climbs in tandem with firm size.7 The reasons
for this correlation include the fact that
bigger firms commonly have better-educated
workers and managers, invest more in equipment and technology, do more training and
skills upgrading, and have longer production
runs (allowing fixed costs to be spread over
additional output). As a business grows, it is
usually able to achieve greater specialization
of skills and outsource tasks that are more
efficiently performed by other parties—both
of which also boost productivity.
Two recent Statistics Canada studies found
that the sizable productivity gap between
Canada and the United States is mainly due
to the fact that small companies and the selfemployed make up a larger portion of the
private-sector economy on our side of the
border.8 Fundamentally, raising Canada’s
productivity game requires that we develop
more large companies—a point that sometimes seems to elude our government policymakers.
Third, cross-national research indicates
that as businesses expand, they are more
likely to engage in international commercial
activity, including exporting. Getting local
companies engaged with outside markets is a
principal means by which small jurisdictions
like BC are able to grow richer over time.
In most countries, big companies usually
dominate the trade statistics. According to
Industry Canada, three-quarters of the country’s exports come from “larger” businesses
(here defined as those with at least 100
employees). The good news for BC is that
there has been a notable increase in the
number of SME exporters over time. Today,
7
85% of our exporters are “small” firms (fewer than 50 paid staff), and they supply more than a
third of the province’s international merchandise exports. The substantial contribution of
smaller businesses to BC’s export mix suggests there is scope to further increase the involvement
of locally based SMEs in international markets.
Fourth, a substantial body of research shows that regions with large “anchor” firms and
growth-oriented SMEs see accelerated innovation. While it is true that many small companies
are highly innovative, large firms are actually responsible for 75-80% of global business
research and development spending and for most patenting activity as well. In Canada, just 75
companies account for half of all private-sector R&D. Bigger companies have a greater capacity
to finance innovation; to commercialize new ideas; to hire and develop scientists, engineers,
and product managers; and to participate in collaborative arrangements with universities and
external research organizations.
YOU SEE A HIGH RISE
OFFICE BUILDING.
WE SEE A
LOW-RISK
INVESTMENT.
For a recent Canadian example, see
Statistics Canada, “Canadian Labour
Productivity Differences Across Firm Size
Classes, 2002 to 2008,” Canadian
Productivity Review, catalogue 15-206-X,
2013.
8
Statistics Canada, “The Distribution of
Gross Domestic Product and Hours
Worked in Canada and the United States
Across Firm Size Classes,” Economic
Analysis Research Paper Series, No 88,
2013; and “Canada-United States Labour
Productivity Gap Across Firm Size
ACQUISITION | MANAGEMENT | DEVELOPMENT | PORTFOLIO DIVERSIFICATION
FEASIBILITY STUDIES | DEPRECIATION REPORTS | CONSULTING
Classes,” The Canadian Productivity
Review, catalogue 15-206-X, 2013.
CPABC in Focus • Feb/Mar 2014
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