News from the IPL
RESEARCHERS
Redefining Energy and Compute in the AI Age
Leah Lawrence
This paper is written by IPL Affiliate Leah Lawrence. In our rapidly evolving digital landscape, data centres play a pivotal role, yet their burgeoning energy consumption presents a significant challenge as we seek sustainable solutions. This White Paper explores the intricate balance between advancing artificial intelligence (AI) and mitigating its environmental footprint. We delve into the impacts of AI on energy demand and the role of innovative technologies in transitioning to carbon-neutral digital infrastructures. Key discussions, led by experts in the field, examine the limitations posed by our current technological parameters and propose strategic frameworks to reconcile the growing computational needs with the finite nature of our energy resources. Through workshops and expert panels, this document outlines potential solutions, such as improving energy efficiency, harnessing waste heat recovery, and moving computing operations to more efficient systems, including edge computing. As the AI industry stands at a crossroads between vertical integration and an ecosystem-based approach, our analysis points to the importance of resource allocation, talent acquisition, and collaborative innovation in shaping a sustainable future. This Working Paper serves as both a call to action and a guide for stakeholders looking to foster an energy-efficient and environmentally responsible AI ecosystem.
Iain Stewart
This paper is written by IPL Affiliate Iain Stewart. Canada faces a productivity crisis that threatens our economic future. After decades of lagging behind international peers in business innovation and productivity growth, the need for improvement has intensified. The challenge is multifaceted. This commentary is focused on improving the effectiveness and impact of these federal business innovation subsidy programs. While these tools are not sufficient to on their own to change economy-wide business innovation outcomes, the programs represent a substantial annual federal expenditure, and this commentary argues that improvements can be made to increase their beneficial impact. After reviewing four “core” federal business innovation support programs (SR&ED, IRAP, ISC, and the SIF), this paper concludes that Canada would benefit from establishing a dedicated business innovation agency, such as the Canada Innovation Corporation announced in Budget 2022 (but not yet implemented). This new agency could improve the client experience by consolidating and coordinating programming, strengthen evaluation by compiling and analyzing program data, and, in so doing, become a centre of expertise and advocate for program experimentation.
Editor's Pick
Building the Future Economy: Securing Canada’s Competitiveness and Autonomy in a Changing World
Bentley Allan, Travis Southin, James Meadowcroft, Moe Kabbara, The Transition Accelerator
This white paper outlines a strategic framework to strengthen Canada’s economic competitiveness and sovereignty in a time of global disruption. It identifies priority opportunities in EVs, critical minerals, clean power, modular housing, and defence—and shows how an integrated industrial strategy can align policy, capital, and partnerships to deliver lasting prosperity. Drawing on insights from the June 2025 Getting it Done Summit, national interviews, and recent research, the paper sets out concrete actions to mobilize investment, accelerate project delivery, and build collaboration across governments, industry, Indigenous communities, and civil society.
Cities & Regions
Rune Dahl Fitjar, Research Policy
The concentration of R&D investments in regions with strong local capabilities helps these regions pull further ahead in the innovation economy, driving spatial inequality. While there is growing awareness of this geographic dark side of innovation, the role of public R&D funding has largely been overlooked. Yet, the unintended spatial effects of public R&D funding tend to far outweigh the impacts of regional policy (Sternberg, 1996). Public R&D spending is often concentrated in developed regions, meaning that it may in practice work as an anti-regional policy (Forth and Jones, 2020). This paper examines the geography of public R&D funding in European subnational regions and its development over time, using data from Eurostat for 200 regions between 2009 and 2018. First, the paper examines which regions attract public R&D funding. More developed regions tend to receive more public R&D funding, mainly because of their higher business R&D funding and human capital. Second, the paper analyses whether public R&D funding is converging across regions. There is unconditional beta-convergence in public R&D expenditure but no evidence of sigma-convergence. For business R&D expenditure, the initial disparities are higher but there is evidence of both beta- and sigma-convergence. The paper concludes that public R&D funding tends to direct resources towards more well-endowed regions and shows no signs of sigma-convergence. Research and policy addressing regional inequality and the dark side of innovation should pay more attention to the spatial distribution also of public R&D funding.
Statistics
Intellectual Property in Canada Technology Specialization and Competitive Advantage
Zafer Sonmez, The Conference Board of Canada
What are Canada’s strengths and weakness in Intellectual Property relative the world and OECD countries? This impact paper evaluates the alignment between Canada’s inventive strengths and its innovation programs. Using Intellectual Property (IP) (patents) as a measure of technology specialization and global competitive advantage, the report finds that Canada has a mix of inventive strengths and weaknesses across 35 technology areas. The country has leading inventive strength in 10 areas; slipping inventive strength in seven areas; lagging inventive strength in 13 areas; and emerging inventive strength in five areas. What are Canada’s highest degrees of specialization? How does the country fare in the number of patents per owner compared with the world average? And what does Canada need to do to become a leader in new and emerging technology areas? Read the impact paper for a full analysis.
European Innovation Scoreboard 2025
Directorate-General for Research and Innovation (European Commission)
This study provides the results of the 2025 edition of the European Innovation Scoreboard. The EIS provides a comparative analysis of the innovation performance of the European Union (EU), the 27 Member States, 12 neighbouring European countries and 11 global competitors.
Innovation Policy
How Reducing Federal R&D Reduces GDP Growth
Meghan Ostertag, ITIF
In this report, ITIF models the impact of cutting federal R&D investments by 20 percent starting in fiscal year 2026. This would be $40.7 billion less than was budgeted for R&D in 2025. The model projects this scenario over 10 years and compares it with three alternative scenarios: maintaining the 2025 R&D budget amount, maintaining the 2025 R&D level as a share of U.S. gross domestic product (GDP), or keeping pace with China’s level of R&D investment as a share of its GDP. Cutting federal investments in R&D may appear to save billions in the budget, but it could cost the economy trillions. In fact, ITIF estimates that cutting federal R&D by 20 percent would cost the U.S. economy up to almost $1.5 trillion compared with China’s growth pace.
New Defence Growth Deals Created to Boost Local Economies Under Major Sector Plan
UK Department of Defence
The UK has recently launched a Defence Industrial Strategy (DIS) to boost local economies through the launch of a £250 million fund for Defence Growth Deals - which will improve collaboration, foster innovation and create jobs in areas with untapped potential. Five initial Defence Growth Deals will be created across England, Scotland, Wales, and Northern Ireland. Building on the success of the Team Barrow approach at the home of nuclear submarine building in Barrow-in-Furness, Defence Growth Deal as will identify areas with high growth potential, and bring together industry, local and national government and academia to make sure that potential is realised. Each Defence Growth Deal will combine defence and wider government investment to harness local sub-sector strengths, drive innovation, and deliver tailored support where needed, such as in skills, housing, and planning, to boost local economies, attract private investment, and ensure long-term sustainability.
Unlocking Canada’s Clean Technology Leadership
Clean50
This submission to the Government of Canada – Budget 2025 represents the views of 71 members of the Canadian clean and environment tech producer, venture capital, investment, R&D, LDC and energy efficiency communities and two industry associations. The submission sets out a practical roadmap for Budget 2025 to: close the competitiveness gap with the United States and other trading partners; unlock billions in private and institutional capital to scale Canadian firms; secure supply chains and protect Canada from Foreign Entities of Concern (FEOC); and embed clean technology into every major federal investment-from housing and infrastructure to defence.
CCI’s 2025 Federal Pre-Budget Recommendations
Council of Canadian Innovators
This submission to the Government of Canada – Budget 2025 comes from the Canadian Council of Innovators, who represent and works with over 150 of Canada’s fastest-growing technology companies. Canada’s productivity has flat lined, our economic complexity ranking has fallen from 22nd to 41st in the world, and the OECD projects Canada will be the slowest-growing advanced economy through 2060. Per capita GDP is shrinking, and decades of outdated policy have left Canada without a modern strategy to compete in the knowledge-based economy. Canada’s economy is not facing a short-term slowdown; it is in a structural competitiveness crisis.
Knowledge-based approaches to the firm: an idea-driven perspective
Patrick Cohendet, Olivier Dupouët, Patrick Llerena, Raouf Naggar, Romain Rampa, Industrial and Corporate Change
The challenges of the 21st century imply reconsidering the knowledge-based approaches of the firm under idea-led perspectives. This article proposes to reexamine the limits of the knowledge-based approaches of the firm by integrating the management of ideas as a process into the analysis. Building on the differences between the notions of idea and knowledge, the authors reconsider in turn the raison d’être, boundaries, coordination and incentive mechanisms, and the role of the entrepreneur of the firm. The authors show that ideas as a process are central to a more actor-inclusive view of the firm, providing a more relevant explanation of how firms can create value and fit into the contemporary world.
Policy Digest
What are the latest trends in industrial policy? Three key findings from OECD data
Antoine Dechezlepretre, Guy Lalanne, Luis Diaz, OECD
Governments across the OECD are increasingly using industrial policy to boost competitiveness, accelerate the green transition and build economic resilience in the face of trade tensions, slowing productivity growth and climate change. But what does this resurgence of industrial policy look like in practice? This blog explores data from eleven OECD countries to identify trends shaping industrial policy.
New OECD data quantifying industrial strategies offers a comprehensive, comparable view of how 11 OECD economies deployed industrial policy tools between 2019 and 2022. The findings reveal significant changes in both the scale and focus of government intervention, with clear implications for policymakers.
Trend 1: Industrial policy spending is growing
Across the 11 countries studied (Canada, Denmark, France, Germany, Ireland, Israel, Italy, Netherlands, Slovenia, Sweden, United Kingdom) industrial policy expenditures through grants and tax incentives grew from an average of 1.40% of GDP in 2019 to 1.55% of GDP in 2022 (equivalent to an increase of 4.1 billion USD), and the amounts channeled through financial instruments (loans, loan guarantees and government venture capital) increased from 0.73% to 0.80% of GDP (equivalent to an increase of 2 billion USD).
Trend 2: Sector-specific support declined, while horizontal support increased
OECD QuIS data highlights that the main targets of industrial policy grants and tax incentives are (1) support to specific economic sectors, (2) broad-based investment support, (3) R&D support and (4) the green transition, respectively representing on average 0.40%, 0.29%, 0.28% and 0.28% of GDP in 2022 across the 11 countries covered.
While sectoral policies remain the largest category, one of the most significant strategic shifts has been a move away from these interventions toward horizontal schemes for business investment and green support, while instruments targeting SMEs, sub-national regions and specific technologies also experienced an important expansion. Sectoral support decreased by 10% in GDP terms between 2019 and 2022, while schemes supporting general business investment jumped by 30% in GDP terms.
Trend 3: Governments are spending more on green industrial policy targets
Another trend has been the expansion of government support for the green transition. This includes programs that encourage the adoption and development of net-zero technologies, such as the use of green hydrogen in manufacturing, as well as measures that promote investment and production in sustainable inputs, like grants for wind electricity generation. Between 2019 and 2022, eight out of eleven countries increased their spending on green industrial policies, representing an increase from 0.23% to 0.27% of GDP, on average.
Among the 11 countries covered, Denmark has emerged as the green policy leader, allocating 0.55% of GDP to environmental targets by 2022. Much of this came through expanded tax exemptions for business purchases of electric vehicles, which grew from just 0.03% to 0.29% of GDP. The Netherlands follows closely, increasing green support from 0.31% to 0.49% of GDP, primarily by transforming its renewable energy support programme into a broader climate mitigation initiative also covering the industry sector and new technologies such as carbon capture and storage.
Germany also boosted its green industrial policy support to 0.33% of GDP in 2022, with most of this increase coming from a major grant programme for energy-efficient commercial buildings, reaching 0.17% of GDP by 2022.
Overall, 79% of green support came through direct grants rather than tax incentives, suggesting governments prefer targeted spending over broad-based incentives for environmental goals.
Events
EVENTS
6th International ZEW Conference on the Dynamics of Entrepreneurship (CoDE)
October 9-10, 2025, Mannheim
The aim of this conference is to discuss recent contributions to entrepreneurial research. It focusses on the formation, growth and exit of young firms linked to innovation, environmental sustainability, or entrepreneurial finance. The conference also addresses the challenges and opportunities of entrepreneurship policies. You are welcome to participate in the conference and contribute theoretical, empirical and/or policy-oriented papers on all areas of entrepreneurship research. Interested researchers are invited to submit a paper (or extended abstracts of at least 4,000 words are also welcome) to entrepreneurship2025@zew.de. Submission deadline: 31 May 2025
Twin Transition, Ecosystems, and Disruptive Innovation
October 23rd-24th 2025, Venice School of Management - Ca’ Foscari University of Venice, San Giobbe - Economic Campus.
The 19th edition of Regional Innovation Policies Conference will take place in Venice, Italy.
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This newsletter is prepared by Travis Southin.
Project manager is David A. Wolfe