Governments around the world spend billions every year supporting innovation. Their investments generate breakthroughs that power economic and social progress. But are their investments in innovation reaching the places that need it most?
The importance of innovation and government support
Spending on innovation is on the rise. In 2021, OECD governments spent more than USD 435bn on R&D, even before tax incentives – which account for the bulk of innovation support to private firms – are added into the mix.
Canada is no exception. Its Strategic Innovation Fund introduced in 2017, with a budget of USD 4.8 billion, aimed at supporting various vital sectors, from advanced manufacturing to clean technologies.
However, much of this investment is place-blind – awarded to educational institutions, firms and projects with little consideration for where they are, and what their innovations can bring to their local economies.
That might be a mistake. First, because it might mean that precious public funds get sucked into the areas already rich in innovation, substituting for plentiful private funds readily available, while widening regional inequalities. Second, because investments that consider – and are aligned with – local industrial strengths and strategies can generate a bigger bang for their buck.
Does government innovation support benefit all?
To better understand Canada’s innovation landscape, our recent study analysed where R&D grants flowed using publicly available open data from the Government of Canada. The findings?
First, we found that large cities get a bigger slice of the pie on a per capita basis. Cities with populations over 500,000 received a hefty CAD 491 per person, well above the national average of CAD 307 per person. In contrast, rural areas are trailing far behind, receiving only CAD 60 to CAD 127 per person.
These funding patterns reflect and reinforce existing areas of success. From 2016-20, the patenting rate of Canadian cities was four times that of rural areas, where innovation is most needed.
What does this mean for regional development?
These observations prompt deep reflection. Wouldn’t it be better to steer innovation support more towards regions that need it the most, especially those in decline or economically disadvantaged – in Canada and beyond?
Strengthening local innovation capacity
A recent OECD report on Enhancing Rural Innovation in Canada provides some inspiration on policies that could be scaled up to do so.
A top priority must be to build innovation capacity outside large cities in a way that is, aligned with local assets and ambitions. Canada’s Community Futures Network provides a useful starting point, delivering business support, financing, and advisory services through 267 local offices across rural and remote areas. These organisations are governed locally and funded by regional development agencies, ensuring responsiveness to diverse community needs.
In Alberta, Regional Innovation Networks (RINs), supported by Alberta Innovates, connect entrepreneurs in smaller centres with mentors, advisors, and start-up services. These networks match early-stage rural entrepreneurs, including those new to technology, with innovation ecosystems that help turn ideas into viable enterprises. This form of proximity-based support helps build local momentum, often in sectors like agri-food, clean energy, and advanced manufacturing.
Investing in talent where it is needed most
Second, there is a need to expand training and skill-building opportunities within rural communities themselves. Access to advanced and specialised education is too often centralised in large cities, drawing young people away and leaving skills gaps behind.
One promising initiative is the Wireless Systems Technician diploma developed in British Columbia’s East Kootenay region through the Digital Technology Supercluster. Delivered locally in Cranbrook, the programme trains students in digital infrastructure and connectivity, enabling them to stay in their communities while acquiring skills aligned with national and global innovation trends.
Meanwhile, in Saskatchewan, the Saskatchewan Indian Institute of Technologies (SIIT), in partnership with Protein Industries Canada and Whitecap Dakota First Nation, created a micro-credential in agri-food processing to fill labour gaps and enhance indigenous participation in emerging value chains.
Infrastructure as a platform for innovation
Finally, there is a need to strengthen hard infrastructure outside of cities, both digital and physical. Canada’s Universal Broadband Fund, with an investment of over CAD 3.2 billion, aims to provide high-speed internet to 98% of Canadians by 2026. These efforts are closing critical gaps, allowing rural businesses and institutions to participate in the digital economy and access innovation services remotely.
New investment in dedicated innovation facilities can also help. Sudbury’s NORCAT Innovation Centre serves as a regional platform for mining technology start-ups, providing applied research, prototyping, and support for commercialisation. On the east coast, the Ocean Supercluster anchors collaborative innovation in the blue economy, connecting industry, academia, and small firms in marine and offshore sectors.
Investing in innovation leaving no place behind
Enhancing rural innovation capacity is not about fairness. It is about making a strategic investment in national resilience and long-term competitiveness. While our work shows Canada’s innovation funding remains imbalanced, promising initiatives are being deployed which can be scaled up and offer valuable lessons for other OECD countries.
Now is the time to turn reflection into action and reframe innovation policy as a tool for development that reaches all territories, leaving no place behind.
To learn more about fostering innovation in regional development, see our new publication Broad-based Innovation Policy for All Regions and Cities and explore related OECD work below:
Stéphane Pronovost is an economist and the vice-chair of the Working Party on Rural Policy at the Organization for Economic Co-operation and Development. Stéphane holds advanced academic credentials, including doctoral-level studies in Management from HEC Montréal.
Geographer and professor in the Department of Urban Studies and Tourism at ESG-UQAM, Juste Rajaonson works in the field of sustainable development and has nearly 20 years of experience in governance, policy development, program management and evaluation focused on sustainability.
He has contributed to the success of numerous governmental urban and regional development initiatives, including with the Privy Council Office, Canada Economic Development for Quebec Regions, the Auditor General of Quebec and CIRANO.
Pier-Olivier Poulin is a researcher and strategist based in Montréal, specializing in sustainable mobility and regional economic development. He currently works at Ville de Montréal. Pier-Olivier holds a Master’s in Urban Studies from INRS and a Graduate Diploma in Business Administration from HEC Montréal.