I. INTRODUCTION
The Organization for Economic Co-operation and Development (OECD) defined entrepreneurship as enterprising activities in pursuit of value generation through the creation or expansion of economic activity, either by “identifying and exploiting new products, processes, or markets”. Entrepreneur activities serve as the economic indicator of private investments in the 34 member countries, which include Canada, one of OECD’s founding members.
In June 2015, Industry Canada issued a document, Determinants of Entrepreneurship in Canada, which contains six determinants of private investments in Canada consistent with the framework set by the OECD. This framework was an offshoot of the benchmarking system that the International Consortium for Dynamic Entrepreneurship Benchmarking (ICE) developed in 2006, which also included Canada. The OECD framework contains three analytical factors: determinants (factors that influence entrepreneurial ventures); performance (the demonstration of entrepreneurial activities and accomplishments); and impact (its effects on the Canadian economy or society). These determinants include the regulatory framework, market conditions, access to finance, knowledge creation and diffusion, entrepreneurial capabilities, and culture.
These determinants are the focus of this exploratory work. Each of these determinants has its respective indicators that were discussed in the Industry Canada report, two of which determinants (determinants 1 and 2) will be briefly discussed hereinafter.
II. DETERMINANT 1: REGULATORY FRAMEWORK
The regulatory framework determinant contains 11 indicators. The six primary indicators is discussed in the Industry Canada report and will be explored in this section. These indicators are (1) Administrative Burden for Entry; (2) Administrative Burden for Growth; (3) Bankruptcy Regulation; (4) Product Regulation; (5) Business and Capital Taxes; and (6) Patent System. The remaining five secondary indicators were not discussed in the report and, thus, will not also be briefly discussed in this section. These indicators are (7) Safety, Health, and Environmental Regulation; (8) Labor Market Regulation; (9) Court and Legal Framework; (10) Social and Health Security; and (11) Income Taxes, including Wealth or Bequest Taxes.
The Administrative Burden for Entry (ABE) indicator refers to the estimate of costs (e.g. money, time, and human resources) incurred in the process of accomplishing administrative requirements to start a business in Canada. It uses the ease of starting a business (ESB) ranking as its sole measure. In 2013, Canada ranked third in ESB among the OECD countries.
The Administrative Burden for Growth (ABG) indicator refers to the comparative ABE costs but in relation their impacts on a business’s ability to grow. These costs include tax forms submission, payroll remittances, employment form records, mandatory government surveys, and property registrations, among other costs. It is reported in two measures: the total cost of regulatory compliance (TCRC) and the time spent in processing taxes (TSPT).
The Bankruptcy Regulation (BR) indicator refers to the legal process for a business to declare its inability to settle its debt based on their capacity to generate revenues. It employs three measures: (a) Time (in years) for creditors to recover their debt; (b) Cost of bankruptcy proceedings (as a percentage of the business’s assets); and (c) Recovery rate (in cents per dollar).
The Product Regulation (PR) indicator refers to government policies that intervenes in the product markets, which are aimed at improving effective market functioning. It uses the OECD-created Indicators of Product Market Regulation (PMR) as its measure every five years.
The Business and Capital Taxes (BCT) indicator refers to the levels of taxation that the government of Canada imposes on business profits, either through sales of goods, services, or assets. It uses two measures: the federal small business tax rate (FSBTR) and international comparisons with other OECD countries. FSBTR, for instance, declined since 2008.
The Patent System (PS) indicator refers to Canada’s framework and rules in granting and enforcing intellectual property (IP) as a means of encouraging innovative activities. Its two measures include patent applications and grant profile and IP global rankings and statistics.
III. DETERMINANT 2: MARKET CONDITIONS
The Market Conditions determinant consists of six indicators. Four of these indicators (Competition; Access to Foreign Markets; Access to Domestic Markets [Interprovincial]; and Degree of Public Involvement) were discussed in the Industry Canada report and thus will be explored in this section. The remaining two indicators (Anti-Trust Laws and Public Procurement), which were not discussed in the report, will not also be covered in this section.
The Competition (C) indicator refers the level of competitive pressure in the Canadian market. OECD identified two types of competition promoting policies: (a) policies that general competition among business players; and (b) policies that promote sector-specific competition. It uses two measures: extent of market dominance and the effectiveness of anti-monopoly policy.
The Access to Foreign Markets (AFM) indicator refers to the extent wherein Canadian businesses can export goods and services to the global markets. It is aimed at identifying tariff and non-tariff barriers. It uses four measures: (a) the percentage of exporting small and medium-sized enterprises (SME); (b) the export value of Canadian firms; (c) comparison by market destination and industry sector; and (d) international ranking of export burdens.
The Access to Domestic Markets [Interprovincial] (ADM) indicator refers the extent that Canadian businesses sell goods and services to non-local (inter-provincial) markets within Canada. It aims to identify provincial barriers to inter-provincial trade. It uses two measures: the percentage of interprovincial SME sales and the value of all-Canadian interprovincial trade.
The Degree of Public Involvement (DPI) indicator refers to extent of public policy involvement in the business sector, which can affect the size and the efficiency of potential markets. It employs the OECD state control measure, which has an index scale of 0 to 6.
IV. DETERMINANT 3: ACCESS TO FINANCE
The Access to Finance determinant consists of five indicators: Access to Debt Financing (access to formal debt sources); Business Angels (access to individual equity); Access to Venture Capital (access to venture equity); Access to Other Types of Equity (access to equity capital); and Stock Markets (activity levels in the Canadian stock market). All these were reported in the Industry Canada document but will not be explored in this section.
V. DETERMINANT 4: KNOWLEDGE CREATION AND DIFFUSION
The Knowledge Creation and Diffusion determinant consists of five indicators, namely: Research and Development Investment; University or Industry Partnership; Technological Cooperation between Firms; Technology Diffusion; and Broadband Access. All these were not reported in the Industry Canada document and thus will not be explored in this section.
VI. DETERMINANT 5: ENTREPRENEURIAL CAPABILITIES
The Entrepreneurial Capabilities determinant includes four indicators, such as: Training and Experience of Entrepreneurs; Business and Entrepreneurship Education and Skills; Entrepreneurship Infrastructure; and Immigration. These indicators, however, were not discussed in the Industry Canada report and consequently will not be explored in this section.
VII. DETERMINANT 6: CULTURE
The Culture determinant consists of four indicators, namely: Risk Attitudes in Society; Attitudes towards Entrepreneurs; Desire for Business Ownership; and Attitudes to Entrepreneurship Education. Like the previous three determinants’ indicators, these indicators were not reported in the Industry Canada document and will not be explored in this section.
VIII. CONCLUSION
The Industry Canada report encompassed six determinants and a total of 35 indicators. These indicators collectively provide a comprehensive perspective on the multiple factors that influence entrepreneurial (i.e. private investment) activities in Canada. In addition to providing a relative insight into the performance of Canadian private investments to other OECD countries, these information also provides active and potential entrepreneurs crucial data upon which they can base certain strategic aspects of their national and overseas operations. This practical usefulness of intentionally gathered data epitomizes the value of information in today’s business atmosphere whether within or outside the Canadian markets.
BIBLIOGRAPHY
Industry Canada. Determinants of Entrepreneurship in Canada: State of Knowledge. Ottawa,
Canada: Industry Canada, 2015.
