Last Updated on January 24, 2019
According to a new study, recent immigrants to Canada who begin small or medium-sized businesses are more likely to export and target markets other than the U.S.
The Conference Board of Canada investigated 15,000 small and medium-sized businesses to determine how companies begun by immigrants who have arrived within the past five years compare to other businesses of the same size.
It found Canada’s diverse pool of immigrants is a source of strength in expanding into new markets, partially because they have an understanding of the language and culture of business in their country of origin.
The study found 12 per cent of immigrant-owned businesses export goods and services to markets beyond the U.S., versus 7 per cent for businesses owned by non-immigrants. The majority of such immigrant-run businesses were in Ontario and Quebec. About 19 per cent of immigrant-owned businesses exported, compared to 14 per cent of other SMEs.
However, the study raised some concerns about the long-term health of companies with a recent immigrant as majority owner. Despite being among the fastest-growing SMEs, these companies earn lower returns on investments in business assets than other Canadian exporters and sell less in dollar value.
The profits of non-U.S. immigrant exporters grew at an average annual rate of 21 per cent compared with 2 per cent for their non-immigrant counterparts. Many are concentrated in wholesale and retail sectors and thus vulnerable to competitive pricing from other markets.
Non-U.S. immigrant exporters also lack networks within Canada, a factor that could ultimately limit their ability to grow. In fact, their cultural ties helped them overcome a weak business model, Goldfarb said.
The Conference Board report put a special focus on the select group of businesses in the knowledge sector run by immigrants, saying it represents important potential in non-U.S. markets.
Because such businesses are innovators and compete on new products rather than low prices, they should be a particular focus of policy makers, the study said.
It advocates policies that encourage financing of knowledge-intensive companies, which have less access to financing than other types of businesses. It also suggests export promotion policies that open doors for such businesses in non-U.S. markets.
Source: CBC News