Innovation Policy in Canada: A Practitioner’s Perspective

My company built identity and access security technology in Canada. We spun out IP from a Canadian university, filed patents, hired Canadian engineers, raised Canadian capital. Our product worked. Canadian innovation policy did not.

We sold to the U.S. Army first. Then a U.S. Department of Defense agency. Then a dozen commercial and financial institutions. Zero to ten percent of our revenue came from Canada in any given year. Ottawa wouldn’t return our calls.

So we bought a company there.

We acquired a small Ottawa-based firm to establish a federal presence, because that was the only way to become a credible vendor in our own country’s capital. A Canadian company, with Canadian IP, had to acquire its way into the domestic market.

It should not require buying a company to sell to your own government.

I run a company that would benefit from the reforms in this article, and I’m disclosing that upfront, but my business is not unique. Hundreds of Canadian technology companies face the same structural barriers.

Here’s what I’ve learned.

Why You Should Trust This

I’ve taken a company public on the TSX-V and the OTCQB. Raised over $50M in equity and debt across four provinces. Won non-dilutive funding through BCIP, DRDC, NRC IRAP, DND IDEaS, and SR&ED. Been ruled ineligible for SR&ED, survived SR&ED audits, had an IRAP advisor ghost us.

  • Spun out IP from a Canadian university and co-invented the patents behind it
  • Competed for and won millions in non-dilutive funding (BC Integrated Procurement [BCIP], Defence Research and Development Canada [DRDC] grants, National Research Council Industrial Research Assistance Program [NRC IRAP], Department of National Defence [DND] Innovation for Defence Excellence and Security [IDEaS], Scientific Research and Experimental Development [SR&ED])
  • Advised policymakers at municipal, provincial, and federal levels
  • Built teams of university co-ops and interns across multiple provinces
  • SR&ED has kept my company afloat and I’ve also been ruled ineligible. Had fantastic IRAP projects and had our ITA completely ignore us. Gone through SR&ED audits, used advisors, filed ourselves.

I’m not a neutral observer, nor am I a policy expert. I have watched the same problems go unfixed for 15 years and I want to see more prosperity in Canada. My business and others like it would benefit from the reforms I’m proposing. I believe the argument stands on its own merits, and I’m disclosing the conflict so you can judge for yourself.

Who This Is For

This is for anyone involved in Canadian innovation policy: deputy ministers, policy analysts, procurement officers, advisory council members, and the entrepreneurs trying to work with them. I wrote it because I’ve had the same conversations in boardrooms and hallways for over a decade, and wanted one document I could hand to someone after a meeting.

The Core Philosophy

Entrepreneurs don’t want handouts. They want customers.

This is the idea that matters most in Canada’s innovation strategy, and the one Ottawa keeps ignoring. Government grants are the least efficient use of government dollars. In SaaS, a dollar of recurring revenue is worth 6x – 10x in enterprise value. A dollar of grant funding is worth zero to one times in the eyes of lenders, investors, and can be perceived as a negative signal.

Be a customer, not a benefactor: Rather than attempting to pick winners through grants, look to be a customer and co-develop with innovators instead of writing checks and walking away. The company gets a reference customer, the government gets a better product, and IP is created that stays in Canada.

Canada spent an estimated $22 billion per year on innovation programs, according to ITIF.[2] The question is whether any of that spending actually turns into commercial outcomes.

Ten Principles for Canadian Innovation Policy

1. Define “Canadian Company” Properly

There is no agreed definition of what makes a company “Canadian.” The current policy environment allows foreign multinationals to qualify for Canadian innovation programs with little more than an address and a handful of employees. Budget 2025 finally introduced a Buy Canadian Policy with a formal definition of “Canadian supplier,” but the definition is broad enough that foreign-owned firms with a Canadian office qualify.[3] The problem I’ve been raising for years is now official policy.

Get this wrong and nothing else in this article matters. If you can’t distinguish a Canadian company from a foreign branch plant, you can’t target innovation spending effectively.

To be clear: a Canadian startup that takes a minority investment from a U.S. venture fund or private equity firm is still a Canadian company. Canadian voting control and beneficial ownership, Canadian directors, Canadian CEO, Canadian IP. The definition targets foreign-controlled subsidiaries, not companies with international investors on the cap table.

What should count:

CriteriaWhy
Voting control and beneficial ownership by CanadiansDecision-making authority and economic benefit stay in Canada, accounting for super-voting shares, debt instruments, and franchise structures
Majority Canadian directorsGovernance decisions made by Canadian citizens
Canadian CEOLeadership accountability in Canada
Headquarters in CanadaWhere strategy is set
IP owned in CanadaThe actual value stays here

What should not count:

CriteriaWhy It Fails
Canadian revenuePenalizes exporters, which is exactly backwards from stated government objectives
FTE countJob creation is an industrial economy KPI, not an innovation economy one

What should be excluded from Canadian programs:

TypeExamplesWhy
Branch plantsMicrosoft Canada, GDIT, Lockheed Martin CanadaForeign HQ, foreign control, IP flows out of the country
Global network affiliatesPwC Canada, Deloitte CanadaStandards, methodology, and core IP controlled from abroad

As Deloitte’s own governance page states, member firms “are able to leverage Deloitte’s brand, eminence, and intellectual property.”[4] If IP and control flow out, this is not a pure Canadian company.

If this definition were to appear in legislation, the operative clause should be straightforward: a “Canadian company” is an entity where Canadians hold voting control and beneficial ownership, a majority of directors are Canadian citizens or permanent residents, the CEO is resident in Canada, the headquarters is in Canada, and the core intellectual property is owned by the Canadian entity. The determination of effective control should account for super-voting shares, convertible debt, franchise agreements, and other instruments that confer de facto authority regardless of nominal equity splits. Rather than leaving 134 agencies to define “Canadian” 134 different ways, centralize the determination in a single body, modeled on how the U.S. Small Business Administration owns the audit of small business status for all federal set-aside programs.

This section alone could be its own article. The Canadian Council of Innovators has been driving this conversation, and it’s gaining traction. But until we settle this definitional question, every downstream policy will leak value to foreign shareholders.

2. Stop Subsidizing Foreign Branch Plants

This is not about kicking foreign companies out of Canada. Branch plants employ Canadians and pay taxes. Let them compete. But stop handing them subsidies meant to build Canadian capacity.

The common defense of these subsidies is jobs. It deserves full cost accounting. Foreign branch plants provide employment, but the best IP talent they develop gets promoted to headquarters abroad. The equity that accumulates from their Canadian operations is owned by foreign shareholders. The R&D they conduct here generates patents filed in other jurisdictions. Over time, the relationship is extractive: Canada provides the talent pipeline and the tax incentives, and the economic value compounds elsewhere.

Large corporations collectively claim over a billion dollars annually in SR&ED tax credits, a significant portion flowing to foreign-controlled subsidiaries.[5] That’s Canadian tax dollars funding R&D that benefits foreign shareholders, with intellectual property flowing out of the country. The Innovation Superclusters program included Microsoft as a founding member of the Digital Supercluster, and Amazon as a participant.[6] Federal innovation dollars intended to build Canadian capabilities ended up subsidizing foreign R&D outposts.

The damage goes beyond subsidies. Foreign branch plants compete directly with domestic startups for the same talent pool, except they can offer Silicon Valley compensation. Amazon’s Vancouver office grew from 2,000 to 5,000 employees.[7] A significant share of top Canadian engineering graduates now work in the United States. We publicly fund the universities that produce this talent, subsidize the branch plants that recruit them, and watch both the people and the IP leave the country.

The SR&ED problem is targeting, not the program itself. SR&ED has kept my company alive. But hundreds of millions flow annually to foreign-controlled subsidiaries conducting R&D that benefits foreign shareholders. Reform should tighten eligibility to Canadian-controlled companies, not eliminate the program.

Budget 2025’s Buy Canadian initiative was a step forward, but the definition of “Canadian supplier” is so loose that it barely changes the dynamic.[3] If a foreign multinational can qualify by maintaining a small office and a few employees, the policy is performative.

We are subsidizing our own competitors and calling it a Canada innovation strategy.

3. Refocus FDI on Minority Stakes

Canada’s foreign direct investment strategy has historically been to attract branch plants. We celebrate when a U.S. firm opens a Canadian office as though we’ve won something. We haven’t. We’ve created competition for talent and lost control. We’ve become a nearshore labour source.

I’ve watched Canadian companies get acquired by foreign firms, watched the IP move to head office, watched the Canadian team get reduced to a satellite.

Google’s DeepMind opened its first international research office in Edmonton in 2017, built on publicly funded AI research at the University of Alberta. Google hired the talent, benefited from the research, then shut down the Edmonton office in 2023 as part of Alphabet layoffs. Researchers were offered relocation.[18]

The reaction should not be to block foreign acquisitions. That would be counterproductive. If there are limited acquirers, capital has less reason to deploy in Canada in the first place.

Fix this by weighting FDI policy toward minority non-control investments. Foreign investors who take a stake and bring market access are building Canada up. Foreign investors who acquire control and move IP out are hollowing it out. Our FDI metrics should reflect the difference.

4. Fund Research, Buy Products, and Create Pathways for Sole Source

Government has two useful roles in innovation, and the dividing line is clear.

StageTechnology Readiness Level (TRL)Government Role
Basic researchTRL 1-3Fund it (academic institutions)
Research to prototypeTRL 4-8Co-develop it (milestone-based contracts, sole source pathways)
Deployment to commodityTRL 9Buy it (competitive procurement)

Technology Readiness Levels are a 1-to-9 scale measuring how close a technology is to deployment, originally developed by NASA and now used across defense and government procurement worldwide.

Fund basic research where private capital won’t go. Universities, labs, proof-of-concept work at TRL 1-3. This is where grants and research dollars make sense.

From TRL 4 through 8, shift to co-development: milestone-based contracts where government is a development partner, not just a check-writer. This is where sole source justification belongs, letting companies that proved the concept in early research earn the right to build it into a product alongside the end customer. The company gets a reference customer. The government gets a product shaped to its needs. IP stays in Canada.

At TRL 9, the technology is commoditized, multiple vendors exist, and standard competitive procurement takes over. Sole source justification stops here because anti-competitive concerns kick in. At this point, companies compete on merit like everyone else.

Milestone-based contracts and phased rollouts de-risk the vendor viability concern. You don’t hand a startup a $50M contract on day one. You start small, hit milestones, and scale.

DND’s IDEaS program funded over 660 prototypes but provided no pathway to procurement. The CCI’s 2024 “Buying Ideas” report found programs like IDEaS “typically do not actually buy the result in the end.”[8] IDEaS was modeled on the U.S. SBIR program. The follow-on procurement pathway existed on paper but rarely materialized in practice, and the funding amounts were an order of magnitude smaller: IDEaS awarded $200,000 where SBIR provides Phase I up to $275K, Phase II up to $1.8M, and follow-on contracts exceeding $25M.[9]

iRobot is the clearest example of what the right pipeline produces. The company received $4.4 million across six SBIR Phase II awards after venture capitalists refused to fund them. The U.S. military became their anchor customer, awarding hundreds of millions in contracts for the PackBot bomb disposal robot.[10] That government relationship gave iRobot the credibility and revenue to launch Roomba, sell a million units, and go public. The Canadian equivalent would have received a $200,000 grant and a handshake.

5. Buy at Meaningful Scale

The pattern in Canadian innovation funding is to spread small amounts of money across as many recipients as possible. It looks good in a press release, but you can’t fund innovation by index investing across hundreds of recipients and expect commercial outcomes.

$35,000 for a drone capability. $200,000 for a cybersecurity prototype. These are amounts that wouldn’t cover a single engineer for a year, let alone build a product the government could actually procure.

The scale argument is not about matching U.S. defense budgets dollar for dollar. Canada spends when it wants to: $100 billion on 12 submarines. The issue is whether innovation spending is large enough to matter. $200,000 awards are not.

The instinct to spread funding across as many recipients as possible is politically understandable and economically destructive. Twenty-five awards of $200,000 lets a minister announce support for twenty-five companies. One award of $5 million lets a company actually build something. The desire to be seen supporting as many companies as possible means no company receives meaningful support. Raise the bar on what qualifies, raise the dollar amount for those that do, and accept that fewer, larger bets produce better outcomes than a spray of token amounts.

NASA’s COTS program awarded SpaceX $396 million in milestone-based funding. Not a grant. SpaceX invested $454 million of its own money on top of that. The result was a launch vehicle developed for roughly $300 million, compared to NASA’s estimate of $1.7 to $4.0 billion using traditional procurement. NASA followed up with a $1.6 billion Commercial Resupply Services contract for 12 missions.[11]

Canada’s IDEaS program gave $200,000 awards with no procurement pathway. One approach built SpaceX. The other built filing cabinets of final reports.

There are signs this is changing. DND’s “Launch the North” challenge allocated $105 million to sovereign space launch capability and attracted over a dozen Canadian rocket companies.[12] That’s the kind of scale that creates an ecosystem. Launch the North needs to become the template, not the exception.

6. Be the First Customer

As I described in the opening, my company’s first government customers were the U.S. Army and a U.S. Department of Defense agency. We sold to a dozen commercial and financial institutions and acquired an Ottawa-based company before we got into a Canadian defense research agency.

This is not unique to my company. In parliamentary committee testimony, Christyn Cianfarani, CEO of the Canadian Association of Defence and Security Industries (CADSI), told Parliament: “Our allies see more value in Canada’s cybersecurity sector than Canada does.”[13]

The numbers back it up.

Five Eyes allies buy three times as much Canadian cybersecurity as Ottawa does. Only 8% of the Canadian cybersecurity sector’s revenue comes from Canadian government contracts.[14] Our closest allies trust Canadian innovation more than our own government does.

Israel has produced over 700 cybersecurity firms with a population of nine million.[15] Unit 8200 and the Israel Defense Forces procure domestic cyber capabilities, battle-test them in operational environments, and produce alumni who launch companies with operational credibility. According to a 2018 study, approximately 80% of Israel’s cyber company founders came through IDF intelligence units, though more recent estimates are lower.[16]

The economic impact extends well beyond any single acquisition. Israel’s high-tech sector accounts for approximately 18% of GDP and over 55% of total exports.[26] Cybersecurity alone generates an estimated $10-12 billion in annual exports.[27] A country of nine million people built a technology export industry that is a substantial driver of national economic output, because the government bought first and the export market followed. The $32 billion Google acquisition of Wiz in 2025 is a proof point, not the punchline.[17]

Canada produces the talent and the technology, then watches other countries buy it first.

Building in Canada and watching other countries buy your product before your own government will is demoralizing.

7. Promote Proactively

As a Canadian company, we’ve been approached by procurement officers and trade representatives from half a dozen countries, at the federal, state, and municipal levels. In Canada, we approached our local government stakeholders as early customers and were rebuffed.

There are two dimensions to fixing this.

First, Canada needs a domestic Trade Commissioner Service. The TCS is a fantastic federal agency that helps Canadian companies sell abroad. We need the same function domestically, facilitating inter-provincial trade and connecting federal, provincial, and municipal buyers with Canadian suppliers.

The IMF estimates that interprovincial trade barriers are equivalent to a 9% internal tariff, according to their January 2026 report on Canada.[19] It is harder for a Canadian company to sell from Vancouver to Montreal than from Vancouver to San Francisco.

Yes, interprovincial trade barriers have constitutional roots in Sections 91 and 92. That makes them harder to fix, not impossible. It requires leadership at every level, and stakeholders at every level can advocate for change regardless of their formal authority.

Second, government end users at every level need to be expected to actively seek out Canadian suppliers. Not passively wait for bids. Get out, meet companies, build relationships. The UK’s 2023 Procurement Act explicitly encourages “preliminary market engagement.”[20] The U.S. runs SBIR industry days and one-on-one supplier sessions. Canada’s own Public Services and Procurement Canada (PSPC) runs Buyers’ Expos. The infrastructure exists. The expectation to use it does not.

This requires political top cover. Rank-and-file procurement officers and program managers can’t champion domestic innovators if their political leadership is busy trumpeting partnerships with foreign tech giants. Politicians at every level should be celebrating Canadian technology companies, not cutting ribbons at branch plant openings.

“Someone else’s problem” is not a strategy.

8. Connect Buyers and Sellers, Then Get Out of the Way

Government doesn’t need to pick winners. It needs to facilitate supply and demand and then step back.

Two programs get this right.

BC’s Integrated Marketplace connects buyers and sellers directly. Government sets up the platform, then gets out of the way. The deals happen between the parties who need to work together.

The Eligible Business Corporation (EBC) tax credit incentivizes angel investors without government deciding which companies deserve funding. The deal is between investor and company. Government just makes the economics work by providing a tax credit to the investor. No program managers in the middle, no adverse selection, no predatory terms.

Compare this to government-funded venture capital, which has earned a reputation for low-quality dealmaking, downside protection, participating preferred structures, and adverse selection. No publicly documented case of a Canadian government-backed VC fund backing a company at seed or Series A that later reached unicorn status. The Venture Capital Action Plan’s (VCAP) “high-performance” funds merely match the 19% industry average internal rate of return (IRR). The OECD’s 2025 benchmarking report found that government VC programs crowd out private capital when they lack professional investment discipline and experienced fund managers.[21] The best companies avoid Canadian government VC because the terms are worse than private alternatives and the signal is negative. It makes it harder to raise follow-on funding when your cap table includes government-backed investors with punitive terms.

9. Connect Existing Programs

The Trade Commissioner Service, NRC IRAP, Export Development Canada (EDC), the Business Development Bank of Canada (BDC), and provincial export networks all have people on the ground. They’re already tracking Canadian companies. But they don’t talk to each other.

I’ve had an IRAP advisor who knew nothing about what the Trade Commissioner Service was doing for us. I’ve had a TCS officer who didn’t know we had IRAP funding. These are programs run by the same federal government, sometimes in the same building, operating as though the other doesn’t exist.

Don’t build new programs. Connect what’s already there.

The inevitable objection is data sharing and privacy. This is not hard to solve. Let companies opt in with a single checkbox: “Yes, share my profile with other federal and provincial programs that might benefit my company.” We already hand over financials, IP disclosures, and business plans to each program individually. Just share it across them. The Accelerated Growth Service concept pointed in the right direction by attempting to coordinate federal programs under one umbrella.

As ITIF’s Lawrence Zhang documented in his July 2025 report, Canada has 134 federal innovation programs.[2]

Canada doesn’t have an innovation system. It has 134 programs and no one driving the bus.

10. Move Faster and Adopt Agile Procurement

Innovation moves in months. Canadian procurement moves in years. By the time a technology gets through the federal procurement cycle, it’s often a generation behind what the vendor is currently shipping.

The fix is agile procurement: shorter cycles, milestone-based contracts, and iterative delivery. Instead of a three-year RFP process for a finished product, procure in phases. Phase one: a small contract to prove the technology works in your environment. Phase two: expand scope based on results. Phase three: full deployment if milestones are met.

This isn’t theoretical. The U.S. Department of Defense runs Other Transaction Authorities (OTAs), which operate within the Federal Acquisition Regulation but are exempt from many of its competition requirements for prototyping and production. The UK’s Defence and Security Accelerator (DASA) runs 12-week innovation competitions with procurement follow-through. Both systems include guardrails: milestone gates, performance requirements, and value-for-money reviews.

Speed does not mean recklessness. It means aligning the pace of procurement with the pace of innovation.

Canadian procurement’s current speed is itself a barrier to entry. Only companies that can afford to wait years for a decision can afford to sell to the Canadian government. That filters out exactly the companies you want: fast-moving innovators who are building the next generation of technology. Speed the cycle up, and you widen the pool of domestic suppliers who can compete.

What This Is Not

This is not a call for lowering the bar. Government procurement is different from enterprise sales. Entrepreneurs need to learn how to sell to government: understand the budget cycle, get certified, write compliant proposals. It’s fine that government procurement is different. It’s not fine that it’s hostile to domestic suppliers.

This is not a crutch for weak companies. As a taxpayer, I want the government to have the best capability available, provided it comes from trusted sources. Israel, Sweden, the UK, South Korea, and the United States all have explicit domestic innovation strategies. Canada has 134 programs and no strategy. Innovation here succeeds despite the system, not because of it.

And this is not an argument that ignores why governments default to large vendors. Risk aversion in procurement is rational. Procurement officers are personally accountable. Large vendors offer real protections: financial stability, support infrastructure, contractual recourse.

The problem is that “proven” has become synonymous with “incumbent,” with no pathway for domestic innovators to become proven. Milestone-based procurement fixes this by letting new vendors demonstrate capability at low risk before scaling up.

What Works

Four programs actually work. Here’s what they have in common.

Evergreen, not one-off. BCIP, SR&ED, and the EBC tax credit have been running long enough that companies can plan around them. One-off programs are worse than no programs at all, because they consume time to apply for and then disappear before you can build on them.

The EBC tax credit gets this right: it connects investors and companies directly. Government sets the rules, then steps back. No program managers picking winners, no advisory boards gatekeeping access.

BCIP connected companies to actual buyers. IDEaS actively separated companies from end customers, preventing the relationships that turn research into procurement. The difference in outcomes is predictable.

Meaningful in magnitude and velocity. Meaningful amounts of money, deployed quickly, with a track to future milestone-based funding.

What Doesn’t Work

Canada imports the structure of American innovation programs without the follow-through (see Principles 4 and 5). If you’re going to copy, copy the whole thing.

Picking winners. Even professional investors, with completely aligned incentives, get it wrong the majority of the time. Government is worse at this. No publicly documented case of a Canadian government-backed VC fund backing a company at seed or Series A that later reached unicorn status.[21] Facilitate supply and demand instead.

Why do foreign multinationals dominate advisory councils? The Innovation Superclusters program was dominated by branch plants.[6] Google’s involvement in Waterfront Toronto consumed years of civic energy and public trust before collapsing.[22] Foreign multinationals have large, well-funded government relations (GR) operations in Ottawa. Without clear definitions of “Canadian company,” advisory councils and working groups get captured by exactly the entities they should be regulating.

Grant dollars create little to negative enterprise value. When government defaults to grants instead of procurement, it signals that innovation is a nice-to-have, not a core requirement. Procurement dollars create customers, reference accounts, and the foundation for export.

Bureaucratic non-answers. Rather than saying “no,” government officials defer to excuses. “The Communications Security Establishment [CSE] has to vet that technology” is a common one. CSE’s Canadian Centre for Cyber Security does run certification programs like Common Criteria and cloud security assessments, but these are well-defined processes, not a blanket veto over IT procurement. Invoking “CSE” as a reason to stall is often a convenient way to kill a procurement without taking responsibility for the decision.

These aren’t individual failures. They’re symptoms of a system that rewards finding reasons to say no over finding ways to say yes. The fix is cultural as much as structural: procurement officers and program managers should be evaluated on how many Canadian companies they got into contract, not how many risks they avoided.

What’s Changed

The conversation around Canadian innovation policy has shifted in the past eight months, but it was a reaction to leadership choices in Washington, not leadership in Ottawa.

Budget 2025 introduced a formal Buy Canadian Policy for federal procurement.[3] It’s the first time the federal government has explicitly committed to prioritizing domestic suppliers. The definition is too broad, as I’ve outlined, but the policy exists. That’s new.

The Canadian Council of Innovators has driven the “what is a Canadian company” conversation into policy circles. What was once a fringe complaint from founders is now a recognized gap. Deputy ministers and policy directors are engaging with the definitional question.

The U.S. tariff crisis has become an unexpected catalyst. When your largest trading partner threatens your economy, Canada’s tech policy problems stop being theoretical. The Institute for Research on Public Policy (IRPP) and other policy journals are now publishing on Canadian supply chain independence in a way they weren’t two years ago.

The Canada Innovation Corporation (CIC) is supposed to launch in 2026 or 2027, representing the federal government’s attempt to centralize Canada’s innovation strategy under a single entity.[23] The CIC will absorb NRC IRAP and is intended to coordinate what is currently a fragmented landscape of 134 federal programs with no unified mandate.

It is the most significant structural reform to Canada’s tech policy in a generation. Whether it addresses the problems in this article or simply becomes program number 135 depends on whether anyone in Ottawa has the appetite to fix what’s broken rather than just rebrand it.

The Ask

Ten principles. One sentence each.

  1. Define “Canadian company” by voting control, beneficial ownership, directors, CEO, headquarters, and IP, not revenue or headcount.
  2. Stop SR&ED and innovation subsidies for foreign-owned branch plants.
  3. Refocus FDI on minority stakes that keep IP and control in Canada.
  4. Fund basic research at TRL 1-3. Co-develop products at TRL 4-8 with sole source pathways. Competitive procurement at TRL 9.
  5. Buy at meaningful scale or don’t buy at all.
  6. Be the first customer. If our allies trust Canadian innovation, our own government should too.
  7. Promote Canadian capabilities proactively. It’s awareness, not protectionism.
  8. Connect buyers and sellers, then get out of the way.
  9. Connect the 134 existing programs instead of building new ones.
  10. Move faster and adopt agile procurement.

Canada spends $22 billion a year on innovation and has no system for turning that spending into commercial outcomes. These ten principles would change that.

Frequently Asked Questions

Does Canada have an effective innovation policy? No. Canada has 134 federal programs, $22 billion in annual spending, and ranks 17th on the Global Innovation Index, down from 14th in 2024.[2][24] No single entity coordinates these programs. The Canada Innovation Corporation is supposed to launch in 2026-2027 as the first attempt at centralization, but it is inheriting NRC IRAP’s portfolio without a clear mandate to reform the procurement pipeline.[23]

Why does Canada underperform in innovation? Branch plants capture subsidies meant for Canadian companies. Programs are fragmented across agencies that don’t coordinate. Government defaults to grants instead of procurement. U.S. labor productivity grew 160% faster than Canada’s between 2002 and 2022.[25] Canadian universities produce more STEM graduates per capita than the U.S. The gap is downstream: commercialization, procurement follow-through, and the absence of a domestic first-customer pipeline.

What is the SR&ED tax credit? Canada’s largest innovation tax incentive, providing credits for R&D conducted in Canada. One of the few evergreen programs. Also one of the more controversial: hundreds of millions flow annually to large corporations, including foreign-controlled subsidiaries.[5] For a founder’s perspective, see my SR&ED post.

How does Canada compare to the US on innovation? Allied nations treat innovation spending as procurement investment. The SBIR and STTR programs have funded over 178,000 awards since 1982, with a direct pipeline from research to production contracts. The UK’s DASA runs rapid innovation competitions with built-in procurement follow-through. Canada treats it as grant disbursement. The SBIR-to-procurement pipeline has produced companies like iRobot, Qualcomm, and Symantec. Canada’s IDEaS program produced 660 final reports.

If You’re Working on These Problems

I’ve been having these conversations for 15 years. If you’re a policymaker, procurement officer, or fellow founder working on any of these issues, I’d like to hear from you.

Connect with me on LinkedIn. If something in this article is wrong, tell me. If something resonates, tell me that too.

Ian L. Paterson is CEO of Plurilock Security (TSX-V: PLUR), host of the Code and Country podcast, and a member of the Canadian Council of Innovators. He has spent 15 years building technology companies in Canada and trying to sell Canadian technology to the Canadian government.

  1. ITIF, “Canada Doesn’t Have an Innovation System: It Has 134 Programs” (July 2025). Author: Lawrence Zhang. Cites 134 federal innovation programs and an estimated $22 billion in annual spending.
  2. Government of Canada, “Buy Canadian” (2025). Policy came into effect December 16, 2025.
  3. Deloitte, “Deloitte Network Structure”. Member firms “are able to leverage Deloitte’s brand, eminence and intellectual property.”
  4. The Logic, “Shredding Tax Credits: Why Canada’s Biggest R&D Program May Be Funding the Wrong Innovation”. Large corporations ($250M+ revenue) claim approximately $1.1 billion annually in SR&ED credits (CRA data, 2018-2022 average). CRA does not publicly track foreign ownership of claimants.
  5. Digital Technology Supercluster, “About Us”. Microsoft, “Canada’s Superclusters Delivering Results” (2021). Microsoft was a founding member of the consortium alongside TELUS; Amazon Web Services participated as a project partner.
  6. CBC News, “Competing with Big Tech for Coveted Workers” (2019). Amazon Vancouver headcount growth.
  7. Canadian Council of Innovators, “Buying Ideas” (2024). DND, Evaluation of the IDEaS Program.
  8. SBIR.gov, “About the SBIR Program”. Standard DoD Phase I awards up to approximately $275,000; Phase II awards up to approximately $1.8 million. SBA waiver caps are $314,363 (Phase I) and $2,095,748 (Phase II).
  9. SBIR.gov, iRobot Success Story. iRobot, $286M US Army Contract.
  10. CGO, “A 2006 NASA Program Shows How Government Can Move at the Speed of Startups”. Wikipedia, Commercial Orbital Transportation Services.
  11. SpaceQ, “Race for Canadian Sovereign Launch: $105M Launch the North Challenge Draws Strong Interest”.
  12. IT World Canada, “Canada’s Allies Buy More Cybersecurity Products Than Ottawa Does, Parliament Told” (2023). Christyn Cianfarani, CEO of CADSI, testimony to House of Commons defence committee.
  13. ISED & CADSI, “State of Canada’s Cybersecurity Industry” (2022, based on 2020 data). Five Eyes allies purchase three times as much Canadian cybersecurity as the Canadian government; only 8% of sector revenue comes from Canadian government contracts.
  14. Startup Nation Central, “Israeli Cyber Annual Insights and 2025 Trends”. Calcalist Tech, “From Unit 8200 to Wiz’s $32B exit: The blueprint for Israeli cyber success” (2025).
  15. SecurityWeek, “From IDF to Inc: The Israeli Cybersecurity Startup Conveyor Belt”. Based on a 2018 study cited by Haaretz: of 2,300 Israelis who founded 700 Israeli cyber firms, 80% were graduates of Unit 8200.
  16. TechCrunch, “Confirmed: Google buys Wiz for $32B to beef up in cloud security” (March 2025). All four Wiz founders are Unit 8200 alumni.
  17. UAlberta Folio, “UAlberta Expertise Brings DeepMind Lab to Edmonton” (2017). The Logic, “Why DeepMind Alberta Won’t Be Part of Google’s AI Future” (2023).
  18. IMF, “Canada Can Grow Faster by Unlocking Its Own Market” (January 2026). Policy-related interprovincial trade barriers average approximately 9% tariff equivalent.
  19. UK Government, “Guidance: Preliminary Market Engagement” (Procurement Act 2023, Sections 16-17).
  20. OECD, Benchmarking Government Support for Venture Capital: Canada (2025). Private Capital Journal, “VCAP and VCCI: Success or Failure?”.
  21. Globe and Mail, “Google affiliate Sidewalk Labs abandons Toronto smart-city project” (2020). CBC News, “Sidewalk Labs cancels plan to build high-tech neighbourhood in Toronto” (2020).
  22. BetaKit, “Federal government punts NRC IRAP’s merger into the Canada Innovation Corporation to 2026-2027”. CDEV, Canada Innovation Corporation.
  23. WIPO, “Global Innovation Index 2025” (2025). Canada ranked 17th, down from 14th in 2024.
  24. ITIF, “Assessing Canadian Innovation, Productivity, and Competitiveness” (April 2024). Analysis of OECD data: “American labour productivity growth was 160 percent faster than Canada’s from 2002 to 2022.”
  25. Israel Innovation Authority, “The State of High-Tech 2025”. High-tech sector contributed approximately 18% of GDP (2024) and 56.4% of total exports ($78 billion). See also Startup Nation Central, “Israel’s GDP Growth Drivers”.
  26. Calcalist Tech, “Israeli High-Tech Breaks Records in 2025”. Israel holds approximately 12% of the global cybersecurity market. See also Startup Nation Central, “Israeli Cyber Annual Insights and 2025 Trends”.