Innovation in a Changing World: Canada’s Strategic Choices

A National Conversation on Canada’s Innovation Strategy is both urgent and crucial. The term ‘strategy’ originates from Greek where it was initially used by the military leadership to command and control resources within a hierarchical structure. Today, ‘strategy’ is often used casually, particularly in business contexts, where it is frequently interchanged with ‘plan.’ However, strategy encompasses much more than just having a plan (Freedman, 2015). 

The idea of a national strategy can draw valuable insights from business definitions of strategy, where experts find that “Only one thing can account for the kind of long-lived success records that we see in the world’s greatest companies—and that is a cleverly crafted and well-executed strategy, one that facilitates the capture of emerging opportunities, produces enduringly good performance, is adaptable to changing business conditions, and can withstand the competitive challenges…’” (Thomson et al., 2022). In the context of innovation policy, strategy must account for the diverse array of actors shaping innovation, many of whom operate independently and cannot receive orders from a centralized authority.

A National Conversation on Canada’s Innovation Strategy can also draw valuable insights from previous innovation policy discussions. The year 2025 marks the 25th anniversary of Jorge Niosi’s publication, “Canada’s National System of Innovation”. Niosi, who passed away in 2023, dedicated his career to understanding innovation and entrepreneurial dynamics in Canada. As a highly influential academic from Université du Québec à Montréal, Niosi specialized in technology management and innovation systems. He authored numerous books and articles, founded and led key research centres, and made a lasting impact on science and technology policy. His research, particularly in the biotech and aeronautic sectors, emphasized the role of anchor actors in Canada’s innovation system.

In his book, based on existing innovation studies, Niosi (2000) distinguished between two varieties of national innovations systems: “the narrow definition (encompassing only the institutions active in R&D and the public regulatory agencies) and the broad sense (also including also supporting private institutions, such as banks, and public ones, such as government infrastructure and education systems)”. Niosi focused his work on the narrow sense, and Canada has not yet fully developed a strong national innovation system in the broad sense. This may be due in part to our vast geographical landscape, the federal government’s limited jurisdiction over innovation-related matters, or perhaps a lack of understanding about the role a national innovation system in the broad sense can play in economic development.

Niosi collaborated with several prominent innovation scholars to explore where Canada’s key innovation actors should focus in terms of internationalization. He advocated for a form of US-Canada innovation system integration. As many predicted, the economies of the US and Canada have continued to integrate. In fact, the two economies have moved in lockstep in recent decades, but since the pandemic, Canada has been losing ground. By the end of 2024, the U.S. economy will have grown by 11%, while Canada’s will have grown by only 6%, underscoring Canada’s economic post-pandemic challenges (The Economist, 2024).

New challenges arise from the U.S., where politicians discuss imposing tariffs, restricting Canadian natural resource, and implementing bipartisan policies that subsidize American innovation through multibillion-dollar programs. The U.S.  is not the only country moving away from laissez-faire policies; many governments are now favouring protectionism or are reviving national industrial policies. For example, the European Union has increased its support for the private sector, while in China and other Asian nations, governments play a crucial role in driving economic development. These efforts extend beyond infrastructure, or working institutions, and encompass an innovation system in the broad sense. 

Since Niosi began researching the Canadian innovation system, the global economy has shifted dramatically. In 1995, the G7 accounted for about 60% of the world’s total GDP (nominal), with nearly half coming from the U.S. According to the latest data (2023), the G7 now represents approximately 29% of global GDP (PPP). Canada’s economy has continued to grow over the last few decades, but other nations have been growing faster.

Irrespective of these changes, we find ourselves at a familiar crossroads: In order to innovate and compete, should Canada focus on either integrating with the U.S. or expanding its networks globally?  Which industry should we prioritize: manufacturing, agri-food, health, digital sector or energy? Should we focus on improving finance, reducing red tape, supporting patent creation, or enhancing education at various levels? Should we emphasize renewable energy or fossil fuels? Should we strengthen the federal government or empower provinces, metropolitan areas, or local governments? Should our efforts target Central Canada, the West, or Atlantic Canada? Should we focus on urban areas, or semi-rural regions? These are not simple dichotomies, but we must recognize that it may not be expedient or efficient to focus on everything.

We cannot over-invest in funding tech companies while laws restrict patenting. We cannot properly support agriculture and agri-food without a robust digital industry. We cannot expect high-performing industries or innovative thinking without efficient secondary education. Effective policies to promote our products require collaboration between federal, provincial, and local governments. Similarly, energy projects, vital for industries in cities, cannot succeed if rural residents do not see the benefits. Ultimately, we must strengthen the entire national system, instead of favouring one actor over another.

A national innovation system does not prescribe which sectors or actors to prioritize in an economy. Instead, it focuses on strengthening the relationships between actors to drive the innovation that benefits Canadians. It is like a great film—it is not each actor’s individual performance that is memorable, but the actors’ dynamic interactions that create something remarkable. Similarly, Canada’s national innovation system thrives and benefits the most people when all relevant parts work together in harmony.

References. 

Freedman, L. (2015). Strategy: A history. Oxford University Press.

Niosi, J. (2000).  Canada’s national system of innovation. McGill-Queen’s Press-MQUP.

The Economist (2024, Sep 30) Why is Canada’s economy falling behind America’s? 

Thompson, A., Peteraf, C., Gamble, J., & Strickland, A. (2022). Crafting and executing strategy: The quest for competitive advantage. McGraw Hill.