The Weakness That's Hurting Canada's Entrepreneurs

A new study reveals Canada to be a top 5 country for entrepreneurship, but we're lacking in one key area

Written by Mira Shenker

Despite reports to the contrary, a new report scores Canada relatively well on research and innovation. In fact, it’s one of the factors that puts Canada among the top five countries in Ernst & Young’s G20 Entrepreneurship Barometer 2013. Canada is weakest when it comes to coordinated support for entrepreneurs.

Released today, the report ranks G20 countries in five areas based on data about entrepreneurial conditions as well as surveys of more than 1,500 entrepreneurs. Canada scored consistently high on nearly all categories of the entrepreneurial environment, emerging as a real leader in fostering an entrepreneurial culture, according to Colleen McMorrow, EY partner and leader of the Canadian Entrepreneur Of The Year Program.

EY measured research and innovation across two of the five pillars. It’s a factor in the Tax and Regulation category, where it did well thanks to the government’s SR&ED program and other refundable tax credits for undertaking R&D ventures. It’s also measured as part of Entrepreneurship Culture (where Canada ranked third overall behind the U.S. and Korea).

“There’s an emphasis on research and innovation in this country,” says McMorrow.

Yet, this May, Minister of State Gary Goodyear said a lack of R&D is holding Canadian entrepreneurs back. Business R&D spending has been slowing since 2006 and, while Canada has invested $9 billion in funding for science, technology and innovation over the last seven years, it hasn’t been enough.

McMorrow says what’s really holding Canada back is a lack of coordinated support, what she calls the “secret sauce” that binds the other four pillars together. “We ranked weaker on that pillar because, although there’s been a raft of initiatives, it’s not clear as to whether we’re making as substantive an impact as we could at this stage,” says McMorrow. There need to be stronger linkages between governments, entreprener networks, business incubators and clusters, says McMorrow, in order for investments in R&D to really pay off.

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While Canada scores high for public spending on education and the teaching of entrepreneurial skills in schools and universities, entrepreneurs are still critical of the country’s incubators, whether public or private-sector led, and the lack of mentors available. They also have trouble accessing informal networks and mentoring services.

It’s party these weaknesses that put Canada behind the U.S. in the culture category. “There’s more of that swagger in the U.S.,” says McMorrow. EY’s survey found that 35% of Canadian entrepreneurs see failure as a barrier to future business prospects, compared to only 20% in the U.S.

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Still, McMorrow  emphasizes, this is a good-news story for Canada. She points to clusters in areas such as Kitchener-Waterloo areas where they market innovators are meeting with the market leaders as best practices. “It’s early days,” she says. “We do need to do more to encourage Canadian entrepreneurs to have the confidence to take risks and not to lose their confidence because of failure.”

“People always say they are afraid to fail,” says Scott Walton, the founder of industrial gas materials innovation business. Both he and McMorrow suggest that the best way to move Canadian entrepreneurs beyond that fear to profile successful entrepreneurs “That will give a lot more confidence to people,” says Walton.


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