This report represents the first comprehensive cross-sectoral analysis of Canadian SME exporters and international new ventures (INVs), i.e., firms with significant export revenues within three years of start-up. This work draws on data from large-scale survey data to challenge several widely held beliefs about the internationalization process of Canadian SMEs, particularly within the services sectors.
The following are selected highlights from among the empirical findings from this work:
• In 2004, 8% of Canadian SMEs exported goods or services.
• There are substantially more firms in the professional and “other” services sectors that export than there are exporter firms in the manufacturing sector.
• Both established exporters (enterprises that export and that began trading before 2001) and international new ventures (enterprises that export and that began trading in 2001 or later) derive an average of 33% of sales revenues from exports.
• A high proportion of exporters earn a relatively small proportion of revenues from exports: 44% of exporter firms report export sales of less than ten percent of total revenue; for 52.3% of Canadian SME exporter businesses export sales accounts for less than 25% of total revenue; 15% of exporters report export revenues of between 25% and 49% of total revenues.
Owners of exporter and non-exporter firms differ significantly on three important attributes: growth intentions, gender and Canadian residency status.
• Owners of exporter firms are much more likely to profess the intention to seek growth of their firms than are owners on non-exporter businesses. After controlling for firm size and sector, firms whose owners had expressed growth intentions were more than twice as likely to be among exporter firms as firms whose owners did not seek growth.
• Owner gender was significantly associated with the propensity to export. Having controlled for potential systemic explanatory factors, majority female-owned firms were still less likely to export compared to majority male-owned firms.
• Among established exporters, immigrants who have resided in Canada for less than 5 years were disproportionately more likely to be the primary owners of exporter firms.
With respect to firm-level attributes, firms that report investment in R&D are more than twice as likely to be exporter firms as firms that did not invest in R&D. Exporter firms were also significantly more likely to apply for external financing and business loans.
Among the (approximately) 287,100 SMEs that began trading in 2001 or later, approximately 21,300 reported exporting. Hence, more than seven percent of new Canadian firms are “international new ventures” (INVs). INVs operate across all industry sectors, an observation that suggests there may have been sampling biases in previous studies that have focused almost exclusively on manufacturing, technology and knowledge-based industries.
• While international new ventures are significantly smaller than established exporters their size, as measured by the number of employees, does not preclude export trade. This study finds that international new ventures achieve comparable levels of export intensity to established exporters with a smaller work force, younger and less experienced owners, and fewer assets.
• Owner profiles of international and domestic new ventures did not differ significantly in terms of age.
• Owners of international new ventures were disproportionately more likely to be new Canadian residents (or immigrants): approximately 10 percent of INV owners were new Canadians compared with less than five percent of owners of new firms that did not export.
The research team sought to consider these findings in the context of current export stimulation programs…. A key recommendation of this study is the need to re-evaluate international trade initiatives in light of these findings. To encourage such research and stimulate discussion among researchers, senior policy makers and trade commissioners, a series of questions about policy and programs is presented.
The complete report is available here.
