The Davos of economic development

There is an interesting story in the Financial Post about a summit held in Fredericton recently on the topic of entrepreneurship.  The title of the piece is “Can New Brunswick become the Davos of entrepreneurship?”.

We have discussed the topic of entrepreneurship at least a couple of hundred times over six years here.  We have looked at data showing that New Brunswick has a higher percentage of small businesses compared to the rest of the Canadian provinces but those small businesses have far less change of becoming mid and big businesses.

We have also talked about the fact that while NB positions itself as an export-intensive province, almost all of the exporting is done by large firms.

We have talked about the difference between a lifestyle small business owner looking to make an income and work for him/herself and an entrepreneur who is willing to risk their RRSPs on a crazy entrepreneurial idea.  New Brunswick has thousands of the former and a small handful of the latter.

We have talked about the DNA of entrepreneurs – what drives them and speculated why there are fewer here than elsewhere.   The fact that success is poo pooed in many corners of New Brunswick (as a side I chatted with a guy that has a huge house and a great car in a small rural town and the rumour around is that he was a drug baron).  The fact there is very little risk capital coming out of the disposable income of doctors, lawyers, etc.  like you might see in a larger urban market. 

I remember the frustration of the folks involved in that effort back in the 1990s to get a risk capital pool started.  They assembled a group of wealthy NBers and asked them to all put some green in a pot.  Then they would hear pitches from entrepreneurs and decide in whom to invest.  The frustration was these angels had the risk tolerance of a bank and the return expectation of a loan shark (or an ATM).   If we don’t have small brown envelopes of cash to throw at interesting ideas, we will have fewer entrepreneurs.

We have talked about the interplay between large firms and entrepreneurships.  I pointed out – much to the angst of several colleagues – that the majority of successful entrepreneurs in New Brunswick started out in a large firm – got experience, came up with a good idea and then went on their own.  Very few started in their Apple garage during high school.

I remember the grand debates over cutting small business tax to the bone back in the Lord years.  He was heralded by the CFIB, by Chambers, by national groups as being a visionary and supporters proudly intoned this would create massive new entrepreneurship in New Brunswick – until that Fraser Institute report showing New Brunswick was 58th of 60th provinces and U.S. states for new business creation – after that tax cut was put in place.  The child-like naivete of thinking a tax cut alone would spur entrepreneurship.

I was having a lunch with a couple of IT guys a while back and we agreed that the best way to truly stimulate IT entrepreneurship in New Brunswick would be to give Gerry Pond $100 million and ask him to allocate it to the best new ideas over the next five years.  Gerry’s had a few whopper losers and a number of winners and would likely be a far better bet then bureaucrats.

In the end, the inference to Davos means thinking.    The World Economic Forum is about the best minds in the world converging to debate the biggest economic challenges of the day.   It is an amazing brand. 

I would say that New Brunswick should try to be the Davos – not of entrepreneurship – but of economic development.  Economic development ties in the broader elements such as investment attraction, workforce development, the role of R&D, infrastructure, networks and entrepreneurship and the complex forces and relationships that bring them together.

I have been calling for this for years for one main reason.  If New Brunswick became a world leader in thinking about economic development the hope is some of the ideas would actually rub off here.

I know there is cynicism about this out there but I urge you to think about it.  Across the generations ideas are the currency of economic growth – that should hold for regional economic development as well.

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3 Responses to The Davos of economic development

  1. OK, I’ve deleted the long ranting version of this response…

    From where I sit, the major obstacle to economic growth in New Brunswick is that the sentiment that anything new must be owned and run by the locals, and there must be incentives and tax breaks to support locally-owned businesses against any external competition (even if they live here).

    I want to see someone in authority in New Brunswick say, and mean it, “We are going to create incentives that help people and companies from other places move here, even if they compete with the locals.” Until we see something like that, I cannot believe people here are serious about economic development.

  2. Tim Coates says:

    Did you see the Fraser Institute study showing that NB is almost last among states and provinces for new business starts? yes, its the fraser so we need a grain of salt, but they were just compiling statscan data and it looked robust. so we may have lots of small biz but according to this study, we don’t have many new one’s starting, or not enough to increase the ratio out of the lower percentiles.

  3. Downes, we are in full agreement on this. There is a scarcity mindset in New Brunswick and many business leaders and residents believe that attracting companies and immigrants will mean less for them – there will be less to go around. I hear this from everyone – neighbours and CEOs. Never mind the dozens of examples across North America where infusions of immigrants and investment were key drivers of growth. Of course I have to put the usual caveats and disclaimers in that not all investment and immigration is positive (I have to say this because people will cite the one or two negative examples they know).

    Coates, I did see that study and I think 58th out of 60 should make us stop and think. If we want to build an entrepreneurial class there is ample evidence it will not come from encouraging more people to start their own businesses. We literally have dozens of programs meant to encourage small business creation -youth, women, older displaced workers, EI recipients, rural displaced workers, – you name it – if you want to start a business there is a funding program for you. But there is no evidence this is particularly helpful to the economy or to economic development more broadly. Further fragmentation of a local market (for electricians or plumbers or consultants) is no substitute for economic growth.

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