How Immigrants Strengthen Canada's Economy
Canada has an export problem. Despite rapid growth in emerging markets, Canada's trade has flatlined over the past decade. With a relatively small domestic economy, Canadians depend on exports to sustain their high standard of living. And most exports go to the relatively slow-growth U.S. market.
Immigrants are frequently touted as part of the solution to boost Canada's exports, particularly to markets beyond the United States. Canada has seen a surge in immigrants from exactly those large economic powerhouses with which we would like to do more business. But are Canada's immigrants actually connecting to global markets?
A recent Conference Board analysis shows that, yes, some immigrant-owned businesses are already helping Canada connect to global markets.
The report, Selling Beyond the U.S.: Do Recent Immigrants Advance Canada's Export Agenda? by Horatio Morgan and Sui Sui of Ryerson University, looked at the export experience of businesses owned by recent immigrants to Canada, compared with other Canadian businesses with similar characteristics. In total, the authors examined data on 15,000 Canadian small and medium-sized enterprises (SMEs).
In short, businesses owned by new Canadians were more likely to export than similar businesses owned by non-recent immigrants. But immigrant ownership does not merely strengthen the exports of Canadian SMEs. It also enables Canada to develop new or stronger trade links beyond the United States. Businesses with recent immigrant majority owners were more likely to target non-U.S. markets than businesses owned by other Canadian businesses.
The report also showed that while exporters with a recent immigrant as majority owner earn lower returns on investments in business assets than other Canadian exporters and sell less in dollar value, they are among the fastest-growing Canadian SMEs. This suggests that immigrant ownership may confer advantages in exporting to non-U.S. markets. For example, social ties or language skills may partially compensate for weaknesses in these firms' business models, such as small company size, limited business experience, or weaker research and development (R&D) activity.
But not all immigrant-owned businesses represent equal potential. Businesses essentially fell into two camps. The first was concentrated in the wholesale and retail sectors, and likely competing on the basis of price. The second was concentrated in knowledge-based industries, and likely competing on the basis of innovation, a crucial ingredient for success in global markets. This latter group represents greater potential for advancing Canada's exports—both in the U.S. and beyond.
In short, while not all immigrant exporters represent the same promise, Canada's diverse pool of immigrants is a source of strength for Canadian firms in expanding into global markets—in the U.S. and beyond. We should do more to tap into and build on this strength.
This post was originally published by The Conference Board of Canada. An upcoming Conference Board webinar A Snapshot of Canada's Immigrant Exporter Experience will further examine the strengths and weaknesses of immigrant-owned businesses in export markets.