21, January 2019 – Blog #19
Entrepreneurship in Alberta – Definite signs of the poor economic situation in Alberta
Alberta again has the highest rate of entrepreneurship in Canada, confirming what we have seen for the last five years. The Global Entrepreneurship Monitor (GEM) report on Entrepreneurship in Alberta shows that 19.6% of Albertans aged 18-64 are involved in starting a business. This is higher than the rate for Canada as a whole (18.8%) and higher than all other innovation driven economies including the US, Australia and Israel. Although Alberta has a slightly higher rate of established businesses than Canada as a whole (7.5% vs 6.2%) it is lower than the US or Australia.
Alberta also has a lower rate of intrapreneurship than the Canadian average, 5.7% compared with 6.6%, similar to last years findings. This factor can be linked to a firm’s innovation and productivity strategies.
Who are these entrepreneurs? They are highly educated, with most having a university or college education, many with graduate degrees. The rate of entrepreneurship rises steadily with the amount of education, peaking in those with some post graduate experience. Their ages vary, with entrepreneurship rates peaking in the 25-34 and 55-64 age group. The entrepreneurship rate in the 55-64 age group is two and a half times the Canadian average, and supports a narrative of older workers losing their jobs in the weak economy.
For Established Businesses, the rate increases steadily with age, as expected, but Alberta has a surprisingly high rate in the 18-24 age group.
The rate of women’s entrepreneurship is almost 90% of the male rate, one of the highest ratios in the world. It is much higher than the Canadian average of 66%.
What do they do? Alberta has a very different startup industry profile than Canada. GEM puts businesses into four categories – extractive (oil and gas, mining and agriculture); transformative (manufacturing), business services and consumer services. Alberta has two and a half as many extractive businesses, twice as many transformative business, roughly similar business services, and far fewer consumer oriented businesses than Canada as a whole.
Why do they do it? Most entrepreneurs say they started their business to purse an opportunity, although 23% do so out of necessity, because they had no other economic opportunities. The necessity rate is 50% greater than the Canadian average, and this may reflect poor economic conditions in Alberta. It is worth noting that in 2014 (when the economy was much stronger), the necessity entrepreneurship rate in Alberta was only 8%.
Size and Growth. Startups in Alberta are much smaller than the Canadian average. One third of all Alberta startups have no employees, compared with 22% in Canada. And only 6.7% have 20+ employees, compared with 12.9% for Canada as a whole. However, almost a quarter of Alberta startups plan to have 20 employees in five years’ time.
How innovative are they? 40% of Alberta startups say they have no novelty in their products or services, the highest rate in Canada. This would indicate a low level of innovativeness. This is corroborated by the metric that over 60% of Alberta startups use older technology, also the highest rate in Canada. However, 12% of Alberta startups say they have no competitors, the highest rate in Canada. So it looks as if there are a few very innovative startups among an overall pool of low innovations.
How supportive is the ecosystem? GEM measures ecosystem performance by polling 36 experts in nine separate areas of expertise. By these measures, Alberta is similar to Canada as a whole, except performance is a little lower in most measures. Alberta is equal to or better than Canada in 4 of the 9 measures used in the report.
What constraints do they face? According to the Expert opinion, the main constraints facing Alberta entrepreneurs are:
- Financial support;
- Government Programs and policies;
- Capacity for entrepreneurship.
GEM is the oldest and largest study of entrepreneurship in the world, covering 60+ countries every year.
The report contains the following recommendations:
- Continue to highlight opportunities for entrepreneurs in the province and develop tactics to mediate fears in future training initiatives.
- Consider ways to increase Employee Entrepreneurship?Intrapreneurship within Alberta.
- Aim to close the gender gap completely and investigate further why Alberta is more successful in this area than elsewhere across Canada.
- Provide support for burgeoning entrepreneurs with high growth expectations within the province in order to optimize their impact.
- Follow expert advice and look for improvements in Government Policies, Finance, and Education.
The full report is available at GEM Alberta 2017 Report.