SME and Entrepreneurship Policy in Canada

OECD

• Publisher: OECD
• Year: 2017
• eBook ISBN: 9789264276376
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Chapter 1. Assessment and recommendations

This chapter summarises the findings and recommendations of the OECD SME and entrepreneurship policy review in Canada. It presents key evidence and analysis on the structure and performance of SME and entrepreneurship activity, the business environment and framework conditions affecting SMEs and entrepreneurship, the strategic framework and delivery system for SME and entrepreneurship policy, federal SME and entrepreneurship programmes, approaches to tailoring SME and entrepreneurship policy to local conditions and ensuring coherence between national and local interventions, and policy to promote women entrepreneurship. It presents recommendations for government action in each of these areas.

The structure and performance of SME and entrepreneurship activity

SMEs account for a substantial share of business activity

Small and medium-sized enterprises (SMEs) make a substantial contribution to the Canadian economy. SMEs with 1-499 employees accounted for 57.7% of business sector employment in 2015 according to data from Canada’s Survey of Employment, Payrolls and Hours (SEPH), which covers all businesses that have at least one employee. On a narrower measure, SMEs with 1-249 employees accounted for an average 60% of business employment in Canada in the period 2001-11 according to the Organisation for Economic Co-operation and Development (OECD) DynEmp dataset. This is a substantial level of employment, although the SME share is somewhat below the average (64.8%) of the 17 OECD countries participating in the project (Criscuolo, Gal and Menon, 2014). The same data source indicates that micro-enterprises (1-9 employees) contributed 16% of total business employment in Canada, which is relatively low compared with other OECD countries, whereas medium-sized firms (50-249 employees) accounted for 22%, which is relatively high. The overall picture is of a country with a substantial SME sector, in which SMEs are relatively large.

Small business productivity should be strengthened

Baldwin et al. (2014) report that gross domestic product (GDP) per hour worked in small businesses was only 47% that of large firms in Canada in 2008, compared with 67% in the United States. They estimate that reducing the size of the productivity gap between small businesses and large firms to that of the United States would increase aggregate Canadian labour productivity by 11%.

Proportions of high-growth enterprises and start-ups are generally below top performing countries

The proportion of high-growth enterprises in industry in Canada (4.6%) is the third highest of 15 OECD countries, as measured by the OECD’s employment definition, but eighth when measured on the turnover definition. In services, the proportion of high-growth firms (3.1%) in Canada ranks eighth out of fifteen on the employment definition, with a similar ranking on the turnover definition (Figure 1.1).1 The proportion of gazelles (recent start-ups with rapid growth) in Canada also appears to be towards the middle of the range of OECD countries for which data are available (OECD, 2015a).2 These data suggest that although Canada’s current performance in generating high-growth enterprises is largely in line with OECD averages, its performance does not match that of the leading countries.

Figure 1.1. Proportion of high-growth firms in the Canadian business population, 2012

Percentage values (Total of employer enterprises with at least ten employees)

Source: OECD based on OECD (2015a), Entrepreneurship at a Glance 2015, OECD Publishing.

StatLink http://dx.doi.org/10.1787/888933553309

Canadian SMEs are relatively innovative

Canadian SMEs (1-249 employees) are active in research and development (R&D), accounting for 36% of total business R&D in 2013, in line with the OECD average (OECD, 2015b). Compared with other countries, Canadian SMEs have very strong performance in some aspects of innovation, with total innovation rates approaching those of large firms (Figure 1.2). Sixty-eight per cent (68%) of Canadian SMEs reported involvement in some form of innovation in 2010-12, a result second only to Switzerland’s 76%. Canada also has a large share of SMEs that combine both marketing/organisational and product/process innovation.

Figure 1.2. Types of innovation undertaken by SMEs and total “large firm” innovation, 2010-12

As a percentage of all SMEs (and large firms)

Note: Data are from the Eurostat Community Innovation Survey (CIS-2012) and other national innovation surveys. For Canada, data come from the Survey of Innovation and Business Strategy (SIBS) 2012 and refer to 2010-12. The survey covered firms with 20 or more employees and with at least CAD 250 000 annual revenue in 2009. The industries covered are NAICS (2007) 31-33, 41, 48, 49, 51, 52 and 54.

Source: OECD based on OECD (2015b), OECD Science, Technology and Industry Scoreboard 2015, OECD Publishing.

StatLink http://dx.doi.org/10.1787/888933553328

SME export activity is limited

However, SMEs (with up to 249 employees) accounted for only 18% of the value of national exports in 2012 compared with an OECD average of 31% (Figure 1.3) (although these figures exclude production of intermediates for export or export through intermediary wholesalers). Only 10% of Canadian enterprises with 1-99 employees exported directly. Even among medium-sized enterprises (100-499 employees), only 34% were involved in export (ISED, 2013a). This limited export activity is likely to limit the opportunities for the expansion of Canadian SMEs.

Figure 1.3. Share of export value by enterprise size, 2012 or latest available year

Percentage of total export value

Note: The shares of exports by enterprise size are calculated as the ratio of the value of exports by each size class over the total value of exports.

Source: OECD based on OECD (2015a), Entrepreneurship at a Glance 2015, OECD Publishing.

StatLink http://dx.doi.org/10.1787/888933553347

Canada has healthy entrepreneurship attitudes

Attitudes to entrepreneurship in the Canadian adult population are generally more positive than averages for OECD countries (Figure 1.4). Furthermore, at 13% in 2014, Canada’s Total early-stage Entrepreneurial Activity (TEA) rate (which measures the proportion of the adult population involved in starting or running a new business) was the fifth highest among the OECD countries for which recent Global Entrepreneurship Monitor (GEM) data are available. It is also encouraging that only 16% of Canadian early-stage entrepreneurs were motivated by lack of other opportunities in the labour market, which is below the OECD average (20%).

Figure 1.4. Entrepreneurial attitudes in the Canadian adult population, 2014

Percentage values

Note: Percentage values are out of the total adult population (18-64), except for “fear of failure” which is out of those who “perceive a market opportunity”. This is the exact definition for each indicator: i) Desirability of entrepreneurship: Percentage of 18-64 population who agree with the statement that in their country, most people consider starting a business as a desirable career choice; ii) Social status of entrepreneurship: Percentage of 18-64 population who agree with the statement that in their country, successful entrepreneurs receive high status; iii) Perceived opportunities: Percentage of 18-64 who see good opportunities to start a firm in the area where they live; iv) Perceived capabilities: Percentage of 18-64 population who believe to have the required skills and knowledge to start a business v) Entrepreneurial intention: Percentage of 18-64 population (individuals involved in any stage of entrepreneurial activity excluded) who intend to start a business within three years; vi) Fear of failure: Percentage of 18-64 population with positive perceived opportunities who indicate that fear of failure would prevent them from setting up a business. OECD data exclude New Zealand and Iceland.

Source: OECD based on data supplied by the Global Entrepreneurship Monitor (GEM) research consortium.

StatLink http://dx.doi.org/10.1787/888933553366

Business dynamics are weak

On the other hand,...

Table of contents

• Title page
• Legal and rights
• Foreword
• Acknowledgements
• Abbreviations
• Introduction
• Executive summary
• Chapter 1. Assessment and recommendations
• Chapter 2. SME and entrepreneurship characteristics and performance in Canada
• Chapter 3. The business environment for SMEs and entrepreneurship in Canada
• Chapter 4. The strategic framework and delivery system for SME and entrepreneurship policy in Canada
• Chapter 5. Federal programmes for SMEs and entrepreneurship in Canada
• Chapter 6. The local dimension of SME and entrepreneurship policy in Canada
• Chapter 7. Women’s entrepreneurship in Canada
• About the OECD