Defence as Innovation Policy: Why Canada’s Defence Industrial Strategy is an Opportunity to give Canada’s Innovation System what it Lacks

Canada’s innovation challenge is no longer a matter of diagnosis but of action. The Council of  Canadian Academies’ (CCA) 2025 report on the State of Science, Technology, and Innovation delivers a clear assessment: Canada continues to excel in academic research and talent development, yet chronically underperforms in productivity, business R&D investment, and technology adoption. Without ambitious and coordinated intervention, the report warns, Canada’s fragmented innovation system will continue to erode economic competitiveness and living standards. 

At the same time, Canada is embarking on the most significant defence–related industrial investment  in its history. Canada’s Defence Industrial Strategy (DIS) aims (backed by $81.8 billion in new defence spending and $6.6 billion in targeted industrial and innovation measures) to rebuild sovereign capability through domestic production, innovation, and supply–chain resilience. While the strategy is framed primarily as a response to global security risks, it represents something far rarer in Canadian policy: a long–term, mission–driven demand signal tied directly to innovation and industrial scale–up. 

Taken together, these two documents reveal a powerful convergence. If implemented deliberately,  the DIS can directly address many of the structural weaknesses identified by the CCA—transforming  defence investment into a catalyst for a stronger, more integrated Canadian innovation system, while  future–proofing both national security and economic prosperity. 

Canada’s challenge is not a lack of discovery. The CCA confirms that universities and colleges remain a global bright spot, producing high–impact research and world–class talent that should not be tampered with. The enduring failure lies in translation: innovations stall between laboratory and market, private–sector adoption remains weak, and promising firms struggle to scale. The DIS responds to this gap by prioritizing domestic intellectual property, co–development with Canadian firms, and accelerated procurement of Canadian innovations. New mechanisms such as the Defence Investment Agency, BOREALIS, and reformed Industrial and Technological Benefits (ITBs) are intended to turn public defence spending into an engine for commercialization and industrial growth.

Yet the success of this strategy depends on a hard institutional truth that has too often been  ignored. Technology and innovation transfer is not the traditional core mission of postsecondary  institutions. 

Universities and colleges are designed to educate and to generate knowledge, not to act as  market–facing intermediaries capable of managing industrial IP portfolios, negotiating complex  defence partnerships, or navigating export controls, security clearances, and accelerated procurement timelines. The CCA report’s findings implicitly underscore this gap: Canada’s innovation  weakness is not scientific but systemic, rooted in insufficient connective capacity between research  and use. 

This reality matters because the DIS explicitly depends on rapid migration of Canadian–origin  technologies into deployable defence capability. Many of the technologies the strategy seeks to  deploy (AI, cybersecurity, advanced materials, aerospace, sensing, and energy systems) originate in universities and colleges. Expecting postsecondary institutions to suddenly perform this expanded function using existing resources is unrealistic, particularly in an era of intensifying budgetary constraints. Technology transfer offices (TTOs) are often under–resourced, uneven in expertise, and structurally misaligned with the speed and complexity demanded by, for example, defence markets. Left unaddressed, they have the potential to become the most important bottleneck for DIS implementation. 

This is why targeted federal investment, and not repurposing research funding, is essential. A clear  precedent already exists. When research security became a national priority, the federal government did not simply impose new obligations on institutions; it invested in dedicated capacity, funding specialized offices, professional expertise, and governance structures. That approach preserved the academic mission while enabling institutions to meet a new national requirement. The DIS now requires a comparable intervention for technology and innovation transfer. 

A DIS–aligned federal technology transfer initiative should be explicit, focused, and outcomes–driven.  Three complementary funding instruments stand out. 

Dedicated grants for institutional TTO capacity would allow universities and colleges to professionalize this function without diverting scarce core funding from teaching and research.  Federal support, matched by institutions or provinces, could fund specialized IP management, including defence–ready contracting expertise, regulatory and security knowledge, and spin–out support. The objective would be durable capability, not one–off commercialization projects. 

Funding success could be monitored with performance metrics that reflect outcomes (including  those specific to DIS) rather than activity volume. Measures such as time–to–licence or 

time–to–procurement, survival and growth of Canadian spin–outs, retention of IP ownership in  Canada, and technology diffusion beyond defence would reinforce the strategy’s emphasis on speed, sovereignty, and scale—while embedding accountability into the system. 

Strengthening technology transfer capacity is therefore not an administrative refinement; it is a  strategic multiplier. It enables the DIS to function as intended while generating lasting benefits  across the economy. Once built, this capacity does not serve defence alone. It mobilizes  academic innovation across areas such as clean technology, advanced manufacturing, digital systems, and infrastructure; precisely the spillovers needed to tackle Canada’s low productivity and technology adoption challenges. 

Canada must concentrate effort where it matters most and align policy instruments behind shared  objectives. The Defence Industrial Strategy offers a rare opportunity to do exactly that. The risk is not that Canada is investing too much in defence; it is that the country fails to integrate defence  investment into a coherent innovation strategy with the connective capacity to succeed. With  targeted investment in technology and innovation transfer, defence spending can build structures  and momentum, building the long–missing bridge between Canadian research excellence and  sustained economic performance, ultimately future–proofing both national security and national  prosperity.