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At a sprawling assembly plant in Brampton, Ont., technicians with Canadian military contractor Roshel have been hustling to build hundreds of specialized light armoured vehicles (LAVs) as part of Canada’s contribution to Ukraine’s war effort. In August, Roshel announced it would begin buying Canadian-made steel for use in the custom ballistic armour that clads its LAVs. That move puts the company in the sweet spot of Prime Minister Mark Carney’s efforts to find new ways to support Canadian industries kneecapped by U.S. President Donald Trump’s tariffs.
Founded in 2016 by Roman Shimonov, a Soviet emigré by way of Israel, Roshel traces its roots to a non-military product: armoured trucks kitted out with surveillance and video encryption tools that prevent inside jobs by crews. To break into the LAV market, Roshel struck a deal with a Swedish firm that had developed state-of-the-art techniques for making lightweight armour. “Our joint work is focused on localizing ballistic steel manufacturing using Canada’s raw materials, ensuring that the country develops sovereign capacity in a technology that until now was entirely imported,” says Shimonov. “Unlike competitors such as Russia and China, Canadian officials have often been hesitant to promote domestic defence companies due to concerns about appearing biased.”
Roshel, he adds, is expanding into civilian markets, including law enforcement, mining and agriculture. “This dual-use model provides both the technical validation of defence projects, and the scale and stability of commercial demand.”
Roman Shimonov, the CEO of Roshel. To get into the light-armoured vehicle market, Roshel struck a deal with a Swedish company that developed lightweight armour.Jennifer Roberts/The Globe and Mail
Such examples point to a potential byproduct of Ottawa’s acquiescence to Trump’s demand that Canada boost defence expenditures to 5% of GDP by 2035. The spending increase of about $150 billion a year should help Canadian companies supplying goods and services to the Canadian military ride out the tariff war, Carney says. But will it also drive R&D and innovation in the wider economy?
A growing number of voices in defence circles think so. “We can buy off the shelf, which would mean mostly foreign technology,” says Gaëlle Rivard Piché, an international relations expert who heads the Conference of Defence Associations Institute, a national security think tank. “But there’s also an opportunity for investing into Canadian sovereign capabilities, creating a true defence base, a commercial base in Canada, and using the increase in defence spending to stimulate economic growth and economic productivity.”
The Network for Strategic Analysis, a group of researchers working with DND on security issues, has come to a similar conclusion. In a brief published this past spring, it noted that the defence sector invests three times as much in R&D as industry generally: “Investing in defence R&D also opens the door to the development of dual-use technologies that could propel Canada’s capacity for pursuing cutting-edge research.”
How this spillover works is a much-discussed topic among economists who study the impact of public spending on GDP growth and productivity. Aspects of the debate rest atop well-known examples: transformational technologies such as the internet, GPS-based navigation and nuclear power originated as military or space technologies developed by U.S. government agencies.
Rather than the open market, U.S. defence contractors supply the voracious appetite of the military-industrial complex and invest heavily in R&D in response to edicts from the Pentagon or the White House. They also often operate behind a veil. “The secrecy permits riskier or more radical and novel innovation,” says Darius Ornston, a University of Toronto global affairs scholar who has studied how agencies like NASA and the Pentagon funnel billions in financial incentives each year to venture-oriented small and mid-size firms looking to commercialize nascent technologies by first building military or space applications.
A few economists have detected even farther-reaching ripple effects. Using time-series data on military procurement and macroeconomic indicators going back generations, they’ve found that surges in defence spending trigger upticks in GDP and labour productivity that last for years. “Military spending has large and persistent effects on output because it shifts the composition of public spending toward R&D,” Juan Antolin-Diaz, an assistant professor of finance at the MIT Sloan School of Management, and Paulo Surico, a professor at the London Business School, wrote in a 2025 paper in the American Economic Review. “This boosts innovation and private investment in the medium term, and increases productivity and GDP at longer horizons.”
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Yet others point out that this phenomenon shouldn’t be regarded as a fire-hose effect, wherein opening the fiscal spigot will lift the whole economy. In a 2021 paper in Research Policy, economists Matteo Deleidi and Mariana Mazzucato found that U.S. spending from 1947 to 2018 on mission-oriented initiatives—such as the 1960s moon shot—produced a larger positive effect on GDP and on private investment in R&D than more generic public expenditures.
Deleidi and Mazzucato suggest that mission-oriented programs deliver greater innovation dividends because they involve a multitude of economic sectors. “For example, the types of investments needed to go to the moon required investments in aeronautics, materials, textiles, electronics, robotics and what eventually became software,” they write. “The spillovers that result from such investments are by definition higher due to their inter-sectoral character.”
It seems important to ground this esoteric debate in the untidy realities of how DND will actually dispense the billions coming its way. The military’s needs are highly diverse, ranging from rebuilding rotting bases to buying state-of-the-art submarines, says Stephen Saideman, director of the Canadian Defence and Security Network at Carleton University’s Norman Paterson School of International Affairs. In some cases, the supply chain is predominantly within Canada; in others—e.g. subs—the parts come from away.
Another complication: Canada has signed on to a NATO-wide procurement initiative meant to leverage economies of scale. “Rather than Denmark buying five howitzers and the Netherlands buying three, they buy 20 or 30 or 40 collectively to reduce the cost,” says Saideman. The wrinkle, in terms of potentially boosting Canadian R&D and productivity, is that within the European buying group, we may have less ability to direct new spending such that it supports Canadian tech.
A Chinook helicopter completes a supply drop to Canadian Rangers during the Canadian Armed Forces' annual Arctic training and sovereignty operation.COLE BURSTON/AFP/Getty Images
Ornston makes the case for what he calls “niching.” Canadian defence contractors should look to specialize in overlooked subsectors within the universe of military goods and services, and which demand Canada-specific expertise (such as operations designed for the far north). Firms can then use the increased spending as a platform to export to other NATO countries that are also re-arming. “The Waterloo tech sector are pros at this,” he says. “They specialize in business-to-business innovation. They found a niche.”
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Rivard Piché offers another important insight. While many people know the heroic narrative about U.S. military tech that changed the civilian world, the reverse dynamic may better describe how Canada could benefit from the new spending. Roshel, she says, is an example of a civilian technology that found a military application and then leveraged procurement deals to hone its systems.
“In Canada, the problem is not necessarily the transfer from military to civilian,” says Rivard Piché. “It’s the other way around. We have technology that’s being developed in labs and by small companies. People are focusing on the civilian uses, but they have military applications, as well.”
Of course, that kind of tech transfer will only happen if the Carney government overhauls Ottawa’s notoriously sclerotic military procurement system. “It’s really about seeing where the blocks are and how we can accelerate the process,” she says. “That will require a change in the culture.”
One might say that’s a mission-oriented public policy all by itself.