Small business, entrepreneurship, and innovation

Released February 2012

The Working Paper, Small business, entrepreneurship, and innovation, shows that public policy should focus on truly entrepreneurial firms to strengthen innovation capabilities in Ontario and Canada.

Previous Institute research has focused on the innovation and prosperity gaps in Ontario and Canada – the failure to achieve our full economic potential.  In the current paper, the Institute draws the connection between innovation, prosperity and our small- and medium-sized business sector.

The Working Paper acknowledges that identifying and supporting small enterprises is a very challenging goal – and there is no special formula for achieving it. But certain factors are associated with the success of entrepreneurs in Canada and elsewhere – education, specific industry experience, maturity, and the benefit of industry clusters. Contrary to popular belief, entrepreneurs who ultimately built today’s global leaders tended to be in their 30s or older when they started up their businesses. They had industry experience relevant to their new venture. And they were much more likely than the average business person to have a university degree, particularly a graduate degree.

The Working Paper identifies programs, such as the Ontario’s Innovators Alliance and the Ontario Network of Excellence, that aim in the right direction – providing support and advice to growing entrepreneurs. The Institute encourages more experimentation, but also rigorous evaluation.  The Working Paper also recommends some economic policies to be pursued for their positive impact on the economy at large, but also for their specific benefit to entrepreneurial firms.

Actions to strengthen entrepreneurship and innovation

Continue to develop economic policy that promotes innovation and productivity in all sectors

  • Invest in post-secondary education
  • Strengthen the environment for industry clusters

Build on current approaches that are customized to high-potential entrepreneurs

  • Experiment with focused support, but with ongoing evaluation of results

Expand smart procurement by governments to create opportunities for small- and medium-sized businesses – and all businesses

  • Enhance firms’ credibility with reference customers
  • Use procurement to drive innovation

Make the tax system as neutral as possible, but explore specific changes to help growth-oriented businesses

  • Reduce capital gains at initial public offering
  • Encourage capital investment by allowing fast write-offs of maintenance investments
  • Shift tax breaks from all smaller firms to growing firms
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Topics: Business growth and innovation