When an innovative Canadian company is acquired by a foreign company, Canadians may instinctively lament the “loss” of another innovative Canadian company. This initial reaction needs to be tempered. We have to be open to the possibility that a merger and acquisition may actually lead to more innovative activity in Canada. But more importantly, we need to consider individual acquisitions in a broader context of cross-border investment and innovation, a context that includes multiple channels and incoming and outgoing flows.
Welcome to Canada: Foreign Direct Investment and Innovation has found a positive relationship between FDI and Canadian innovation. This conclusion holds across different kinds of flows and investment types.