Case Study: Restructuring Canada's FDI Competitiveness—Five Industry Investment Pathways in a Changing Global Capital Map

Executive Summary

This case study focuses on the restructuring of Canada's foreign direct investment (FDI) competitiveness amid changes in the global capital landscape. It primarily draws on the research report Canada's New Capital Playbook, jointly released by the Royal Bank of Canada (RBC) Thought Leadership team and McKinsey & Company in September 2026, ahead of the Canada Investment Summit held in Toronto. Its methodological basis comes from McKinsey Global Institute research on investment location choice.

Research shows that about three-quarters of announced greenfield FDI globally since 2022 has been concentrated in data centers, semiconductors, electric vehicles and batteries, pharmaceuticals, and enabling industries such as critical minerals and energy. The Capital 10 (C10), a group of middle powers comprising Canada, Japan, Singapore, Germany, France, Australia, Spain, Brazil, Sweden, and South Korea, controls 43% of global outbound FDI with an economic size of about one-fifth of global GDP. Canada itself attracts 3.6% of global inbound FDI, higher than its 2.0% share of global GDP, but its per capita capital stock is about US$125,000, ranking low among comparable economies, and domestic capital expenditure accounts for only 15% of GDP.

The report estimates through scenarios that, if investment strategy is adjusted appropriately, Canada could unlock about US$1 trillion in incremental capital expenditure within five years, corresponding to about US$950 billion in GDP and up to 1.4 million direct jobs. The value of this case study lies not in forecasting outcomes, but in demonstrating how a resource-endowed, middle-sized developed economy defines its own investment competitiveness position in an environment of capital scarcity and intensifying competition, and how that definition translates into industry-specific investment judgments.

1. Case Background

1.1 Temporal Context and Data Window

The main data window observed in this case study is from 2022 to 2024, extending to the release point of the September 2026 report. This period corresponds to three simultaneous changes: contraction in total global FDI, highly concentrated capital flows, and the rising weight of middle powers in cross-border capital flows. The report's choice to be released before the Canada Investment Summit in Toronto itself illustrates the functional positioning of this type of research—not an academic summary, but a shared judgment framework for investors and policymakers.

1.2 Three Changes in the Global Investment EnvironmentFirst, FDI has become scarcer and is concentrated in industries that shape the future. The report points out that since 2022, about three-quarters of announced greenfield FDI has flowed to data centers, semiconductors, electric vehicles and batteries, pharmaceuticals, and enabling industries such as critical minerals and energy. This means FDI has not disappeared; rather, its direction and selection criteria have changed: capital is more willing to enter areas with long-term structural demand and higher policy visibility.

Second, the role of the United States in the global capital system is changing. The United States has long been the largest FDI destination, but as domestic capital expenditure strengthened, firms’ share of investment at home rose. One observable indicator is that the U.S. share of Canada’s outward FDI has risen to 36%, compared with about 11% two decades ago. This reflects both the depth and return attractiveness of U.S. capital markets and the reassessment other economies face in capital allocation.

Third, the capital weight of middle powers has decoupled from their economic weight. C10 members collectively produce about one-fifth of global GDP, yet control 43% of global outward FDI, a scale larger than that of the United States and China combined, while their total economic output is only half that of the latter two. This structural mismatch is a key starting point for understanding contemporary cross-border capital flows.

1.3 Canada’s Position in the C10

Canada’s position is dual in nature. On the one hand, it is an important capital exporter, with outward FDI accounting for about 5.6% of the global total, significantly higher than its 2.0% share of global GDP; on the other hand, as a capital importer, it attracts 3.6% of global inward FDI, also higher than its economic weight, but relative to its resource endowment, educated labor force, and potential for clean, low-cost electricity, it is still regarded as an underinvested economy.

This duality constitutes the core tension of this case: a country capable of exporting capital on a large scale yet facing relatively slow domestic capital accumulation.

1.4 Why This Case Is Worth Studying

The value of studying the Canada case lies primarily at three levels.

First, it provides a sample for middle powers to position themselves in capital competition. C10 members are neither the sole source nor the sole destination of global capital, and their strategic choices can serve as a reference for most medium-sized economies.

Second, it transforms investment competitiveness from a macro ranking issue into an industry-specific cost issue. The report does not use broad competitiveness scores; instead, it compares unit costs and levelized cost positions in specific industries, such as Canada’s relative advantages in industries dominated by electricity costs and its relative disadvantages in labor costs and economies of scale.

Third, it demonstrates a typical research paradigm: using scenario estimates to define the boundary of possibility rather than substituting forecasts for judgment. This point is especially important for understanding the nature of FDI analysis literature.

2. Investment Overview

2.1 Types of InvestmentThe FDI involved in this case is primarily in the form of greenfield investment, i.e., building new production facilities, energy facilities, or digital infrastructure, rather than acquiring existing assets. The reason is that the five sectors on which the case focuses—liquefied natural gas, mining, electric vehicles, pharmaceuticals, and data centers—mostly require additional capacity or new infrastructure, rather than simple asset restructuring.

On this basis, the case also includes several other investment forms:

• Expansion Investment: expanding capacity on the basis of existing mines, pharmaceutical facilities, or energy bases.
• Joint Venture: common in energy and mining, where investors and local enterprises or provincial institutions jointly bear capital expenditure and risk.
• Cross-border M&A: more typical in mining and pharmaceuticals, used to acquire reserves, R&D pipelines, or existing capacity.

It should be noted that the report’s analytical scope is mainly based on announced greenfield FDI data, which means the data reflect investment intentions and project pipelines rather than completed capital formation. This distinction must be retained when reading the conclusions of this case.

2.2 Investment Entities

The investment entities in the case can be divided into three categories.

The first category is multinational enterprises and institutional investors. This includes energy companies, mining companies, automobile and battery manufacturers, pharmaceutical companies, as well as data center operators and the pension funds, sovereign wealth funds, and infrastructure funds that provide them with long-term capital. The report mentions that the Canada Investment Summit attracted investors with total assets under management exceeding $100 trillion; this scale shows that potential capital supply is not scarce—what is scarce are projects and location conditions that meet investment criteria.

The second category is government entities. The Canadian federal government and provincial governments are both shapers of the investment environment and, in some infrastructure and energy projects, participants in different ways. Other national governments in C10 likewise play a role in capital allocation, which makes competition among countries not only market behavior but also a competition in policy design.

The third category is industrial ecosystem participants. This includes supplier networks, universities and research institutions, hospital systems, and the engineering and construction workforce. These entities do not directly provide equity capital, but they determine the speed of investment implementation and operating costs.

2.3 Investment Scale and Scenario Basis

The most frequently cited scale figure in the case is the scenario estimate proposed in the report: releasing approximately $1 trillion in incremental capital expenditure over five years. This figure corresponds to approximately $950 billion in GDP and up to 1.4 million direct jobs, and implies an increase in GDP per capita of 10% to 15%.It must be emphasized that this is a scenario, not a forecast. The purpose of a scenario is to answer a specific question: under given conditions, where are the boundaries of possibility? It does not describe the most likely outcome, nor does it include the probability of implementation failure.

In addition to aggregate figures, the case also includes several comparable cost metrics, the most concrete of which is data center construction cost: Canada's levelized construction cost is approximately US$190 per megawatt-hour, while that of the United States is approximately US$242 per megawatt-hour. Such industry-specific unit cost data better illustrate the actual basis for investment decisions than aggregate estimates do.

3. Why Investment Happens

When analyzing FDI motivations, merely describing corporate strategy is often insufficient. A more effective approach is to identify which variables carry the greatest weight in affecting returns in specific industries, and to observe the relative position of a location with respect to these variables.

3.1 Cost Structure: Electricity and Economies of Scale

An important observation in the report is that Canada performs strongest in industries where electricity costs dominate competitiveness, but needs improvement in industries where labor costs and economies of scale dominate. This assessment essentially decomposes national-level competitiveness into industry-level cost functions.

For liquefied natural gas and data centers, electricity costs and energy availability directly determine long-term operating costs, giving Canada a structural advantage. For EV components and pharmaceuticals, unit labor costs, production capacity scale, and supply chain density are more critical, so Canada's relative position needs to be reassessed.

3.2 Resource Endowments and Geographic Corridors

The geographic logic of resource-based investment is very clear in the case. The report notes that Canada's west coast is among the lower-cost locations globally for LNG exports to Asian markets, while the east coast is strategically important for European countries seeking to diversify energy supply.

In mining, Canada's advantages are not only reserves, but also deposits that can be operated competitively, skilled labor, a dense supplier base, and collaborative relationships with research institutions. The combination of these elements enables it both to expand existing industries such as potash and uranium and to be positioned to supply minerals such as copper, nickel, and zinc for which projected global demand gaps exist.

3.3 Market Demand and Geopolitics

Shifts in the direction of FDI are often driven by structural adjustments on the demand side. Europe's demand for energy supply diversification, projected shortfalls in critical minerals globally, and AI-driven data center demand together form the basis of investment demand for multiple industries in the case.

Geopolitical factors here are not background noise, but a direct location-choice variable. The report explicitly notes that many large institutional investors are seeking diversified allocations to hedge against risks posed by geopolitical disruptions. This demand for diversification objectively creates an opening for mid-sized economies.

3.4 Supply Chain RestructuringThe electric vehicle sector best illustrates supply chain logic. According to the report, Canada has an opportunity to transform into a technology hub by focusing on high-value automotive components—powertrains, electronic systems, battery systems, and software-intensive components—and thereby increase the degree of export diversification.

The key to this judgment is that the investment target is not the vehicle assembly stage, but rather stages with higher value added and greater coupling with local R&D capacity. This is a common strategic choice in supply chain restructuring: not pursuing full-chain coverage, but locking in the comparative advantage of specific stages.

The pharmaceutical sector follows a similar logic. The report notes that Canada has an advantage in unit manufacturing costs relative to the United States, Ireland, and Germany, and can rely on a highly skilled workforce cultivated by world-class universities and hospital networks. The investment driver here is not the lowest cost, but the combination of cost and talent supply.

3.5 Policy Environment and Capital Competition

One judgment the report repeatedly emphasizes is that global competition for capital has never been more intense, and economies that win the competition need to offer both higher returns and speed, certainty, and market access. This effectively shifts the evaluation criterion for the policy environment from the generosity of incentives to execution efficiency.

Approvals for large energy and resource projects usually involve multiple federal and provincial levels, and timelines and uncertainty constitute practical variables in investors' assessments. This background fact shows that the policy environment's impact on FDI is often reflected in time costs and predictability of outcomes, not only in fiscal incentives.

4. Investment Environment Analysis

4.1 Market Conditions

The most important market condition in Canada's investment environment is its deep connection with the North American market. This connection is reflected both in existing trade and supply chain arrangements and in capital flows. Firms in data centers, EV components, and pharmaceuticals typically view Canada as part of accessing a larger regional market, rather than as an independent end market.

But this advantage is two-way. The report notes that the United States' share of Canada's outbound FDI has risen to 36%, up from about 11% two decades ago, indicating that capital allocation within the same region is highly concentrated. For economies seeking to attract FDI, proximity to a large market is both a gateway and a source of competitive pressure.

4.2 Infrastructure and Energy

Energy and grid conditions are the most distinctive advantage in Canada's case. The site-selection logic for data centers is especially clear: a cool climate, available land, relatively low-cost energy, grid stability, and skilled construction workers together create locational attractiveness.

In terms of liquefied natural gas, the different positioning of the east and west coasts shows how the geographic attributes of infrastructure directly determine market direction—the west coast faces Asia, while the east coast faces Europe. Completely different investment logics may form within the same country, a common phenomenon of spatial differentiation in FDI research.

4.3 Regulation and InstitutionsThe assessment of the institutional environment requires distinguishing two dimensions. One is the stability of the rules; the other is the speed and certainty of rule enforcement. The report lists speed and certainty as key factors in competition for capital, indicating that in an environment with abundant capital but intense competition, the weight of the latter is rising.

For the resource and energy projects involved in this case, institutional factors often affect investment decisions through project timelines rather than direct costs. Longer preparation and approval cycles increase the cost of tied-up capital and also change investors’ required internal rate of return for projects.

4.4 Labour

Labour is the factor in Canada’s investment environment that most requires granular analysis. In pharmaceuticals and R&D-intensive segments, Canada’s skills supply formed through its university and hospital systems constitutes an advantage; in manufacturing and construction segments, labour cost and availability issues constitute constraints.

The report’s overall judgment is that Canada needs to improve its performance in labour costs and economies of scale. The implication is not that labour quality is insufficient, but that in cost-sensitive industries, Canada’s positioning needs to rely more on automation, scale, or value chain position to offset cost differences.

4.5 Industrial Ecosystem

The significance of the industrial ecosystem lies in lowering fixed costs for new entrants. Mining is a field explicitly mentioned in the report: a dense supplier base and research partnerships allow new projects to obtain professional service support more quickly for construction and operations.

Pharmaceuticals and electric vehicles rely more on the clustering of R&D institutions and engineering talent. The depth of the ecosystem determines whether investment can expand from a single project into an industrial cluster; in FDI research, this is usually regarded as a key variable for whether a project can survive long term.

4.6 Limitations and Weaknesses

An objective analysis must also explain limitations. Key data provided by the report include: Canada’s capital stock per capita is about US$125,000, the fourth lowest among comparable economies, far below the US figure of about US$337,000; domestic capital expenditure is 15% of GDP, tied with the UK at the low end of the same group of economies; the net investment rate after depreciation has fallen to about 1.6% of GDP, the third lowest in the group.

These data describe a structural state: the capital stock is not deep, and its expansion is relatively slow. It means attracting foreign investment is not a substitute for domestic investment; it needs to be matched with domestic capital.

5. Implementation and Development Process

This case involves not a single project but a logic for advancing the reconstruction of investment competitiveness. For ease of analysis, it can be summarized into four stages. It should be noted that the following stage division is a distillation of the report’s analytical logic; it constitutes an analytical framework, not an official policy timeline.

Stage One: Identifying Changes in the Global Capital Landscape

The starting point is a re-description of the external environment: contraction in total FDI, concentration toward future industries, a shift in US capital allocation, and a rising weight of C10. The core output of this stage is not policy but consensus—namely, recognition that the conditions of capital competition have changed and that the previous narrative is no longer sufficient to support investment decisions.### Phase Two: Comparing Competitiveness by Industry

The second phase breaks the national competitiveness question down into cost comparisons for specific industries. Five fields—liquefied natural gas, mining, electric vehicles, pharmaceuticals, and data centers—were selected because they are relevant to future industries, and Canada has an identifiable cost-position advantage or disadvantage in each.

The methodological significance of this phase is greater than the significance of its conclusions: it shows that the competitive unit for attracting investment is not the country’s overall image, but its position on an industry’s cost curve.

Phase Three: Investor Mobilization and Information Alignment

The third phase is reflected in concentrated communication aimed at capital suppliers. The Canada Investment Summit brings together investors managing more than $100 trillion in assets; its function is to reduce information asymmetry within a short period, enabling potential investors to assess location conditions using a unified framework.

This arrangement itself reflects the changing form of contemporary FDI marketing: from scattered investment promotion activities to systematic communication built around a research framework.

Phase Four: From Capital Intent to Capacity Deployment

The final phase is project execution. Key variables at this phase include approval speed, infrastructure readiness, labor supply, and supply-chain support. The report does not describe the pace of capacity deployment for specific projects, so this case stops at the framework level here and makes no speculation.

Key Timeline Clues

• From 2022 onward: global greenfield FDI clearly concentrated toward data centers, semiconductors, electric vehicles and batteries, pharmaceuticals, and enabling industries.
• 2022–2024: the observation window in which C10 outward FDI accounted for 43% of the global total.
• September 2026: RBC Thought Leadership and McKinsey & Company released the relevant research report and made it public before the Canada Investment Summit in Toronto.

6. Economic and Industry Impact

6.1 Macro Level

The report’s scenario estimates give three macro magnitudes: approximately $1 trillion in incremental capital expenditure, approximately $950 billion in GDP, and a 10% to 15% increase in GDP per capita. The significance of these numbers is that they illustrate the multiplier relationship of capital expenditure—investment is not only current-period spending but also affects long-term output through capacity formation.

Two qualifications need to be retained when using these numbers. First, they are scenario outcomes that depend on a series of preconditions; second, GDP growth is an indirect result of investment, passing through channels such as productivity, employment, and exports, and there is no automatic correspondence.

6.2 Employment Impact

The report estimates that the scenario corresponds to up to 1.4 million direct jobs. Beyond direct employment, large energy, mining, and data center projects usually also bring temporary construction-period employment and indirect employment in the supply chain.Employment structure also merits attention. Data centers and energy projects have concentrated demand for construction and engineering skills; pharmaceuticals and EV components have concentrated demand for R&D and engineering/technical talent. Differences in the types of jobs created by different industries affect the preparedness of training systems and regional labor markets.

6.3 Supply Chain Impacts

Among the five sectors, mining and EVs have the clearest supply chain spillover effects. In mining, Canada's existing supplier base can expand through new projects; in EVs, a strategy focused on high-value components means supply chain spillovers are concentrated in specific segments rather than the full chain.

The impact of data centers is more evident in energy and construction. Their direct spillovers to local manufacturing are relatively limited, but their influence on long-term power system planning is greater.

6.4 Technological Development

The report emphasizes the role of universities, hospitals, and research collaboration in the pharmaceutical and EV sectors. The spillover effects of such investment usually appear in R&D capacity and talent retention rather than direct capacity expansion. The measurement of technology spillovers has long been controversial in FDI research, so this case only describes mechanisms and does not infer a specific scale.

6.5 Regional Economies

Regional divergence within the same country is very pronounced in this case. LNG on the west coast targets Asian markets, while the east coast targets Europe; the distribution of data centers is more influenced by power and climate conditions; pharmaceuticals and auto parts are related to existing urban and industrial clusters.

This means that a national-level FDI strategy must confront the issue of resource allocation across regions when implemented, and this process is usually jointly determined by provincial policies and local conditions.

6.6 Industrial Transformation

In the EV sector, the report uses the phrase “transition into a technology hub,” pointing to a change in industry positioning rather than mere capacity growth. The core indicators of industrial transformation include export structure, value chain position, and R&D intensity. These variables usually change more slowly than investment is deployed.

7. Challenges and Lessons Learned

7.1 Regulatory and Institutional Challenges

Resource and energy projects generally involve multiple layers of approval. Institutional challenges usually manifest not as missing rules, but as a combination of process timelines and uncertainty over outcomes. For long-term projects sensitive to the cost of capital, this uncertainty is factored into required returns, thereby affecting investment decisions.

7.2 Market Differences and Regional Competition

The market differences Canada faces are mainly reflected in the competitive effects of proximity to a large market. The United States is both an important destination for Canadian capital and a strong competitor for attracting global capital. Report data show that the U.S. share of Canada's outward FDI has risen from about 11% to 36%, indicating increased concentration in intraregional capital allocation.

7.3 Operational and Cost RisksThe shortcomings in the cost structure are a clear source of risk. Canada has an advantage in industries dominated by electricity costs, but is at a relative disadvantage in industries dominated by labor costs and economies of scale. Such structural cost differences are difficult to change through short-term policies; they need to be mitigated through value chain positioning, automation, or clustering.

7.4 External Factors

Commodity price cycles, global interest rate levels, geopolitical changes, and shifts in technology pathways all affect the investment pace of the five sectors in the case. LNG and mining are sensitive to price cycles, data centers are sensitive to technology and energy prices, and pharmaceuticals are sensitive to regulation and R&D cycles. Different sectors respond to external shocks in different ways, which determines the diversification value of an investment portfolio.

7.5 Transferable Lessons

From the perspective of FDI research, the main insights provided by this case include:

1. The unit of analysis for investment attraction should be the industry, not the country as a whole. The same economy may occupy completely opposite competitive positions in different industries.
2. Costs of tradable factors constitute structural advantages. Factors such as electricity costs, land, and climate conditions that are difficult for policy to replicate quickly often determine long-term investment positioning.
3. The function of scenario estimates is to define the boundaries of possibility. Equating scenario results with forecasts is the most common misreading in FDI research.
4. Capital export capacity does not equal capital attraction capacity. A country can be both an important source of outward investment and an economy with insufficient domestic investment.
5. The evaluation criteria for policy competition are shifting toward speed and certainty. In an environment of abundant capital, execution efficiency is more differentiating than the strength of incentives.

8. Key Points for Understanding FDI

First, global FDI is thinning and concentrating. Total volume is contracting while direction is concentrating at the same time, with about three-quarters of announced greenfield FDI flowing to enabling industries such as data centers, semiconductors, electric vehicles and batteries, pharmaceuticals, and critical minerals and energy. For most economies, the question is not how to attract more FDI, but how to enter the industries into which capital is flowing.

Second, middle powers have become a structural force in capital. The C10, with about one-fifth of global GDP, controls 43% of global outward FDI, showing a clear decoupling between economic weight and capital weight. The investment behavior of this group is changing the landscape of global capital flows.

Third, investment competitiveness can be decomposed into specific cost functions. In this case, Canada's advantages are concentrated in industries dominated by electricity costs, while its disadvantages are reflected in industries dominated by labor costs and economies of scale. This method of decomposition is closer to the actual logic of investment decisions than composite rankings.Fourth, ownership of capital and the location where it is used can be separated over the long term. Canada’s outward FDI accounts for 5.6% of the global total, higher than its 2.0% share of global GDP, while domestic capital expenditure accounts for 15% of GDP, with a net investment rate of about 1.6%. The coexistence of capital export and insufficient domestic investment is a common feature of many mature economies.

Fifth, the validity of the research conclusions depends on the measurement basis. In this case, the $1 trillion in capital expenditure, $950 billion in GDP, and 1.4 million jobs are all scenario estimates; their value lies in illustrating the relationship between conditions and outcomes, rather than predicting the future.

Appendix: Core Entities and Relationships

Related Questions

Why is this investment case worth studying?

Because it presents the complete logic of how a medium-sized developed economy repositions its investment competitiveness in an environment of capital scarcity and intensifying competition, encompassing both changes in the macro capital landscape and sector-by-sector cost comparisons.

What types of FDI are involved in the case?

Mainly greenfield investment, while also including expansion investment, joint ventures, and cross-border M&A. The report’s data basis is mainly based on announced greenfield FDI, reflecting investment intentions rather than completed capital formation.

What factors influenced investment decisions?

They mainly include electricity and energy costs, resource endowments and geographic access, market demand and geopolitical changes, supply chain restructuring, and the stability and implementation efficiency of the policy environment.

What is Capital 10 (C10)?

It refers to the ten largest capital source countries other than the United States and China, including Canada, Japan, Singapore, Germany, France, Australia, Spain, Brazil, Sweden, and South Korea. Together they produce about one-fifth of global GDP, yet control 43% of global outward FDI.

What are Canada’s respective advantages and limitations in its investment environment?

Advantages are concentrated in energy and electricity costs, resource endowments, skilled labor, research institutions, and connections to the North American market. Constraints are mainly reflected in labor costs, limited economies of scale, a relatively low capital stock per capita, and a low net domestic investment rate.

What do the data center cost differences illustrate?

Data presented in the report show that the levelized construction cost of data centers in Canada is approximately $190 per megawatt-hour, lower than about $242 per megawatt-hour in the United States. This indicates that in an industry dominated by electricity costs, locational conditions can create quantifiable cost advantages.

Is the $1 trillion investment scale in this case a forecast?

No. It is a scenario estimate, used to illustrate the scale boundary that could be reached under specific conditions, rather than a forecast of actual future investment.

What relevance does this case have for other countries?

Its analytical approach is transferable: compare cost positions by industry, identify structural factor advantages that are difficult to replicate, and shift policy environment assessment from incentive intensity to implementation speed and outcome certainty.

This article is content from the GlobalFDI.org case study section, based on independent analysis of publicly available research reports, and does not constitute assessment opinions or investment advice regarding any country, region, enterprise, or investment project. The scenario estimates mentioned in the article are all cited from the referenced publicly available research reports and do not represent the predictions of this platform.