Financing Innovation in Security and Defence 

Lessons Canada and Québec Can No Longer Ignore 

In many advanced economies, innovation in security and defence is no longer seen as a specialized field confined to military issues. It is increasingly recognized as a strategic and structural lever at the intersection of technological sovereignty, economic competitiveness, and national resilience. 

Countries that succeed in this domain have built coherent funding frameworks anchored in long-term vision. Their investments go beyond operational capabilities to include complete innovation systems that enable the development of critical infrastructure, industrial value chains, talent pipelines, and financial mechanisms that can absorb risk. These systems support both military and civilian (dual-use) applications. 

Canada is beginning to shift its approach. Recent developments such as the renewed defence vision “Our North, Strong and Free,” to NORAD modernization efforts, NATO defence spending commitments, and a rapidly evolving geopolitical context, demonstrate a growing awareness. However, a gap remains between stated ambitions and the structural capacity to finance innovation in security and defence in a consistent, transparent, and sustainable manner. 

If Canada, and Québec in particular, hope to remain credible in an increasingly competitive international landscape, they must move beyond a fragmented approach and draw inspiration from the most effective global models, not to copy them, but to adapt their foundational principles. 

A Context of Profound Transformation 

Three major dynamics are reshaping how nations approach innovation in security and defence: 

1. The growing convergence between civilian and military technologies. Artificial intelligence, cybersecurity, autonomous systems, advanced sensors, space technologies, and energy innovation are now largely emerging from the civilian sector, often led by SMEs, startups, and research ecosystems before being adapted to defence and security uses. 
   
2. The reconfiguration of global value chains. Recent shock, pandemics, armed conflicts, geopolitical tensions have exposed the vulnerability of technological dependencies. Sovereignty now depends not only on military capabilities but also on the ability to master, produce, and evolve critical technologies over time.
   
3. The financialization of defence innovation. Where the state once acted as the primary investor, we now see the emergence of specialized funds, hybrid public-private mechanisms, and venture-capital-style approaches that invest early and accelerate technological maturity. 

These trends require rethinking how we fund innovation: as a strategic investment, not merely a line item in the budget.

Three Global Reference Models 

The United States: Mission-Driven Innovation 

The U.S. model is built on a robust institutional architecture with specialized agencies such as DARPA (Defense Advanced Research Projects Agency) and AFRL (Air Force Research Laboratory). Innovation is mission-oriented, supported by multiyear budgets, and characterized by high risk tolerance. 

This model demonstrates that the state can act as a strategic investor, catalyzing complete ecosystems and effectively engaging the private sector. Its ability to fund early-stage projects, integrate risk management, and accelerate large-scale deployment is a major competitive advantage. 

The United Kingdom: Integration of Innovation, Industry, and Security

The UK has adopted an integrated approach where industrial policy, national security, and innovation are explicitly aligned. The Defence and Security Accelerator funds SMEs working on specific challenges and facilitates access to public procurement and end users. 

This model underscores the importance of closing the gap between innovation and adoption by supporting companies from R&D to operational integration. 

Scandinavian Countries: Systemic Resilience and Coherence 

Finland, Sweden, and Norway have developed models based on national resilience, civil-military duality, and clear governance of investments. Innovation is treated as a collective preparedness tool to ensure national sovereignty. 

These approaches show that medium-sized countries can build credible, coherent, and sustainable strategies by aligning political vision, financial instruments, and industrial capabilities. 

Common Principles Across These Models

Despite their differences, these models share key foundations: 

• A clear and ambitious strategic vision 

• Dedicated, multiyear, risk-tolerant financing mechanisms 

• Formal recognition of the role of dual-use technologies 

• Tight integration of innovation, industry, and operational needs 

• Governance focused on execution and impact 

Adapting These Lessons to Canada and Québec 

This is where the core challenge for Canada and Québec becomes particularly pressing. 

Canada has considerable assets: world-class research ecosystems, high-performing tech companies, and an advanced industrial base in aerospace, complex systems, artificial intelligence, and cybersecurity. A significant portion of these capabilities is concentrated in Québec. 

Yet these assets remain fragmented, poorly aligned with security and defence priorities, and weakly connected across financial and institutional channels. 

The issue is not the absence of programs, but the lack of an integrated financing architecture capable of: 

• Intervening at various stages of technological maturity 

• Supporting dual-use technologies without siloing them into sector-specific boxes 

• Linking innovation, industrialization, and operational adoption 

• Coherently mobilizing both federal and provincial governments 

In Canada’s federal context, this is crucial. Québec is not just a potential beneficiary; it must be a structuring actor playing a key role in a national strategy, provided that funding mechanisms fully recognize and integrate this reality. 

Toward a New Understanding of Security and Defence Financing 

For Canada, the time has come to move from a spending mentality to a development-oriented logic that prioritizes strategic autonomy and industrial capacity. It must be recognized not as a cost, but as a long-term strategic investment in sovereignty and economic strength. 

Successful countries have understood that financing is both an industrial policy tool and a national security instrument. It shapes value chains, reinforces industrial sectors, and creates lasting competitive advantages. 

Canada still has a narrow window of opportunity but it is closing fast if efforts remain fragmented, opportunistic, or disconnected from industrial and territorial realities.