An Integrative Institutional Framework of the Canada-U.S. Business Performance Gap

Canada is consistently ranked among the best places to live. However, its potential for sustainable prosperity could depend on how well its business sector navigates a rapidly changing world. Canadian companies innovate and export less than their American peers and generate lower returns from such activities. Prior studies have provided insights into different aspects of this underperformance problem. Still, more helpful insights can be gained by synthesizing their distinct views. This article develops an institutional perspective on comparative economic development between Canada and the United States. I posit that initial institutional differences, linked to different separation patterns from British colonial rule, induced distinct path dependencies in the Canadian and US economies. A vital premise is that the United States historically adopted more classically liberal mercantilist institutions than Canada. This initial institutional disparity is associated with American firms’ nationalistic and profit motives, plus their early attempts to organize and lead global value chains (GVCs). Ultimately, this article presents an integrative institutional framework that links the Canada–US business performance gap to a complex interplay among a trio of institutionally induced gaps at the firm, GVC, and business leader levels.