An Integrative Institutional Framework on 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, we can gain more helpful insights by synthesizing the distinct views. This article develops an institutional perspective on comparative economic development between Canada and the United States (U.S.). The general thesis posits that initial institutional differences, linked to different separation patterns from British colonial rule, induced distinct path dependencies in the Canadian and U.S. economies. A vital premise is that the U.S. 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-U.S. business performance gap to a complex interplay between a trio of institutionally induced gaps at the firm, GVC, and business-leader levels.