Context Matters

The relationship between intellectual property (IP) development, retention, and commercialization and foreign direct investment (FDI) is a key priority for Canadian innovators and policymakers. FDI is one way to bring new capital, infrastructure, labour, and ideas to Canada. The relative contribution of IP intensive industries to national economies has risen internationally, and IP provides one lens through which to study the impact of FDI on Canadian innovation, R&D, and business ecosystems. This study finds that while FDI and IP are sometimes directly related, such as in the purchase of strategic IP or the development of IP as part of FDI, the actions of foreign multinational enterprises (FMNEs) and Canadian companies in such circumstances are much more likely to be determined by other incentive structures such as market access, cost and availability of talent, private investment opportunities, or R&D subsidies. Furthermore, the impact of FDI on Canadian innovation and IP depends on technology subsector, local business density, type of FDI, and other considerations.

This paper takes two approaches to examining the impact of FDI on IP in Canada. It looks at the role of key variables in FNME and Canadian innovator decision-making (including market size, talent, private investment, and government regulation and funding). Simultaneously, it presents three case studies from very different technology subsectors—medical devices; carbon capture, utilization, and storage (CCUS); and artificial intelligence (AI). First, the key variables show that there are structural elements at play in Canadian innovation that guide the relationship between FDI and IP, and that strengthening the Canadian innovation ecosystem requires addressing the underlying structural barriers to domestic IP retention and commercialization. Second, the three case studies illustrate that not all technology and innovation in Canada is impacted by FDI in the same way: location and business density, availability of domestic capital, scale-up costs and infrastructure, and whether FNMEs are investing horizontally or vertically (via procurement) all mediate outcomes for Canadian innovation.