Punching Above their Weight: Aboriginal-Owned Businesses

August 8, 2017
Kristine St-Laurent

Looking to increase innovation and productivity? Take a leaf from Aboriginal[1]-owned firms, suggests a new study by the Canadian Council for Aboriginal Business (CCAB). The 2016 Aboriginal Business Survey tracks Aboriginal business performance across Canada in five-year increments, complementing data from the National Household Survey (NHS) and Industry Canada. The 2016 “Promise and Prosperity Survey”[2] points to Aboriginal businesses outperforming their non-Aboriginal counterparts[3] in three distinct arenas:

  • Innovation
  • Exports
  • Diversification of export markets

So what do Aboriginal firms do differently?

1. They are more willing to try out new processes and products/services to increase productivity

Aboriginal businesses recognize the importance of innovation and demonstrate a greater willingness to innovate compared to other Canadian firms. Aboriginal businesses were more than twice as likely as others to try a new service or product over the last three years, and nearly three times as likely[4] to introduce new processes or business practices. The share of Aboriginal businesses that have recently introduced innovations in the form of new products, services or processes has risen 14% since 2010. More than six in ten (63%) Aboriginal businesses report having invested in innovation in the past three years, outpacing the Canadian average.[5]

The Aboriginal-owned businesses most likely to invest in innovation are mid-sized companies with annual revenues of $500,000 or more. Notably, self-reported “highly successful”[6] Aboriginal firms had an even greater inclination to invest in innovation than survey respondents overall – nearly three-quarters (73%) said they did so, a full ten percentage points higher than the 2016 CCAB survey respondent average.

Source: 2016 Promise and Prosperity Survey, Canadian Council for Aboriginal Business

Source: 2016 Promise and Prosperity Survey, TD Economics, Industry Canada

2. They have a higher propensity to export

The majority of Aboriginal firms employ less than 10 people. Although, like most small businesses, they are not likely to be exporters, the share of Aboriginal businesses that do export is significantly higher than for Canadian businesses in general. Firms that export often achieve higher levels of productivity, grow faster, and create/support higher-paying jobs. Using Industry Canada data as a benchmark for comparison, Aboriginal-owned businesses are nearly three times as likely to export as other Canadian firms. Notably, businesses owned by Aboriginal women and older entrepreneurs (55+) are also more likely than others to export to the U.S. and other international markets.

Source: 2016 Promise and Prosperity Survey, TD Economics, Industry Canada

3. They export outside of the United States

Aboriginal businesses are highly successful at tapping into markets outside the United States. Nearly one in five[7] of all Aboriginal businesses report providing goods or services to international consumers outside of America. This is an outstanding accomplishment, given that only 11.8%[8] of all Canadian SMEs are involved in any type of export activity and, of those that are, the majority (92%)[9] sell only to the United States. Aboriginal-owned businesses in British Columbia and Ontario are most likely to export to international clients, which may reflect their proximity to the Canada-U.S. border and international shipping access.

Source: 2016 Promise and Prosperity Survey, Canadian Council for Aboriginal Business

Supporting upward momentum

While the 2016 “Promise and Prosperity Survey” findings point to a national Aboriginal business sector that is optimistic about the future, the survey notes that a majority of Aboriginal firms employ less than 10 people. The results also shed light on some obstacles to growth—many of which are also echoed across the Canadian business sector as a whole.

Source: 2016 Promise and Prosperity Survey, Canadian Council for Aboriginal Business

Attracting talent continues to be an impediment to growth. Since 2010, the proportion of businesses generating full-time or temporary employment has declined, as has the rate of Aboriginal employment within these businesses. Aboriginal firms also cite complex regulatory environments, unreliable broadband infrastructure, and access to capital as barriers to scaling up.

Aboriginal firms increasingly are becoming innovative contributors to the Canadian economy. The scale-up challenges facing them also apply across the national business landscape. Governments at all levels will need to address the human capital, regulatory and investment barriers to business growth to support the continued upward momentum of Canada’s Aboriginal businesses.

[1] Aboriginal includes First Nations, Inuit, and Metis peoples.

[2] Survey methodology and sample size can be found on pg. 53, CCAB’s 2016 Promise and Prosperity Survey. The survey contacted 6,515 Aboriginal-owned firms in Canada. Of 6,515 firms contacted, 1,971 firms agreed to respond. Of those 1,971 firms, 1,101 provided valid survey responses. Response rate was 45%.

[3] Industry Canada’s Key Small Business Statistics offers a benchmark for comparison between Aboriginal and non-Aboriginal owned SME’s. See Industry Canada 2016 Statistics.

[4] Relative to Canadian average, Industry Canada 2016 Statistics.

[5] While it’s not quite an apples-to-apples comparison, Industry Canada breaks down SME’s investment in innovation by industry. The industry reporting the highest investment in new products or processes is manufacturing (61.5%) and the lowest is transportation and warehousing (31%). Given the range of these figures, Aboriginal firms are more likely to innovate compared to other Canadian firms as a whole. See more details on page 17, 2016 Report: Key Small Business Statistics.

[6] Defined in the 2016 Aboriginal Business Survey as firms that were profitable in the past year, had increased sales and expect income growth in the next two years.

[8] Pg. 18, Industry Canada 2016 Key Statistics

[9] Pg. 19, Ibid

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