Building Business Success
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Building Business Success
Full Report
April 2007
Aneliese Debus, Research Analyst
Much has been said about Canada’s lackluster productivity performance. In recent years, the Canada-US productivity gap has widened and Canada has lost its prominent place on cross-country productivity rankings. Some have suggested that Canada’s tame results are to be attributed to low levels of capital investment and to a shift towards less productive sectors. Others single out Canada’s large share of small and mid-sized businesses (SMEs) as a key reason for the gap.
SME productivity
Some studies have suggested that part of the blame for Canada’s poor productivity performance rests on SMEs. According to these, the dominance of SMEs in Canada is the reason behind lower national investment rates and lower productivity outcomes.
Other sources, in contrast, contend that SMEs are responsible for most of the productivity growth observed in Canada in recent years, having outpaced larger businesses in terms of productivity performance.
In general, productivity studies are anchored on standard, macroeconomic-focused measures of productivity. They often conclude that productivity outcomes are dictated by factors such as aggregate demand, access to finance, technology embodiment and a country’s industrial composition, among others. The macroeconomic debate, however, is of little direct help to understanding the productivity performance of individual businesses and especially of SMEs because the macro measures used are often too abstract, impractical and not easily translatable into ordinary business terminology.
This report attempts to bring the SME perspective to the productivity debate. Looking at productivity growth from the point of view of the SME owner, it estimates productivity growth in the SME sector from the micro dimension and concludes that the SME sector has contributed positively to overall productivity improvement over the past 12 months.
This study also examines investment plans, identifies existing barriers to investment and pinpoints factors constraining the growth of SMEs.
