**‘The government right now is putting in really important pieces that we can control in order to create that economic growth. But we can’t do it alone,’ Industry Minister Mélanie Joly says. /** **CANADA2020 PHOTO**

Canada has slipped three spots in the latest Global Innovation Index, ranking 17th worldwide in 2025, a drop that highlights what experts call a persistent failure to turn research strengths into economic growth.

The country performs highly in “inputs of innovation,” Robert Asselin, CEO of U15 Canada, an association of 15 leading public research-intensive universities across Canada, said in a LinkedIn post. He pointed out that Canada ranks 13th globally on this measure, “thanks to our leading research universities, a high-quality education base, and a growing venture capital market.”

But we trail in “innovation outputs,” he says, citing our lagging position in labour productivity growth (101st), industrial designs (95th), trademarks (85th), and high-tech exports (37th). “Promising firms in AI and biotech highlight our potential, yet too few succeed in scaling within Canada.”

Switzerland, Sweden and the U.S. claimed the top three positions in the index, which ranks about 130 countries and is produced by the World Intellectual Property Organization.

An op-ed in the Financial Post by University of Calgary professors Alice de Koning and Yrjo Koskinen echoed Asselin’s concerns. “Canada cannot grow prosperous by shipping raw materials alone. We’ve played that game for decades. It has made us stable, but not dynamic. To thrive in today’s economy, Canada needs to move up the value chain,” they wrote.

They argued this “innovation gap” explains much of Canada’s “mediocre productivity. We spend on research, but fail to turn it into profitable companies. We generate ideas, but see them scaled up abroad. We train world-class graduates, but too often lose them to companies south of the border.”

De Koning and Koskinen stressed that cultural and structural barriers hold Canada back. “Too many firms are risk-averse. They underinvest in R&D, shy away from bold bets and stick to incremental improvements. The result is a steady flow of good, but not great, companies,” they wrote. “Worse, when Canadian startups do succeed, they often fail to scale up. The lucky ones are sold early to foreign buyers. Others hit a growth ceiling and stagnate because of limited domestic venture capital and a lack of managerial expertise in scaling up global operations.”

At the Canada 2020 conference Future Forward: Shaping Public Policy in Canada in Ottawa on Sept. 23, Industry Minister Mélanie Joly placed competitiveness at the heart of the government’s agenda.

She told attendees that “our old alliances don’t necessarily hold anymore” and it’s time to rethink Canada’s place in the world.

“For a long time, we just thought that there would be new markets opening, expanding customer base because we would have new free trade agreements and it was up to us as a government to open these agreements and business would follow,” she said. “We would do that through bilateral or multilateral agreements. That world is over.”

She said while the government is rethinking its relationship with the U.S. and working to get deals on different tariff industries, Canada is looking elsewhere for new partnerships.

“The only way President Trump’s approach doesn't work as much is if there's a creation of an economic bloc of countries that actually believe in free trade and that can counter that approach he's taking, which is basically to tariff every country that wants to do business with the U.S. That's why it's important for us to keep the free trade zone with the EU and some countries in Asia,” she said, adding that while Canada will be “more protectionist,” the government will also focus on other markets.

“When you think about how we react, that's always our reflex: How can we preserve our relationship with the EU? How can we preserve our relationship with Japan and Korea? Meanwhile, we need to make sure that EU, Japan and Korea thinks about us, because they're going through the same thing.”

Domestically, she said the upcoming industrial strategy is organized around three central goals: protecting jobs, creating jobs and attracting global talent. It is also linked to parallel work on competitiveness and the environment.

Joly said the first priority is shielding industries most exposed to international trade disputes and tariffs, such as auto, steel, aluminum, lumber, and copper.

She described a three-part plan:

Short term: “We’re protecting the market for them and we’re also working on liquidity for big and small companies.”
Medium term: Helping industries “pivot and adapt,” with $5 billion provided through a new Strategic Response Fund.
Long term: “Empower our domestic market through our defence industrial strategy, through national major projects, through an important housing strategy,” while also reducing “over-dependency on the U.S. and pivot.”

The second element is focused on job creation through the forthcoming defence industrial strategy, which Joly summarized as “buy, build and partner.”

Buy: Using procurement — including upcoming submarine purchases — to generate supply chain benefits. “There’s $15 billion worth of ITBs right now that are left at the table. We need to work on that to make sure we’re creating jobs out of that.”
Build: Expanding beyond shipbuilding into aerospace, space, and artificial intelligence.
Partner: Leveraging international collaborations, with Joly pointing to the Bombardier-Saab “GlobalEye” project between Canada and Sweden.

She also highlighted national major projects, particularly in energy, as vehicles for foreign investment, reinforced by a “Buy Canadian” policy to ensure procurement supports domestic firms.

The third pillar involves bringing top researchers and innovators to Canada, while supporting homegrown expertise.

“We’re working on a talent attraction strategy that I think will be a really good plan and our opportunity to seize at a time when academic freedom is being hindered in the U.S. and lots of great researchers are looking to resettle. Canada is that place. I think we can attract the best because we can offer them a path to become Canadian,” Joly said.

At the same time, she emphasized that additional investments in research granting councils were meant to ensure Canadian researchers also benefit.

Reindustrialization and competitiveness

Beyond these three pillars, Joly said the government intends to support “a form of reindustrialization” to ensure strategic sectors — particularly steel and aluminum — remain viable for economic and national security.

She said the broader industrial strategy will also include:

A defence industrial policy tied to procurement.
An environment competitiveness strategy, being developed by Environment Minister Julie Dabrusin.
Measures to strengthen competition, such as reducing telecom costs.
A focus on growing Canadian global champions to reduce foreign takeover risks.

“Our companies can be bought easily by American companies and that’s a vulnerability that we’re preoccupied with. We need to be able to grow global champions. … We need to be able to build strong companies that will have an important impact and influence in the world,” she said.

Joly underscored that business will be a central partner in the plan. “The government right now is putting in really important pieces… But we can’t do it alone.”

De Koning and Koskinen warned that “infrastructure matters, but pipelines and ports won’t solve our productivity malaise. Canada’s future prosperity depends on our ability to innovate, take risks and grow our own global champions. We have the people and the resources. What we need now is the ambition — and the courage — to back them.”