Innovation-Led Foreign Direct Investment: A Comparison of Australia and Canada

Australian and Canadian businesses are in constant global competition for attracting foreign direct investments (FDI). FDI is an important avenue for the transfer of knowledge and technology, which can promote international trade and become a driver of business development and economic growth (OECD 2024). Numerous empirical studies have shown that FDI promotes productivity and, as such, strengthens the labour market (Blomstrom & Kokko 2002; Boghean & State 2015; Hiep, Trung & Chien 2022). An increase in FDI inflows has also been positively associated with an increase in overall tax revenue (Camara 2019; Binha 2021; ALshubiri 2024). For high-income countries, innovation is an important attractant for FDI. While all high-income countries offer advanced infrastructure and stable institutions, it is innovation that sets them apart, providing unique values to global investors. Therefore, this article examines the attractiveness of the investment environment from the innovation viewpoint with a specific focus on Australia and Canada.