Canada’s innovation ecosystem has poor-performing funding models, is risk-adverse, has weak global standing and declining international competitiveness, according to a Canadian Centre for the Innovation Economy roundtable organized by The Conference Board of Canada.

“Incrementalism is no longer enough. Bold policy shifts and mission-driven strategies are now required,” keynote speaker Dan Herman (photo at right), a lecturer at the Munk School of Global Affairs & Public Policy at the University of Toronto, told the roundtable.

Canada is home to world-class research, talent and entrepreneurship. But the country’s inability to scale innovation poses a major economic threat, said Herman, who was executive director at Innovation Canada for Innovation, Science and Economic Development Canada.

In 2022, just 7,320 Canadian companies met the high-growth threshold by employment, well below the federal goal of 28,000 by 2025.

Herman said while Canada flounders, its competitors are increasingly compressing their innovation cycles – rapidly moving from idea to product.

Emerging economies are now aggressively funding industrial strategies that integrate capital, procurement and regulatory support.

The leaders’ roundtable included 21 senior leaders across tech, finance, natural resources, research, and government to discuss the future of Canada’s innovation economy. The event included roundtable discussions led by Conference Board of Canada researchers to capture and guide conversation on actionable innovation-led economic growth.

After Herman’s opening keynote, five panellists shared their experiences furthering Canadian-led innovation in a discussion moderated by Claudia Kwyriak (photo at right), president and CEO at the Ontario Centre of Innovation. The panellists (photos L to R below) were:

• Dominique Barker, chief financial officer and head of sustainability at Lithium Royalty Corp.
• Martin Basiri, CEO of ApplyBoard Inc., the world’s largest online international student recruitment platform.
• Manav Gupta, chief technology officer and vice-president of IBM Canada.
• Omair Shah, partner and director, strategic portfolio development, at TELUS Ventures.
• Nikki Bhatia, chief of staff at Xanadu.

The panellists said Canada has ambitious entrepreneurs, but overall the country remains a risk-averse nation among its international competitors.

According to a report on the roundtable, their view is “while we celebrate research and startups, we are hesitant to pick winners, scale technologies, or reform procurement. Our window to pick is narrow, too, since rivals are also courting the same founders.”

The panellists told the leaders’ roundtable that time is of the essence. Moving decisively before 2028 would keep Canada firmly on the world stage.

In the panellists’ view:

• Canada is a powerhouse of ideas. Labs and researchers punch above their weight and combine world-class institutions with ambitious, immigrant-fuelled entrepreneurship.
• Canada is a nation of entrepreneurs. We rank first in number of entrepreneurs, but while our entrepreneurs are not risk-averse, the government, the general population and large industries tend to adopt technologies and other new innovations slowly.
• Late-stage equity capital is a critical limiter. Our lack of late-stage equity capital leads to a subsequent flow of intellectual property, talent and tax revenue that drains outside our borders. Growth financing dries up after Series A funding, corporate procurement insists on foreign validation, and policy culture remains wary of picking winners.
• Time to place some big bets. Game-changing domains – quantum, batteries, and AI – hold promise for Canada to make our mark as a nation. To do this, we can back companies in key sectors end-to-end, move beyond proof of concepts and pilots, expedite permits, create responsive regulation, and provide security with guaranteed first orders from Crown agencies.
• Double down on what we already do well. Canada can provide more support for companies that already have momentum, more capital support for high-risk and high-growth companies, Scientific Research and Experimental Development (SR&ED) tax credits that reward sales, a merit-based immigration visa, light-touch regulations for emerging tech (measured in weeks), and agile oversight for frontier tech.

What’s needed to improve Canada’s innovation ecosystem?

Following the panel, participants were divided into roundtable discussions moderated by a Conference Board of Canada staff member. Discussants said that in the next few years, creating global winners will involve:

Scaling Canadian technology companies on home soil. To do this, we can:

• Provide clear policies that incentivize, encourage and anchor deep-tech firms in Canada, where they can become world leaders in areas such as (but not limited to) quantum, advanced batteries, enterprise AI and clean tech.
• Keep headquarters, IP and executive teams in Canada to foster a positive feedback loop for talent, corporate growth and economic value capture.

Foster an AI-enabled population. To do this, we can:

• Treat analytical thinking and computer systems design as a fundamental educational component for all Canadians from kindergarten to Grade 12 through to continuous learning—as essential as reading comprehension and the scientific method.

Leverage patient and long-sighted domestic capital. To do this, we can:

• Expand the role pension funds and insurers play in supporting late-stage Canadian scaleups. Link high returns to domestic spillovers for job growth and economic development.

Use our values to fuel growth and attraction. To do this, we can:

• Leverage Canada’s reputation for the rule of law, pluralism, and clean power as a competitive asset that can attract global partners – and the consequent talent they bring.

Participants shared examples of success:

• Canada’s AI Supercluster, ScaleAI. Exemplifying targeted public-private co-investment in AI adoption, the Port of Montreal’s predictive logistics platform linked the port authority, SMEs and researchers to develop AI tools that extend vessel forecasts from hours to weeks, thereby slashing turnaround times and inspiring replication projects.
• Ontario’s Critical Technology Initiatives. This challenge-driven fund prioritizing AI, 5G, quantum, blockchain and robotics is midway through its deployment, fostering commercialization support through regional innovation centres.
• Creative Destruction Lab. This seed-stage accelerator led by experienced entrepreneurs and scientists is helping early-stage science and technology ventures scale, raise capital, and generate impactful equity growth.

Scaling and growing a resilient and inclusive innovation economy

Leaders at the roundtable said Canada can scale and grow a resilient and inclusive innovation economy if we:

• Launch an independent innovation agency to identify Canada-wide emerging technology strategies.

This would be an arm’s-length innovation agency based on the U.S. Defense Advanced Research Projects Agency, with a long-term view to building specialization and competitive advantage.

This agency would select platform missions – such as AI model development, quantum-safe cybersecurity, and net-zero critical minerals battery development – with decade-long or longer roadmaps featuring five-year milestones, an annual public funding envelope, and a dashboard tracking IP filings, pilot-to-procurement conversion and net export revenue.

Canada should consider consolidating disparate federal business, innovation and growth support programs. This would create a multi-billion-dollar annual envelope by redirecting existing program funding without raising taxes, providing longer-term certainty on investment horizons and coordinating public–private investment.

• Align domestic capital to the innovation agenda through a pension “innovation investment” program.

This includes encouraging major public and jointly sponsored pension plans to allocate and report on a percentage of assets under management to late-stage Canadian innovation assets.

• Allocate SR&ED fundings into a “go-to-market” commercialization credit.

This involves redesigning the SR&ED tax incentives to include support for commercialization activities in Canada by Canadian-owned and operated businesses. The initiative should be piloted with domestic SME claimants.

Canada’s inability to accelerate innovation-driven economic growth isn’t just a business risk; it risks further decline in our international leadership and living standards, the Conference Board of Canada said.

“Without stronger domestic investment, market-shaping procurement, and national alignment on key technological priorities, we risk falling behind.”

See also: “Canada’s innovation economy is constrained by a ‘fragmented, inconsistent capital landscape’ preventing startups from scaling’ (in this week’s Short Report)

Canada needs to put science, technology and innovation at the core of economic policy

Canada needs to fix broken structures to create an innovation-driven economy

R$