There are roughly 1.15 million SMEs in Canada, and these small, innovative companies are vital in driving the nation’s economic growth. But in order for Canada to remain competitive in the global market, these SMEs need to become sustainable larger companies; in other words, “high-growth firms” HGFs), which disproportionately drive growth in employment or sales, and are often found in the knowledge, science, and technology sectors.
The fastest way for SMEs to boost productivity and economic growth is to innovate.
Canadian SMEs have fallen behind foreign counterparts in competitiveness due to several key factors:
1. Low productivity, resulting from a lack of capital needed to develop and implement efficiency- and productivity-enhancing initiatives (e.g., ICT, labour training, expanded R&D, and the introduction of innovation).
2. Scope for innovation. Although the fastest way for SMEs to boost productivity and economic growth is to innovate, fewer than one out of four Canadian SMEs invest in research and development (R&D).
3. Limited export activity. SMEs which successfully become exporters tend to grow faster and invest more than their non-exporting counterparts, but only an estimated 10 percent of Canadian SMEs are exporters.
Additional barriers to growth for Canadian SMEs include: difficulty attracting and retaining skilled workers; acquiring the financing needed to implement new initiatives; an uncertain market which creates unstable demand; and tax-benefit thresholds for businesses identifying as SMEs which discourage growth.
It’s important for policy makers to provide support and funding to SMEs through tailored financing, venture capital, consulting services, and sharing loan risk with financial institutions. As well, to provide support that would maximize opportunities for trade and capacity, including:
Mitacs can help businesses overcome many of these challenges by leveraging its academic and industry networks to create cost-effective research collaborations, focusing on innovation-oriented Canadian SMEs. This, in turn, allows companies to access skilled university researchers (from Canada and abroad), who can help fuel — and commercialize — the innovation needed to facilitate growth.