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Today, we issued a report entitled Manufacturing Innovation: Driving Canada’s Biggest Sector through Disruptive Technologies.

In the report, we argue that the best way for Canadian companies to compete and win in modern manufacturing is through a strong commitment to innovation. This appears to be a continuing challenge as Canada’s innovation rank, a key component of competitiveness, is troublesome. Canada is ranked 22nd on the World Economic Forum’s Competitive Index for its capacity for innovation and 15th by the OECD measure.

To find out why Canada is falling in the innovation rankings, we consulted with members within the manufacturing sector—the largest sector of the Canadian economy—to uncover the barriers that are preventing them from harnessing technology and innovation.

Key barriers:

  • Risk vs. reward: companies are slow to adopt advanced technologies because they are uncertain if such a costly investment will in fact boost their productivity.
  • Canada’s complicated tax system: companies struggle to understand and comply (which in itself is costly) with the various policy frameworks in which they operate.
  • Cost inputs: rising electricity costs are inflating top lines and squeezing bottom lines like never before.
  • Access to markets: Canada’s small market size and its large geographic mass challenges manufacturers to grow within their home market. Exporting is therefore increasingly important, but increasingly challenging.
  • Access to capital: there are challenges to financing innovation as capital providers want more than technical demonstrations and prototypes as collateral.
  • Access to skills: finding and holding on to skilled labour is an ongoing problem.
  • Jurisdictional competition: companies must compete for investments from their foreign-based head offices, which are often influenced by head office’s perception of Canada’s investment environment.


To overcome these barriers, our discussions led to three overall recommendations:

1. Manufacturers can leverage best practices in overcoming barriers that currently prevent them from broader and faster adoption of disruptive technologies. Some of these best practices include:

  1. Collaborating with other companies/organizations to pool resources.
  2. Embedding a culture of innovation throughout the entire organization.
  3. Differentiating between innovation and invention.
  4. Developing more and tighter connections with sources of training and apprenticeships.
  5. Developing virtual prototypes versus ones that are manufactured.


2. Canada’s innovation policy framework must be structured to acknowledge and support business investment in R&D. Government should consider new incentive options, such as adopting an “innovation box” approach to R&D funding that reduces taxes and promotes domestic intellectual property activity.

3. A policy framework that rewards collaboration, recognizes product cycles across various industries, acknowledges that the milestones for innovation incentives cannot be generic across industries and moves beyond a bias for breakthrough technology research is essential to improving Canada’s innovation scorecard.

Read our report.

For more information, please contact Scott Smith, Director, Intellectual Property and Innovation Policy.

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