Need for a job drives many of Canada’s entrepreneurs: report

CALGARY (Troy Media) – Canadians are increasingly starting their own businesses, but in many cases because they feel they have to, according to an international study on entrepreneurship.

The 2018 Global Entrepreneurship Monitor (GEM) Canada report found that Canadians are among the most likely in the 49 countries surveyed to see themselves as having both the ability and intention to start a business. Canadians are also the most likely of the G7 nations – twice the rate of the U.S. – to cite “necessity” as the reason for doing so.

Geoff Gregson and entrepreneurs
Geoff Gregson

The necessity motive is defined as “no better choice for work,” write authors Geoff Gregson, Chad Saunders and Peter Josty. That means Canadians’ compulsion to start a business may reflect the impact of 2018’s macro-economic conditions, such as weaker consumer spending, trade uncertainty with the U.S., reduced government spending as a result of rising fiscal deficits, and effects from oil price declines and no new pipelines.

“This is quite puzzling,” said Josty in an interview. “We don’t really understand why. Is it the unemployment rate? We don’t know.”

He also said it is unclear where the necessity-driven entrepreneurship is concentrated: Alberta, Newfoundland, the Yukon, or other parts of the country.

Chad Saunders
Chad Saunders

Other Canadian entrepreneurs are driven by an opportunity or desire for improvement (the survey does not elaborate on the nature of improvement). In fact, Canadians’ drive for “improvement” was also the highest among the G7 countries.

Young people comprise an increasing share of business startups as well as the running of young businesses. The number of Canadians aged 18-24 who are either involved in startups or are operating young businesses increased from 4.9 per cent in 2017 to 20.1 per cent last year. At the same time, 14.7 per cent of that age group were running established businesses.

“Findings suggest that, while Canada continues to rely heavily on the entrepreneurial potential of the 25-54 age range, the 18-24 age group is becoming more active in entrepreneurial activity,” the report states.

Peter Josty
Peter Josty

Compared to other G7 countries, Canada has the highest percentage of entrepreneurs with either a post-secondary degree or some graduate study. Entrepreneurs in Canada and the U.S. possess much higher educational levels than Japan and the four European countries of the G7, the report found.

The number of women involved in startups and young businesses has steadily increased since 2016, while the participation by men fell in 2018. Male participation at 20.4 per cent is roughly three per cent higher than the female rate. Still, the 17 per cent participation by Canadian women in startups and young businesses is higher than in any of the other G7 countries – the U.S., U.K., France, Germany, Italy and Japan.

The report found that Canadian women appear to have very positive attitudes towards entrepreneurship, seeing both opportunities to start a business and believing they have the skills to succeed. Women also have a lower fear of failure at business than men in Canada.

Josty said governments have focused on encouraging women entrepreneurs.

Yet, our willingness and desire to jump into the world of entrepreneurship faces significant hurdles, according to the report. Canadians have the highest rate of businesses discontinuance – retiring, selling or closing – of any G7 country, and also have a low rate of “established business activity” (in operation for more than three years).

“There’s a huge amount of churn going on,” said Josty. “The failure rate is very high.”

The report cites the lack of supports for entrepreneurs as one possible reason for this trend: education for entrepreneurs is rated as poor, as is support for the ability to bring research and development (R&D) breakthroughs to market, and the shortage of financing for entrepreneurs. The authors say their findings “raise concerns over the context for supporting entrepreneurship in Canada.”

The report provides a total of seven recommendations to help develop a stronger entrepreneurial sector:

  • More “policy attention” (i.e., money and support) for larger startup teams with growth ambitions
  • Targeted assistance for younger business owners
  • Better entrepreneurship training at the post-secondary level
  • Support export opportunities to help new and established businesses grow
  • Support more entrepreneurial activity by employees
  • Help women build entrepreneurial skills, as well as examining the high level of necessity-driven entrepreneurship
  • Reduce regulations which may constrain new business activities in Canada.

The GEM Project was established in 1999 and is considered the most comprehensive study of entrepreneurship in the world. GEM offers a portrait of the individual entrepreneur in terms of attitudes, activities, and aspirations. It also allows for a more detailed demographic breakdown of how factors like age, education and gender play a role in entrepreneurial activity.

The report is in its sixth year since the survey of Canada was re-established in 2013. Data was collected in two ways: the Adult Population Survey, using telephone surveys (landline and mobile) and online panels of randomly selected adults, aged 18-79 years, conducted by an independent polling firm; and, a National or Provincial Expert Survey – a questionnaire completed by 36 experts using the instrument developed for the global GEM project.

Gregson is research fellow at The Centre for Innovation Studies (THECIS), a Calgary-based not-for-profit organization devoted to the study and promotion of innovation; Saunders is an assistant professor at the University of Calgary’s Haskayne School of Business; and Josty is Executive Director at THECIS.

© Troy Media

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