Attitudes, Activity and Aspirations of Canadian Entrepreneurs: An A+

By Tina Kremmidas

At the very heart of entrepreneurship is the activity of turning ideas into marketable products, processes and services. As a source of innovation, entrepreneurs spur productivity, national competitiveness, economic growth and job creation.

Several theories have been put forward to explain the field of entrepreneurship. These theories have their roots largely in economics, psychology and sociology. All three fields intersect to provide useful perspectives. Entrepreneurial activity originates at the individual level and, therefore, depends on an individual’s attitudes, motives and aspirations; identification and perception of economic risks and opportunities; technical, organizational and behavioral skills; and managerial competence. In turn, entrepreneurial motives and actions are influenced by cultural and institutional factors, the business environment and macroeconomic conditions.

The Global Entrepreneurship Monitor (GEM) is one of the most important source for data on the attitudes, activities and aspirations of individuals who participate in various phases of entrepreneurship. The GEM (2013) data is harmonized across 70 countries, which facilitates cross-country comparisons.
Where does Canada stand?

Success Starts With Attitude

Attitudes toward entrepreneurship vary between countries. They influence the willingness of individuals to become entrepreneurs and establish new enterprises, and the likelihood that society will support their efforts.Overall, Canadians have a very positive attitude towards entrepreneurship.

Sixty-one per cent of Canadians (18 to 64 years of age) believe entrepreneurship is a desirable career choice, more than in any other G7 country, except Italy.
Seventy per cent of Canadians believe successful entrepreneurs enjoy high social status, a figure that has remained relatively unchanged in recent years. The occupational status of entrepreneurs is held in high regard across the country, but particularly in Newfoundland and Labrador where 81 per cent of working-age residents feel entrepreneurs are accorded high social status.

Seventy per cent of Canadians think the media has done a good job in promoting entrepreneurship in Canada.

Seizing the Opportunity

Fifty-seven per cent of working-age Canadians believe there are good opportunities to start a business in the area where they live (up from 36 per cent a decade ago), the highest percentage among G7 countries. Results on this measure vary considerably across the country, ranging from a low of 53 per cent in Ontario to a high of 73 per cent in Saskatchewan. As a comparison, 47 per cent of Americans see good opportunities to start a business in the area where they live.

Forty-eight per cent of Canadians believe they have the required skills and knowledge to start a business compared to 56 per cent of Americans. Residents of British Columbia are the most confident, with 59 per cent stating they have the skills and knowledge to start a business. Only 36 per cent of Quebecers believe they have the skills and knowledge to be entrepreneurs.

About one-third (35 per cent) of Canadians with positive perceived opportunities indicated that fear of failure would prevent them from setting up a business compared to 31 per cent of Americans. Newfoundlanders and Labradorians are less prone to be deterred from starting a business due to the fear of failure. Residents of Manitoba fear failure the most.

Canada is a Leader in Early Stage Entrepreneurial Activity

Roughly 12 per cent of working-age Canadians (14.5 per cent of the male population and 9.9 per cent of the female population) are early stage entrepreneurs—either nascent entrepreneurs (i.e. engaged in setting up a business) or owner-managers of a new venture (less than 3 ½ years old). This is up from 8.3 per cent a decade ago. Early stage entrepreneurship rates in Canada are virtually equal to that of the U.S. and higher than in other G7 countries. Indeed, the U.S. and Canada rank the highest in overall early stage entrepreneurial activity among 25 innovation-driven economies.

The province of Alberta has the highest entrepreneurship rate (18.6 per cent) in Canada, followed by Saskatchewan and Manitoba (14.0 per cent and 13.7 per cent, respectively). Less than 10 per cent of Quebec working-age residents are engaged in early stage entrepreneurial activity.

Canada as a whole shows strong entrepreneurial engagement among the younger work force, with Canadian participation peaking in the 25-34 age group. There are some striking differences across the country. In British Columbia, Alberta and Saskatchewan, early stage entrepreneurial activity is most prevalent in the 35-44 age group. In Manitoba, early stage entrepreneurial activity peaks among 18-24 year olds. In Quebec, there is a higher percentage of individuals engaged in early state entrepreneurial activity in the 45-54 age bracket.

Sixty-seven per cent of Canadians involved in early stage entrepreneurial activity are driven by opportunity as opposed to finding no other option for work and indicate that the main driver for being involved in this opportunity is being independent or increasing their income. Among G7 nations, opportunity-driven entrepreneurship is the highest in Canada.

Canada leads G7 nations in the percentage of 18-64 year olds who have personally provided funds for a new business, started by someone else, in the past five years. Nearly six per cent (5.7 per cent) of working-age Canadians did so compared to 4.6 per cent of Americans. These so-called “angel investors” play a crucial role in the entrepreneurship ecosystem by providing much-need seed money to help start-ups get off the ground.

Entrepreneurial Aspirations Matter

Entrepreneurs in Canada (and the U.S.) are more ambitious than their G7 counterparts when it comes to job creation expectations and new product introduction.

Twenty-two per cent of early-stage entrepreneurs in Canada have a target of at least 10 jobs and 50 per cent growth in five years. Both Alberta and Quebec stand out with notably higher proportions of growth-oriented early-stage entrepreneurs (28 per cent an 26 per cent, respectively).

Thirty-two per cent of early stage entrepreneurs in Canada have, or expect to introduce a new product (34 per cent in the U.S.)   
Export is not an early goal of a typical Canadian start-up, but it is important for some. Fourteen per cent of early-stage entrepreneurs in Canada expect that at least 25 per cent of their customers will come from other countries. In this regard, Canada ranks 5th among G7 nations.

Determinants Affecting Entrepreneurial Performance

Many studies indicate that entrepreneurs and entrepreneurship are created by a combination of three factors: opportunities, skilled people and resources. These factors, in turn, are influenced by the regulatory environment and culture. Resources reflect access to capital, R&D and technology. Opportunities are created by the market conditions in the country.

These six themes—the regulatory framework, culture, access to capital, access to R&D and technology, entrepreneurial capabilities and market conditions—describe the determinants affecting entrepreneurial performance.

Policymakers interested in facilitating and encouraging the growth of entrepreneurship should promote public policies centred on these six themes.

For example, there have been calls for a national angel tax credit for investments in innovative start-up companies. Many U.S. states offer such a credit to increase the amount of funding available to start-up businesses. They recognize that angel investors play a crucial role that others are not willing to fill—they make personal, risky bets on start-up companies that have the potential to create a significant number of well-paying jobs.

In the 2013 federal budget, the Government of Canada provided business incubator and accelerator organizations funding so they can better provide entrepreneurs the resources, facilities and expertise needed to develop their business plan and seek follow-on financing. It noted that it will continue to look for ways to better connect innovative and high-growth firms with venture capitalists and entrepreneurial services abroad. The government also created new awards to highlight Canada’s entrepreneurship culture and to celebrate the achievements, mentorship, risk-taking and resilience of Canadian entrepreneurs.

Canada has also introduced the Start-up Visa Program, the first of its kind in the world, which links Canadian venture capital funds, angel investor groups and business incubators with innovative foreign entrepreneurs who want to launch their start-up companies in Canada. In July of this year, the first successful applicants were welcomed to Canada.

In recent years there has been a growing emphasis on entrepreneurship education and training in a wide range of secondary and post-secondary educational settings to strengthen entrepreneurial capabilities. Starting early in getting familiar with the idea that running one’s own business as a potential career option is important and schools can play a central role in this regard.

Public policy should also focus on creating the conditions for entrepreneurs to take advantage of domestic and global market opportunities. Governments at all levels should examine opportunities to use procurement to encourage young, innovative firms. Additionally, with a number of early stage entrepreneurs aspiring to tap foreign markets, it is important that they have access to up-to-date market information on foreign countries as well as assistance in identifying new customers, finding reliable suppliers, developing distribution channels, dealing with foreign regulations and learning how to adapt a product to local market conditions. The Canadian Trade Commissioner Service can play a crucial role in this regard.

Finally, policy initiatives that relieve administrative burdens on entrepreneurs should be an ongoing priority.

In Conclusion

Canada boasts a high rate of intention and early state entrepreneurial activity compared to other industrialized nations suggesting that an encouraging climate exists for the aspiring entrepreneur. However, not all early stage firms will survive. According to Industry Canada data, about 85 per cent of businesses that enter the marketplace survive one full year, roughly 70 per cent survive for two years and about half survive for five years.

The creation and nurturing of business enterprises that can compete on a global scale and bring sustainable economic and job growth is one of the most important economic policy challenges facing Canada. It requires a strong understanding of the drivers of high-growth entrepreneurship and collaborative action on the part of federal and provincial governments, businesses, investors, industry associations and educational institutions.

Tina Kremmidas, Economics Contributor