Honourable Chair and esteemed members of the committee, thank you for inviting the Vector Institute to speak on this important topic today.
You've heard from other witnesses about challenges in Canada's research ecosystem and how these challenges impact private sector investment in research and development. We would like to focus on a specific actionable solution that's delivering measurable results right now: the capacity to translate research into real-world application across industries.
Canada possesses extraordinary AI research strength. We are home to global pioneers, leading universities and AI institutes, and breakthrough discoveries that have shaped the entire field, yet there has been a translation gap between innovative AI research and direct impact for Canadian companies and their customers. While the global AI adoption rate for business is 34%, Canada lags at 26%. We've fallen from fourth to eighth place in the Tortoise global AI index, and we risk continuing that trend.
To address the gap, the Vector Institute has demonstrated leadership through the creation of a dedicated AI engineering capability that bridges fundamental research and business application. This isn't traditional tech transfer: It's a fast-follow capability that can rapidly translate breakthrough research into deployable solutions while managing implementation risks.
Vector's AI engineering team consists of scientists and technical professionals who understand both cutting-edge research and business problems. They can define how an AI breakthrough can solve real-world challenges and help Canadian companies implement the technology safely and effectively.
Vector's private sector partners derive return on investment through direct access to Vector's AI research innovation and its ability to rapidly convert academic outputs into practical applications that can be deployed to drive measurable improvements in quality and efficiency. A recent Deloitte study commissioned by the Vector Institute reveals that for every federal dollar invested in AI, there was $10.64 in private sector investment in Canada. That's not a theoretical future return; it's happening right now. Last year, close to 80% of start-up and scale-up companies that participated in Vector's industry programming reported new or improved products, services or processes as a result of their engagement.
Here is why such results matter for private sector investment: Canadian companies need confidence to invest in AI. Vector serves as a trusted partner in a context where business leaders recognize that they need AI capabilities but lack the expertise to deploy and evaluate AI solutions. Vector helps companies navigate from research to implementation while maintaining the highest standards for safety and governance.
The Vector Institute has also observed that government and public sector adoption as a first customer for Canadian AI start-ups and scale-ups can help demonstrate that AI advancements can be trustworthy, beneficial and Canadian-controlled. What we are hearing from our ecosystem is that Canada needs to double down on its investments in this translation capability to continue driving private sector investment and measurable returns on that investment.
This can be summarized as follows.
First, Canada can prioritize sustained funding for research-to-application translation capabilities, not just fundamental research. The distinction between fundamental and applied research is increasingly irrelevant in AI: Commercial breakthroughs often emerge from fundamental discoveries within months.
Second, Canada can support not-for-profit institutions that can work across sectors. Here in Ontario, organizations like the Vector Institute, the Creative Destruction Lab and Mitacs generate economic returns because they bridge academic research and private sector applications.
Third, Canada can consider AI adoption requirements in government procurement and funding transfers. When government demonstrates confident, transparent AI adoption, it builds public trust that enables broader business adoption and strengthens the retention of Canadian start-ups and scale-ups as they build their markets.
Canada's AI ecosystem gave us a head start in the global AI competition, but we risk squandering that lead unless we rapidly increase AI adoption rates. Vector has proven that responsible research-to-application translation creates measurable economic impact through increased AI adoption by Canadian firms. That adoption leads to increased productivity. We stand ready to ensure that this trend continues and that Canadian AI capacity makes its way into Canadian firms.
Thank you, and we welcome your questions.