs that combine investment with management coaching, technology adoption and organizational development produce stronger long-term economic outcomes. Building stronger management capability will enable Canadian firms to better leverage innovation investments, adopt advanced technologies more effectively and compete successfully in global markets.

The Accelerated Growth Service is a good example as it brings together federal organizations to support growth-oriented companies. The concept is important because it treats the company as a whole rather than treating innovation as an isolated R&D problem.

Future SME support programs should therefore integrate:

• executive leadership development;
• commercialization planning;
• technology adoption strategies;
• export readiness;
• workforce planning;
• digital transformation;
• succession planning; and
• productivity benchmarking.

6. Reorient research funding toward SME productivity and commercialization

Canada should rebalance existing research and innovation funding to place greater emphasis on solving business productivity challenges and accelerating commercialization.

This recommendation does not require significant new funding; rather, it calls for aligning existing programs to better support technology adoption, process innovation and business growth within SMEs. This approach would reduce the risks associated with innovation while helping firms adopt technologies that improve productivity and global competitiveness. Federal innovation programs should increasingly reward projects that demonstrate clear commercial and productivity outcomes, including:

• adoption of advanced technologies and artificial intelligence;
• digital transformation and automation;
• process innovation and operational efficiency;
• commercialization of Canadian intellectual property;
• export readiness and business scale-up; and
• collaboration between SMEs and research organizations.

7. Identify and support Canada’s strategic anchor firms

Canada should identify a small group of strategically important Canadian companies whose long-term success is essential to national prosperity, supply chain resilience, technological leadership, and economic security. These firms should receive coordinated government attention to support their continued growth while ensuring that critical Canadian capabilities remain globally competitive.

This approach leverages private sector strengths by recognizing that certain firms function as strategic anchors within larger industrial ecosystems. They generate high-value employment, invest heavily in research and development, support extensive domestic supply chains and create export opportunities for thousands of smaller Canadian businesses.

Government should undertake periodic strategic reviews of these firms to assess emerging opportunities, investment requirements, supply chain risks, workforce challenges and foreign acquisition pressure.

Characteristics of Strategic Anchor Firms

Potential strategic anchor firms should demonstrate several characteristics:

• significant investment in Canada;
• global market leadership or strong export performance;
• substantial business investment in research and development;
• critical supply chain importance;
• strategic relevance to national security or economic resilience; and
• the ability to anchor broader industrial ecosystems.

8. Strengthen applied research to solve practical business challenges between SMEs and post-secondary institutions

Canada should strengthen applied research partnerships between SMEs and post-secondary institutions by refocusing existing programs on commercialization and technology adoption. Rather than introducing new funding streams, governments should streamline and better align current programs to make them more accessible to businesses and more accountable for measurable commercial results. Canada’s colleges, polytechnics and universities represent one of the country’s greatest competitive advantages as they can help SMEs solve practical business challenges.

Programs should increasingly support projects that move innovations from laboratory research to commercial application by:

• increasing industry-led applied research;
• supporting technology readiness and prototype development;
• embedding researchers within businesses;
• improving commercialization planning;
• strengthening intellectual property development; and
• helping firms scale products into domestic and international markets.

Policy Considerations

Future policy should focus on:

• simplifying access to innovation programs;
• aligning funding around commercialization and productivity;
• expanding industry-led applied research;
• strengthening partnerships between SMEs and post-secondary institutions;
• embedding researchers directly within businesses; and
• measuring success through business growth, productivity improvements, exports, and commercialization outcomes rather than research activity alone.

The recently launched Labs4 initiative provides one example of how existing programs can be aligned to support commercialization. Its Technology Readiness Level-Up program enables researchers to work directly within college and polytechnic applied research facilities to develop and validate commercial technologies. It further supports commercialization by connecting entrepreneurs with multidisciplinary student teams to address real-world business challenges.

Conclusion

It is evident that Canada is not lacking in ideas, proven practices or potential solutions to better translate knowledge into economic value. Significant effort has already been invested in evaluating the country’s innovation ecosystem.

A broad consensus has emerged that the challenge is not a lack of funding or the need for new programs. Rather, the priority is to better align existing policies, programs and policy instruments around a shared objective: enabling Canadian firms to innovate, adopt new technologies, commercialize research, scale internationally and improve productivity.