Canadians are great at inventing things. However, we are considerably less great at keeping them Canadian. An increasing share of patents developed by Canadian inventors are owned by foreign firms—primarily American. Meanwhile, only 1.1% of Canadian businesses filed for patents (as of 2019), compared to an OECD average nearly six times higher. For a country that pours billions annually into research and development, something isn’t adding up.

There is a clear relationship between labour productivity and long-run improvements in living standards. Improvements in labour productivity can come from three sources: 1) giving workers more or better equipment to work with (capital deepening); 2) gaining expertise through education and experience (improvements in labour quality); or 3) finding more efficient ways of operating or producing higher-value goods through technological progress (known as growth in multifactor productivity).

We have recently discussed the first source (investment) as a major contributor to Canada’s lagging productivity performance. Innovation performance, including research and development (R&D), is another key variable.

Canadian policy makers understand this, which is why governments at both the federal and provincial levels have built one of the most generous R&D tax subsidy systems in the world. Despite generous tax subsidies, Canada still lags its peers on business R&D (see chart).  

Canada’s business R&D spending has flatlined at roughly 1% of GDP for a decade, less than half of the OECD average of about 2% and a third of spending in the United States. As we’ve discussed previously, to reap the productivity gains, innovation inputs like talent and R&D need to be translated into better outputs like patents and technologies commercialized here in Canada. More broadly, this is a theme in the latest Global Innovation Index, where Canada ranks high on inputs (like an educated workforce) but low on outputs (like trademarks).

One option that’s been explored, but didn’t make it into the federal budget, is shifting Canada’s support to be less front-end loaded on R&D, and lower taxes on income derived from intellectual property (a so-called ‘patent box’). But it goes well beyond tax, and there is no single, silver-bullet solution. Policy makers have not yet solved the perennial challenge of increasing the return on our innovation input.

Who owns Canadian inventions?

Recent research indicates that more than 50% of patents with Canadian inventors end up owned by foreign companies, with little commercialization activity occurring within Canada.

The consequences are showing up in the technologies that matter most for future growth. A 2025 OECD paper found that Canada’s patenting activity in fourth industrial revolution technologies (4IR) such as AI, connectivity, and autonomous systems is growing at just 3% annually, against a global rate of 8%. This matters because the same OECD study found that Canadian firms filing more 4IR patents show measurable gains in productivity.

Alberta is not immune to these dynamics, but it isn’t without opportunity either. Alberta’s resource sector has long innovated out of necessity—horizontal drilling, SAGD technology, AI inspection robots, emissions reduction systems—and patents offer legal protection and help safeguard proprietary technology. What is also encouraging is that Canada’s strongest emerging specialization in 4IR technologies is in agricultural applications and two Calgary-based firms—Calgary Scientific and Evolution Engineering—already appear among Canada’s top 4IR patent filers. The question is whether the policy and competitive environment will evolve to help more of these inventions and the companies that develop them remain Canadian.

Answer to the previous trivia question: The combined population of Canada, the United States and Mexico is about 512 million (as of 2024).

Today’s trivia question: Acetylsalicylic acid received a patent in 1900 (now expired). What is it better known as?