Every see video of the sharks and the little tiny fish that follow them around? It’s interesting because the shark will feed and the leftovers will be scooped up by the little guys.
In my column today, I have some research that I completed to show the linkage between big and small business in economic development. I made a list of all 280+ Census Divisions (basically counties) in Canada and looked at their population growth rate from 2001 to 2006. I then looked at the Canadian Business Patterns database for June 2009 and ranked the Census Divisions by percentage of large firms in their regions (I used 100 employees as the definition of a large employer). Regions that had at least 2 of firms with 100 employees or more had a much faster population growth rate, on average, than those that had under 2%.
I also looked at the small business growth rate (establishments with under 10 employees) in communities that had a higher percentage of larger businesses. Across Canada, communities where there are at least 2% large businesses collectively added 40,000 new small businesses (net) from 2003 to 2009. In communities where there are less than 2% large businesses, there was a collective loss (net) of 10,000 small businesses.
Now I am not saying that all regions with a higher percentage of large businesses will grow faster than others but on average the evidence is quite conclusive. In New Brunswick, all six nothern New Brunswick counties are all well below the 2% threshold.
Of course my reason for putting this together is my longstanding belief based on research and observation that successful economies have a mix of export-oriented larger firms (product or service) and smaller service firms supporting the economy. Certainly, within the mix we need to see entrepreneurs bubble up that are driven to grow successful businesses – but in my reckoning many of these will end up as larger businesses some day (isn’t that the goal?).
Coupled with this longstanding belief has been my even longerstanding frustration with economists such as Desjardin over at UdeM that in a cavalier way serve up that we must focus on small business as a response to large forest products plant closures. People listen to guys like him because their position gives them credibility. I wonder outloud if he has ever looked at the data to support his conclusion on this.
While there have been some high profile large business support projects in recent months (AV Nackawic for one), the vast majority of economic development in New Brunswick from ACOA to IRAP to the bulk of BNB’s programs are targeted towards small and maybe medium sized businesses. We need to rebalance this equaation and we also need to understand that if we get the mix right, we will see entrepreneurs emerge with less government stimulation.
I’ve talked about this before but it is worth reiterating that large businesses are an excellent incubator for entrepreneurs. They get experience in the big biz and then get frustrated, leave and start their own business. Think about NBTel. There is a thread of exNBTelers in a large percentage of the ICT firms in this province. I think if we had a few more NBTels, we would have a lot more tech. entrepreneurs over time.