ANALYSIS & OPINION

By Lawrence Zhang

Lawrence Zhang is head of policy at the Ottawa-based Centre for Canadian Innovation and Competitiveness, affiliated with the Information Technology & Innovation Foundation in Washington, D.C. This commentary first appeared here.

Canada’s innovation system has a structural problem. And it needs a structural solution: an institution designed to make the system deliver, not just add to it.

More than 50 countries have built dedicated innovation agencies to convert research into economic strength. Canada has not.

Instead, we have 134 federal innovation programs. Each is layered on the last to patch failures without addressing the system’s design flaws.

What Canada needs is a new federal institution that makes the system more than the sum of its parts: a Canadian Innovation and Industrial Transformation Agency. It would act as mission control for innovation by coordinating strategy across departments, linking support from research to commercialization, and building the industrial capabilities Canada needs to compete on more than just natural resources.

This isn’t a new realization. The 2011 Jenkins Panel recommended the establishment of a Canadian Industrial Research and Innovation Council to rationalize and deliver federal business innovation programs. We’re overdue to finish the job, but this time with a mandate and machinery built for today’s geopolitical and economic realities.

The case for institutional reform is in the data. Canada’s R&D intensity and comparative advanced industry output have lagged for years. We consistently struggle to move technologies from lab to market at scale.

One root cause is an outdated policy architecture: a linear model that funds university research and then calls it a day, assuming innovation will magically emerge fully formed at the end.

But real innovation systems don’t move in straight lines. They loop, link and compound. Without institutions to manage that feedback and carry technologies through deployment, progress stalls.

For decades, we’ve treated innovation as a policy file, not a system. We’ve staffed it with generalists and managed it through siloed programs and compliance.

The result isn’t progress, it’s paperwork. No agency is mandated to steer strategy across departments, sequence support or commercialize. Programs operate in isolation.

Firms graduate from the National Research Council’s Industrial Research Assistance Program with nowhere to go. The Strategic Innovation Fund moves slowly and isn’t built to coordinate across sectors. The Scientific Research and Experimental Development tax incentive acts more like a grant than a credit, rewarding firms for staying in their lane and punishing them if they scale.

These programs matter, but they operate in isolation – stranding firms, fragmenting funding and stalling technological advancements. The system is built to avoid picking winners and, therefore, cannot build them.

If any department were meant to coordinate the system, it would be Innovation, Science and Economic Development Canada (ISED). But ISED governs programs, not systems. Like all departments, it was built for policy, not delivery. That’s not a failure of leadership. It’s a failure of design.

Departments can’t coordinate what they don’t control. What’s missing isn’t intent. It’s institutional machinery. Canada needs a system operator: an agency with the authority, mandate and talent to move technologies from research to deployment at scale.

Faced with this gap, recent debates floated two institutional fixes: a U.S. Defense Advanced Research Projects Agency (DARPA) funder (called CARPA) and the Canadian Innovation Corporation (CIC).

CARPA would place high-risk bets on early-stage technologies with missions. CIC would streamline program delivery and improve client service. Unfortunately, both were shelved. What’s needed is a combination of the two proposals – an institution that takes responsibility for the system itself. That’s why we need a Canadian Innovation and Industrial Transformation Agency with the authority to coordinate strategy, steer delivery, and close the structural gaps that hold back deployment.

A new Crown corporation is needed to govern Canada’s innovation ecosystem

The institution wouldn’t run every program, but it would govern the pipeline, link disconnected efforts and ensure innovation support moves with speed, sequence and sector focus by:

1. Running strategic intelligence for the system: Build a live picture of Canada’s industrial position by tracking where capacity exists, where scale-up stalls and where rivals are advancing. Produce sector roadmaps that identify technological choke points, regulatory bottlenecks and policy tools pulling in opposite directions. Use this intelligence to steer action across government, anchor decisions in real-world trajectories, and provide a shared baseline.
2. Coordinating delivery across the pipeline: Structure innovation support as a true pipeline, not a program catalogue. Align mandates, budget cycles and delivery timelines across departments to ensure that public research, commercialization funding, permitting and procurement reinforce one another. Identify duplicated effort and gaps. Rewire the system to move in sequence, not in parallel.
3. Operating at market speed, with technical depth: Build a delivery team of engineers, scientists, commercialization veterans and procurement professionals, not just policy generalists. Run competitive calls, manage contracting and make deployment decisions on commercial timelines rather than quarterly planning cycles. Use a separate pay band and flexible hiring authority to attract and retain staff with sector fluency and operational credibility.
4. Building commercialization muscle where it’s missing: Invest in testbeds, demonstration sites and early procurement pathways to de-risk adoption of emerging technologies. Prioritize sectors where private capital is scarce or timelines are long, such as biomanufacturing, agri-tech, and quantum. Close the capital gap by giving technologies a place to prove and scale.
5. Laying the foundation for navigable service delivery: Create a single point of entry and a structured path through R&D, demonstration and scale-up support so firms don’t have to start from scratch with every application or interpret siloed eligibility criteria. This agency wouldn’t replace all programs, but it would serve as the coordinating centre of gravity so firms can access the right support at the right time, without hiring consultants to decode the system.

This institution must be a Crown corporation. Not a secretariat or special office. Only a Crown agency can operate outside standard government human resources, information technology and procurement constraints while maintaining strategic accountability to ministers. That accountability can be enforced through mandate letters, corporate plans and quarterly reporting.

Anything less would leave the agency trapped inside a system built for policy, not delivery. Its internal structure would combine strategic intelligence, sector-specific delivery teams, a central coordination unit and dedicated staff for demonstration, procurement and regulation.

While civilian in focus, the agency would directly support Canada’s dual-use technology objectives across AI, biomanufacturing and quantum. That makes it a natural contributor to Canada’s new five-percent NATO commitments.

The work must be structured to qualify under NATO’s R&D accounting rules, but the agency itself should remain outside the Department of National Defence to preserve a civilian industrial focus. This will require close coordination with Defence and co-reporting arrangements, ensuring accountability for national security priorities without importing military delivery culture.

The agency’s launch should include the full transfer of existing delivery tools:

• the National Research Council’s Industrial Research Assistance Program (IRAP) and its 350 staff.
• the Strategic Innovation Fund.
• Innovation Solutions Canada.
• the Department of National Defence’s Innovation for Defence Excellence and Security program.
• Design and appeals functions related to the Scientific Research and Experimental Development tax credit.

Other countries have “mission control” agencies within strong innovation systems

Additional funding would be required for DARPA-style missions, technology demonstration programming and agency operations. The $200 million annually earmarked in Budget 2022 for the Canadian Innovation Corporation is a floor, not a ceiling.

This isn’t a new idea. Canada has launched strategic industrial tools before, including the Defence Industry Productivity Program, Technology Partnerships Canada, the Strategic Aerospace and Defence Initiative, and IRAP itself, which is now 75 years old. The institutional memory exists. What’s missing is the machinery to coordinate, scale and deliver across the system.

Other countries have figured this out. Finland’s Business Finland combines innovation funding with export promotion and investment targeting. The U.K.’s Innovate UK connects challenge-based R&D with industry-led development. Japan’s NEDO manages both early-stage tech bets and large-scale demonstrations.

It’s reasonable to ask: If countries like Finland or the U.K. succeed with agencies like Business Finland or Innovate UK, why does Canada need this mission control agency?

Because those agencies operate in stronger systems. Their success reflects not just internal design but the coherence of the surrounding policy environment – something Canada lacks. Here, departments operate in silos. Procurement doesn’t talk to permitting. Research funding isn’t sequenced with deployment or export strategy. It is a failure of coordination. And it is why, despite spending billions, we continue to underperform.

A Canadian Innovation Corporation-style agency would improve delivery but it wouldn’t fix the fragmented architecture. This new Crown agency would.

It would take responsibility for the core system functions that currently fall through the cracks, such as publishing sector-level capacity maps, coordinating permitting timelines across jurisdictions, sequencing capital support through IRAP, the Strategic Innovation Fund, regional development agencies and more, and ensuring that technologies developed with public R&D dollars actually reach procurement and export markets.

This isn’t a call for endless new funding. It’s a call to rewire how we support innovation and to back that system with a stable, long-term revenue base.

One option: a grand bargain that accelerates permitting in exchange for a modest resource levy, using resource revenues to help build the institutions of Canada’s future.

Some will say this would step on the toes of departments. Yes, it would. That’s the point.

Departments control key innovation levers like procurement, training, regulation and infrastructure, but they aren’t built to align them toward industrial goals. The result is policy beige.

This new national Crown agency would be structured to advise, align and coordinate – not override. But it would need clear authority to set direction, manage shared files and publish performance data across the portfolio.

It would be a delivery institution, not a policy shop. ISED would remain the federal government’s lead on innovation policy and economic development strategy, while this agency would focus on its role of execution and coordination.

This isn’t about replacing programs. It’s about governing them coherently, strategically and at speed. Canada doesn’t need more pilots. It needs a national operator to move technologies from lab to market and transform innovation into industrial strength.

We’ve layered delivery band-aids on a system that never had a working circulatory system to begin with. It’s time to stop duct-taping holes and start building architecture.

Editor’s Note: Research Money asked Lawrence Zhang to respond to two questions about his commentary. These are the questions and his emailed responses:

What is the first thing Canada needs to do to get on track in creating this new Crown corporation to fix the structural problem in Canada’s innovation system?

The first step is to admit that this is a structural problem, not a program design issue. At the Cabinet level, at the Deputy Minister level, and at the everyone in civil society who is writing op-eds and talking about innovation level.

Before even putting pencil to paper in creating a new Crown corporation, political leaders need to name the real issue: no one is responsible for making the system work end to end. Not the proposed CIC, not NRC, not ISED. Without that framing, any attempt to create a new Crown corporation will either be seen as duplicative, or get buried in interdepartmental compromise.

Once that’s explicit, a focused process can begin: a mandate letter, feasibility design and legislative path for creating a new Crown corporation with authority across the pipeline.

 What is the risk for Canada if we remain on the same path and don’t fix the structural problem in Canada’s innovation system?

We’ll keep spending more to get less.

Canada is already putting billions into R&D tax credits, grant programs and growth funds. But because those tools aren’t sequenced or aligned, they don’t compound. Instead, they stall. Firms get stuck between programs. Technologies die in the demo stage. Good ideas don’t scale. The cost is rising: more spending, slower results, fewer firms making it big.

If we don’t fix the structure, we’re not just wasting money, we’re falling further behind countries that have. Not because they spend more, but because they build coherent systems that actually work.

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