Guest Column

Canada is losing its entrepreneurial edge

Contributed to The Globe and Mail

Canadian flag near Kitchener, Ontario with only half of it remaining. (Peter Power)

In many ways, the words Canada and entrepreneurship go hand in hand.

The country offers low business start-up costs, public funding, a well-regulated banking sector, a highly educated work force and a variety of mentoring programs. Canada, you might say, represents a veritable paradise for entrepreneurs who are looking to get started. And many around the world have already figured that out.

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Last fall, Ernst & Young’s Entrepreneurs Speak Out: A Call to Action for G20 Governments found that Canadian new-business registrations outperformed those of mature G20 markets, and the G20 as a whole. Eighty-eight per cent of those surveyed agreed that Canada’s unique environment offers an ideal setting for building a new business.

That’s good news for our still-recovering local economy. Entrepreneurs represent a powerful group capable of driving markets forward, in the best of times and the worst of times. They translate good ideas into businesses that can generate jobs, developments, breakthroughs and profits.

But something odd is happening on the road from start-up to standout. While local markets are humming with activity at the start-up phase, we are lagging behind over the long term.

In August and September, 2011, Ernst & Young sponsored a global Economist Intelligence Unit survey of 195 Canadian and non-Canadian executives, to ascertain and compare their attitudes toward expanding abroad and to determine the factors that drive their investment decisions.

The survey – Canada in a Globalized Economy: An Investment Perspective – found that while executives from high-growth companies saw a lot of opportunity around the globe, very few saw Canada as a place with a strong entrepreneurial culture outside the start-up phase. Only one-third said the country has superior market-growth prospects.

The survey also uncovered that while Canadian respondents are reluctant to tackle international opportunities, 40 per cent of high-growth companies worldwide plan to shift some foreign investment from developed to emerging markets within five years. So while businesses are looking more and more to emerging markets, and competition is heating up to land those crucial foreign investment dollars, Canada seems to be slipping off the radar as an investment destination for entrepreneurial-minded companies.

If we don’t curb this thinking, Canada could miss its chance to cement itself as a dominant presence on the global economic stage. Entrepreneurial start-up activity drives innovation, but a startup paradise alone cannot nurture the kind of high-growth companies that become ingrained in the fabric of the country’s economy for decades to come. We need a broad mix of businesses and entrepreneurs from all points on the entrepreneurial spectrum to propel us forward.

That means supporting entrepreneurial growth along the entire journey, not just in the early days. While initiatives such as this month’s report by the federal Red Tape Reduction Commission open up new ways to eliminate barriers, there remains considerable work to be done.

We must get to the bottom of why our brand as an entrepreneurial destination isn’t resonating. Canada’s ranking on the list of countries receiving the most foreign direct investment has slipped from third in 1980, and it fell out of the top 10 completely in 2010. The Conference Board of Canada has warned that this diminishing investment is damaging the country’s productivity and economic performance, and it urgently recommends that more be done to attract foreign investors. We need a continuing influx of dollars and jobs to fan the flames of entrepreneurship here.

We must also help Canadian entrepreneurs who are ready – but hesitant – to conquer international markets. They need mentoring and support to effectively assess opportunities, and to move forward while striking the right balance between caution and optimism. I’m not advocating leaping before you look but, rather, looking long and hard for the right strategic moves that can build your business from the outside in.

Perhaps most importantly, we’ve got to help high-growth, mid-market companies overcome challenges that – if left unaddressed – could derail their long-term potential, or see them sold too soon.

That’s where we all come in:

• Corporate citizens prepared to support entrepreneurial organizations, provide coaching and create opportunities for recognition and networking.

• Associations capable of producing tool kits, fighting red tape and nurturing ideas.

• Governments ready to create policies and regulations that spur innovation.

• Educational institutions focused on building entrepreneurial skills and theories into their curriculum.

• Entrepreneurs willing to impart their own wisdom back to their peers and followers, sharing insight and troubleshooting challenges.

There’s no easy way to right the diverging trends we’re seeing. But by rallying Canadian stakeholders around the cause, we can move the needle in the right direction and move a step closer to the kind of entrepreneurial Eden this country’s bright lights so truly deserve.

Special to The Globe and Mail

Colleen McMorrow is entrepreneurial services leader, and program director of the National and Ontario Entrepreneur Of The Year, at Ernst & Young LLP.

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