New report outlines strength of entrepreneurship in province

GEM-Newfoundland-Report-cover

The provincial GEM report examines
entrepreneurship in the province.

June 11, 2014

A study by researchers at Memorial University’s Faculty of Business Administration has found that entrepreneurial activity in the province is on par and in some cases exceeds that in the rest of the country.

The findings were released today in the 2013 Global Entrepreneurship Monitor (GEM) Newfoundland and Labrador Report, part of an annual study of entrepreneurship throughout the world. The provincial report was authored by Drs. Gary Gorman, Dennis Hanlon and Blair Winsor at the business faculty.

“This is a good news report as it tells us that, in spite of Newfoundland and Labrador’s history of being a “have not” province, the state of entrepreneurship in this province is strong,” said Dr. Hanlon, associate professor of entrepreneurship. “In particular, early-stage entrepreneurial activity is being driven by opportunity rather than necessity, which is likely a reflection of the strong provincial economy.”

In Newfoundland and Labrador, entrepreneurs are similar to those in the rest of the country in terms of age, gender, education and income. However, the province differs from the rest of the country in several ways such as how entrepreneurs are viewed, for example, with more than 80 per cent of respondents in Newfoundland and Labrador saying that entrepreneurs are accorded high social status, and total early-stage entrepreneurial activity, which is slightly lower than the national average.

The report also identifies some areas that can be further improved to strengthen entrepreneurial activity such as access to private funding, education and training, and greater support for high-growth firms.

This is the first time in 10 years that GEM data have been collected in Canada and the first time that Newfoundland and Labrador has actively participated in the study. The Newfoundland and Labrador Report complements the 2013 GEM Canada Report released in April.

“These data provide a baseline from which we can begin to understand some of the rapid changes occurring in the entrepreneurial ecosystem,” said Dr. Hanlon.

Dr. Wilfred Zerbe, dean of the Faculty of Business Administration, says reports such as GEM are an important tool for informing entrepreneurship-focused initiatives in the province, such as a planned Centre for Innovation, Entrepreneurship and Technology Commercialization that is currently under development by the faculties of business administration and engineering and applied science.

In 2013, GEM surveys in Canada were conducted at the national level as well as in seven provinces: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and Newfoundland and Labrador.

The Newfoundland and Labrador report was funded by the provincial department of Innovation, Business and Rural Development and the Atlantic Canada Opportunities Agency.

About the Global Entrepreneurship Monitor (GEM) Program

GEM is an annual international study of entrepreneurship that began in 1999. With over 70 countries participating, it’s the largest study of entrepreneurship in the world. Its three main objectives are to measure differences in entrepreneurial attitudes, activities and aspirations among economies; to uncover factors determining the nature and level of national entrepreneurial activity; and to identify policy implications for enhancing entrepreneurship in an economy.

More information is available at www.gemconsortium.org.

Methodology

In Newfoundland and Labrador, the report was compiled using data from two surveys: an adult population survey (APS) examining entrepreneurship activity and demographics, and a provincial expert survey (PES) that assessed the entrepreneurial ecosystem.

Key Findings

State of entrepreneurship (from APS)

  • 81.2 per cent of the province’s labour force feels entrepreneurs are accorded high social status (Canadian result: 70.1 per cent).
  • 75.9 per cent indicate the media is doing a good job of supporting entrepreneurship (Canadian result: 69.9 per cent).
  • 65.6 per cent believe there are good opportunities to start a business in Newfoundland and Labrador. However, only 53 per cent believe they possess the skills and knowledge to do so.
  • Slightly more than 28 per cent of the province’s adults (ages 18-64) are actively engaged in activities related to starting or running independent businesses.
  • The rate of early stage entrepreneurship (i.e. those who are contemplating setting up a business or have started one in the last 3.5 years) in Newfoundland and Labrador is 10.8 per cent, slightly lower than the national average of 12.1 per cent.
  • The business services sector has the highest rate of entrepreneurship participation in the province (37.9 per cent) and in the country (40.5 per cent).
  • The rate of necessity-driven early-stage entrepreneurship is the lowest in the country, at 0.7 per cent in Newfoundland and Labrador versus 1.8 per cent in Canada.
  • The province has one of the lowest rates of people planning to start a business in the country at 13.3 per cent (Canadian result: 17 per cent).
  • Newfoundland and Labrador has one of the lowest participation rates in angel investing in the country: two per cent compared to the national average of 3.9 per cent.
  • Nearly one in five early-stage entrepreneurs in the province is growth-oriented, which is comparable to the overall average for Canada. However, Newfoundland and Labrador doesn’t fare as well in either innovation or internationalization, areas which are necessary to compete at an international level.
  • Entrepreneurs exhibit higher scores for well-being than the general population. Among entrepreneurs, females express greater well-being than their male counterparts, and owners of existing businesses report greater well-being than employees in the province.

Demographics (from APS)

  • In the 55-64 age group, Newfoundland and Labrador has the highest rate of early-stage entrepreneurial participation at 27.3 per cent compared to the national average of nine per cent.
  • The provincial ratio of 0.73:1 female to male early-stage entrepreneurs is stronger than the overall Canadian ratio of 0.68:1.
  • Newfoundland and Labrador has the highest rate of immigrant early-stage entrepreneurship in Canada at 19 per cent. Quebec has the second-highest rate at 14.8 per cent.

Entrepreneurial ecosystem (from PES)

  • The experts surveyed think that entrepreneurial opportunities in Newfoundland and Labrador are increasing; however, know-how to start and manage small businesses and high-growth firms is considered low.
  • With the exception of government assistance, the experts believe that access to funding in the province for entrepreneurial activity is problematic. Entrepreneurs among the experts surveyed are more negative about access to capital, particularly from private sources.
  • In the opinion of experts, there are shortcomings with education and training, especially at the secondary and primary educations levels where respondents indicate low levels of teaching directed to knowledge of market economic principles, and entrepreneurship and new firm creation.
  • According to the experts, support for women entrepreneurs is generally positive.
  • The experts also thought that support for and attitudes toward innovation were positive.
  • Physical infrastructure in Newfoundland and Labrador is considered to be good, but still ranks lower than the other provinces participating in the study.
  • Experts in Newfoundland and Labrador think that Canadian culture is less supportive of entrepreneurship compared to experts in other provinces.
  • Specific recommendations by the experts focus on financial support (venture capital), education and training (mentoring and experiential programs) and government policies (enhance those directed at small businesses).

Susan White-MacPherson