As published in the Financial Post.

Although the 2021 federal election was naturally marked by partisan disagreement, the Liberals  and  Conservatives did agree on one major policy idea: the creation of a federal research institution with a mandate to take big risks.

Both party platforms committed to create a Canadian Advanced Research Projects Agency (CARPA), modelled on the United States’ Defense Advanced Research Projects Agency (DARPA), in order to bolster Canada’s capacity to generate breakthrough ideas and technologies.

Canada lacks a public agency that’s dedicated to promising technologies that are far from market readiness, but have the potential to generate huge market rewards. The agency that the Conservatives and Liberals proposed would fill this gap by intentionally prioritizing what’s been described  as “wild card” technologies rather than “safe bets.”

Given Canada’s underwhelming performance  on innovation and productivity, this bipartisan campaign promise has a solid justification. There’s a growing need to shake up the country’s innovation ecosystem with a new agency dedicated to “radical innovation” while most other government agencies and programs continue to support “incremental innovation.”

Both types of innovation are important. But the main challenge in the present moment is that businesses and governments tend to prioritize safe, incremental progress due to a combination of factors that includes worries about market failure, political calculus, and academic gatekeeping. The private sector will not produce enough radical innovation on its own because of the high levels of risk and lengthy timelines for potential investment returns.  The net effect is a deficit of promising ideas in the innovation pipeline and too little commercialization and scale occurring in the private economy.

A CARPA could help solve this problem. It cannot simply replicate DARPA. National defence is neither a comparative advantage for Canada, nor a galvanizing problem requiring technological solutions in the Canadian context. The key is for Canadian policy-makers to understand why DARPA has done so well and replicate its approaches here. As we outline in a new policy paper for the Public Policy Forum, CARPA’s mandate should be to catalyze a new generation of scientific and technological breakthroughs towards the goal of net zero emissions by 2050.

Now that the election is behind us, Innovation Minister François-Philippe Champagne is responsible for creating the new agency. His mandate letter from the prime minister specifically charges  him to develop a “uniquely Canadian approach” that reflects the insights and lessons from DARPA’s 64 years at the centre of American scientific and technological progress.

It’s an important task. A government only gets one chance to establish a new organization’s culture, governance, and mission. These formative choices will ultimately determine whether CARPA becomes a source of breakthrough ideas and technologies, or merely another player in the labyrinth of federal agencies and programs devoted to innovation.

There’s reason for cautious optimism. The minister has expressed a great deal of ambition for the new agency, including recently describing CARPA as a “new chapter in innovation.” He seems to instinctively understand that the current moment of profound environmental, geopolitical, and technological change demands a renewed commitment to science and technology on the part of Canadian policy-makers.

A good place for him and his colleagues to start is DARPA itself. The modus operandi of DARPA is to support high-risk, high-reward projects free from political interference or academic and bureaucratic capture. Full stop.

The agency’s lean yet highly expert team has tremendous autonomy to set priorities and pursue promising defence-related technologies with minimal oversight or scrutiny. Its team of roughly 100 project managers is empowered to pursue promising technologies with one major caveat: they must represent “transformational change.” Its funding guidelines explicitly exclude projects that amount to mere “evolutionary improvements.”

DARPA’s  well-documented success  has been in large part a consequence of being highly disciplined in distinguishing between potential scientific and technological breakthroughs (what one innovation policy expert has even  called  “wacky things”) and incremental progress. The former are prospective DARPA projects. The latter are the purview of other federal agencies and programs.

This culture of radicalism over incrementalism means that DARPA’s  failure rate  is quite high. It also means that the agency doesn’t concern itself with the equitable distribution of its attention or resources across businesses, post-secondary institutions or states. DARPA project managers select and support projects based solely on merit. Even if its success rate is low, by prioritizing breakthrough ideas and technologies, its return-on-investment is massive for the U.S. economy. DARPA’s high-risk, high-reward mandate has manifestly paid off.

The main question for the government is about CARPA’s basic purpose: will it have the autonomy to pursue breakthrough ideas and technologies, or will it succumb to political pressure to distribute its funds according to institutional, regional and sectoral considerations? If the answer is the latter, then CARPA will undoubtedly fail as a source of radical innovation. But if it’s the former, then it has the potential to bring about the “new chapter in innovation” that Minister Champagne envisions.

If we want to catalyze more breakthrough ideas and technologies, we can neither rely on market forces nor traditional public research funding models. We need CARPA to act as a new bridge between bold ideas and private firms.