Despite top-tier education, big Canada trails smaller Switzerland and Sweden in innovation

Bank of Canada Governor Tiff Macklem reiterated on Wednesday his alarm from last year that the country's productivity is decreasing. This time, however, he was straightforward: “Unfortunately, what that means is that unless something else changes, our incomes will be lower than they otherwise would be.”

Behind this statement lies a paradox.

In 2022, Canada ranked among the highest of the 38 member countries of the Organisation for Economic Co-operation and Development (OECD) in educational attainment, with 63 percent of adults aged 25 to 64 having completed some form of tertiary education—whether a college diploma, university degree, or vocational qualification.

The OECD’s membership comprises democratic, market-oriented economies, but its education dataset also includes several partner countries, expanding the total coverage to more than 40 nations. Among adults aged 55 to 64, Canada also ranked near the top for tertiary attainment—behind only South Korea, with Russia in third place.

In the same year, Canada scored about 497 in mathematics, 507 in reading, and 515 in science—each above the OECD average for 15-year-olds worldwide, according to the Programme for International Student Assessment (PISA). Canadian teens were outscored by only eight jurisdictions (Singapore, Macao [China], Chinese Taipei, Hong Kong [China], Japan, Korea, Estonia, and Switzerland) in mathematics.

Canada also tops the list in attracting skilled immigrants.

Yet, despite this impressive background, when it comes to innovation, it falls short.

The Global Innovation Index (GII) 2025, now in its 18th edition, measures innovation performance across roughly 140 economies. According to the GII, the world’s most innovative countries are:

1. Switzerland

2. Sweden

3. United States

4. Republic of Korea

5. Singapore

6. United Kingdom

7. Finland

8. Netherlands

9. Denmark

10. China

(It’s interesting that Israel, often cited as a world leader in startup density and venture capital per capita, doesn’t appear in the top 10.)

Canada, notably, does not make the list—and that’s where Switzerland’s and Sweden’s stars truly shine.

The exceptions: Switzerland and Sweden

What’s striking is that Switzerland and Sweden are relatively small countries—and nowhere near as ambitious as Canada, with its 41-million-plus population, when it comes to immigration policy. Sweden, with nearly 11 million people, and Switzerland, at roughly 9 million, continue to outperform much larger economies.

Switzerland is home to global heavyweights such as Nestlé, Lindt, Novartis, and the Mediterranean Shipping Company. The brand behind my own ten-year-old, still-sturdy watch—Swatch—is another hallmark of Swiss design. But the country’s strengths extend well beyond chocolate, fintech, watches, pharmaceuticals, and logistics: its biotech sector is thriving too.

Sweden, meanwhile, has long built global brands—Ericsson, IKEA, Spotify—and continues to surprise. Forbes reported this summer that Stockholm-based Lovable hit $100 million in annualized revenue within eight months by using AI to help non-coders instantly turn ideas into websites, apps, and online ventures.

Big gaps in R&D

Global research and development (R&D) spending reached $2.8 trillion in 2023—up from $1 trillion (adjusted for inflation) at the turn of the century. That scale helps explain why smaller countries with consistent investment see bigger payoffs.

WorldStats, which aggregates data from sources like the World Bank and UNESCO, lists the top 10 countries by R&D investment as a share of GDP. With Canada spending only 1.55 percent of its GDP, here’s the lineup:

Israel 5.56 %
South Korea 4.93 %
United States 3.46 %
Belgium 3.43 %
Sweden 3.42 %
Switzerland 3.36 %
Japan 3.30 %
Austria 3.26 %
Germany 3.14 %
Finland 2.99 %

Checkpoint Research, which helps companies access Canada’s Scientific Research & Experimental Development (SR&ED) tax incentive program, calls the current situation “Canada’s R&D Crisis.” The group notes that spending fell from 1.87 percent of GDP in 2021 to 1.81 percent in 2022—below both G7 and OECD averages.

Why?

• Private-sector investment is weak: unlike the U.S. (73 %) and Japan (70 %), Canada struggles to drive business-led R&D.
  
  

• Canada must act to stay competitive: better incentives and policy shifts are needed to close the gap.

Could it be cultural?

Omid Ekhlasi, CEO and founder of Techarena—a Stockholm-based platform for innovation and entrepreneurship—argues that Sweden’s success comes from a blend of sound government policy, strong education investment, and a distinct, modest entrepreneurial culture.

Ekhlasi’s description aligns closely with the Triple Helix model, developed in the 1990s by Henry Etzkowitz and Loet Leydesdorff, which emphasizes collaboration between academia, industry, and government to drive innovation.

Ekhlasi also notes that Sweden’s smaller size forces its entrepreneurs to think globally from day one—a constraint that becomes a competitive edge.

“Unlike entrepreneurs in larger countries, such as Germany or the United Kingdom that often prioritise scaling in their domestic market, Swedish founders are quickly confronted by their country's limited comparative size,” he wrote. “This perceived weakness becomes a strength, compelling them to design and implement solutions with international potential far earlier than competitors.”

Equally intriguing is the cultural code of Jantelagen—a Swedish concept encouraging humility and equality, reminding people that no one is better than anyone else.

Canada’s missing link

It’s hard to pinpoint what has gone wrong in Canada—despite world-class education and a steady inflow of talent. Part of the issue may be that R&D isn’t part of everyday conversation. Only in the past two years have discussions around productivity really entered the mainstream, spurred largely by the Bank of Canada’s warnings. 

At a University of Toronto debate this October—“Are Canada’s So-Called Oligopolies Holding Us Back?”—I noticed a disconnect. The furor between the haves and have-nots is intensifying, yet neither side tackled R&D. Meanwhile, companies like Samsung, Google, and Toyota invest billions in internal innovation.

Spurring innovation is one of the surest ways to challenge oligopolies and invigorate markets. It introduces new players, disrupts entrenched power, and gives consumers more choice.

Luckily, Canada’s business R&D spending has been rising—reaching a record $30.4 billion in 2022 and projected even higher for 2023—but it still lags major innovation economies such as the U.S., Japan, and Germany.

The mindset shift

Hopefully, we will catch up—but maybe catching up isn’t the real goal.

What if we applied a Swedish mindset here—one that values humility, cross-sector collaboration, and the quiet confidence to build globally from local roots?

Canada doesn’t lack brains; it lacks bridge-builders—people willing to turn credentials into connections, and education into enterprise.

That’s the real innovation gap we need to close.