News Release

Canada’s lopsided innovation policy: Too much focus on supply, not enough on demand

May 27, 2019 Print

Montreal — Ottawa’s Innovation and Skills Plan offers only part of the solution to Canada’s innovation challenge. Current initiatives focus too much on generating new technology and innovation through R&D tax credits, subsidies, and venture capital, and they do not address the broader issue of low uptake and market demand for leading-edge technologies, says a new study by the Institute for Research on Public Policy.

Canada’s poor record on productivity growth and business R&D is widely acknowledged and has long been viewed as a policy priority. Yet decades of government-led attempts to promote productivity and innovation through supply-side measures like R&D tax credits have not produced the desired results. Jakob Edler (the study’s author and a top expert on innovation policy in Europe, who was asked to comment on Canada’s innovation strategy) argues that the real source of the problem lies on the demand side: if businesses do not use the latest technologies they fall behind in productivity; if businesses do not sense the market is ready to absorb their innovations, they are reluctant to innovate.

“Canada’s innovation policy needs to address these demand-side problems, and more effort should be made to mitigate what businesses consider to be the biggest obstacles to innovation: uncertainty and risk,” says Edler.

In his view, a more balanced approach is required ─ one that intervenes on the demand side to accelerate the diffusion and adoption of new technologies, and to create new markets, by

  • increasing the public sector’s ability to demand and absorb innovations, and hence be a better partner for innovative firms,
  • calling for innovative solutions to address societal challenges and mobilizing citizens, businesses and public bodies as buyers of these innovations, and
  • connecting producers and users to encourage user-driven innovation that is responsive to market needs.

Edler concludes that linking societal purpose and economic benefit should be the guiding focus for a future-proof innovation policy in Canada.

A Costly Gap: The Neglect of the Demand Side in Canadian Innovation Policy, by Jakob Edler, can be downloaded from the Institute’s website (

The Institute for Research on Public Policy is an independent, national, bilingual, not-for-profit organization based in Montreal. To receive updates from the IRPP, please subscribe to our e‑mail list.

Media contact: Shirley Cardenas   tel. 514-594-6877

A Costly Gap: The Neglect of the Demand Side in Canadian Innovation Policy

A Costly Gap: The Neglect of the Demand Side in Canadian Innovation Policy

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