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News Releases


Canadian firms as entrepreneurial and growth oriented as American small business

But barriers to growth must be eliminated for Canadian SMEs to reach full potential
The Path to Prosperity: Speech by Gordon M. Nixon
Summary of a speech by Gordon M. Nixon
Canadian firms as entrepreneurial and growth oriented as American small business
Canada's SMEs Study (pdf, 42kb)
IPSOS Reid Report (pdf, 42kb)

TORONTO, October 7, 2002 - Canada's small business entrepreneurs are just as prepared as their counterparts in the United States to take new risks and to aggressively grow their businesses. This is the surprising finding of a major new study released today by RBC Financial Group, Canadian Manufacturers and Exporters, and the Canadian Federation of Independent Business.

The study is based on existing data and a survey of 1,200 owner/managers of small- and medium-sized enterprises (SMEs) on both sides of the border. It shatters the popular myth that Canadian companies don't grow as rapidly as American firms because their owners are more risk averse and less interested in aggressive growth. In fact, the study shows there are significantly more external factors that create barriers to growth for small business, than internal ones.

When asked to identify the most significant barriers facing them today, business owners in both countries pointed to taxation, the economic/market environment, and human resource issues including the availability of qualified personnel. Other barriers include competition, access to financing (particularly higher-risk debt and equity), and government regulation.

The study concludes that the removal of these and other barriers is important because small business represents a larger percentage of the Canadian economy than the American market, so any productivity gains the sector makes will have a much greater impact north of the border.

"We have done a good job starting new businesses in Canada, but we haven't done nearly as well in growing them into the market leaders and industry champions we need to prosper in the global economy," said Gordon Nixon, President and CEO, RBC Financial Group. "If we can grow our small firms more profitably and efficiently, we can go a long way towards enhancing our future productivity and standard of living."

The report (which can be found at www.rbc.com), recommends public policy reforms to help SMEs to become growth leaders, while offering adequate incentives to foster their development. All three partners agree that Canada needs policies that provide the right environment for more of the country's firms to become global market leaders.

"The number-one incentive, with the biggest impact on business growth in both countries, is lower and less complex taxes," said Catherine Swift, president of the Canadian Federation of Independent Business. "Given the tenacity and optimistic nature of small business owners, any changes that deal with the barriers to their growth, such as taxation, red tape and access to financing, will reap major benefits for the economy and for Canada as a whole."

"Given the link between Canada's prosperity and its level of productivity, the task at hand is to explore how we can help SMEs grow productively," said CME President & CEO Perrin Beatty. "The Path to Prosperity study suggests three key measures: provide SMEs with more effective tools to invest in productive capital; help SMEs expand their marketplace and become more export oriented; and make it easier for SMEs to adopt new technology and invest in additional research and development activity."

The survey, announced last May, interviewed 800 Canadian and 400 American SME operators to obtain insights directly from these entrepreneurs on what they perceive to be incentives and impediments to their growth.

The study recommends several private policy recommendations to dismantle the underlying barriers to growth, including:

  • Increasing equity financing to young, innovative firms, particularly through venture capital and angel investors;
  • Encouraging the development of a more robust market for sub-prime debt financing for higher risk firms;
  • Enhancing the management knowledge of SME owners by providing value-added business information as part of relationships with financial institutions and others; and
  • SME management taking greater advantage of new technologies, conduct more research and development, look at ways to expand their market and export potential, and invest in productive capital.

From a public policy perspective, the study partners recommend:

  • Ottawa stay the course on monetary and fiscal policy, and lead the charge on enacting policies geared towards rebuilding productivity, since existing initiatives are clearly not working.
  • Immediately addressing barriers to growth embedded within tax policies, especially profit insensitive taxes.
  • Overhauling the regulatory framework, making it less complex and costly, and enhancing the protection of intellectual property rights.
  • Pursuing initiatives geared towards greater technology-sharing arrangements and technology expositions.
  • Further liberalizing internal trade, financing and labour markets.

"While our study represents a good beginning, more work is clearly required, particularly around management practices and the key drivers of successful growth," said Mr. Nixon. "However, given the growth-oriented mindset of our entrepreneurs, we should be moving quickly to address whatever barriers we can. The impact of ignoring such challenges could well be the continued erosion in our standard of living and a growing inability to afford the kind of society Canadians value."

The telephone interviews were made between July 10 and August 23, 2002 with a random sample of 800 small- and medium-sized firms in Canada and 400 in the U.S. The associated margin of error in Canada was +/- 3.5% and +/- 5.6% in the U.S. For the purposes of the survey, firms were qualified as small or medium if they have 250 employees or fewer. There were no financial qualifiers on the sample.


Media contacts:
RBC: Beja Rodeck, (416) 974-5506
CME: Carolyn Conner, (613) 238-8888 ext. 222
CFIB: Holly Bennett, (416) 222-8022


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