Canada is widely recognized as one of the most innovative countries in the world, with universities producing excellent research and talented scientists and engineers. But there's a troubling disconnect. According to a new analysis from the Centre for International Governance Innovation, the country's innovation isn't translating into productivity gains that improve living standards. Business leaders, the report argues, need to actually adopt these innovations in their operations—something that isn't happening fast enough.

This gap isn't just academic hand-wringing. A November 2025 Fraser Institute study on Canada's productivity performance reveals the damage. Canada's stagnant productivity growth has been the major reason that the standard of living of Canadians hasn't improved in recent years, with labour productivity growth trailing the United States for at least four decades—a divergence that became significantly more pronounced after 2001 and especially after 2017. In other words, we're great at creating new ideas in labs, but terrible at getting them into businesses where they can actually boost wages and economic growth.

Why does this matter so much? Because productivity is the engine of prosperity. When businesses invest in new technology and better processes, workers can produce more value in each hour they work—and that's what drives higher wages and improved living standards. When businesses invest in physical and intellectual capital they equip workers with the tools and technology—like machinery, computer programs, and artificial intelligence—to produce more and provide higher quality goods and services, but because Canada has lower levels of investment in tools and technology, workers are less productive. The country isn't short on brilliant research. It's short on companies willing to bet on that research by buying new equipment, training workers, and overhauling how they do business.

The path forward isn't complicated, though it requires political courage. Major restructuring of Canada's business and personal taxes—particularly eliminating the capital-gains tax—would promote innovation and the growth of technology-oriented firms and encourage business investments in productivity-enhancing assets. The key is to reduce onerous regulations, rein in high government spending, and create a pro-growth tax environment that makes Canada a more attractive place for business to locate and invest. Canada can keep churning out world-class research, but until businesses actually use it, the country's living standards will keep falling further behind.