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Economic Viewpoint

Accelerating Small Business Success: Navigating the Canadian Innovation Landscape

October 16, 2023
Jimmy Jean, Vice-President, Chief Economist and Strategist, Randall Bartlett, Senior Director of Canadian Economics and Kari Norman, Economics Document Production Specialist

Canada has a productivity and innovation problem, and Canadian small-and medium‑sized enterprises (SMEs) struggle the most. This is true not just relative to larger Canadian companies, but also to SMEs in other countries.

While SMEs generally recognize the benefits of investing in innovative technologies and processes, they face barriers that prevent them from making those investments. Key among these barriers are a lack of technical skills and knowledge, challenges hiring highly skilled workers and difficulty accessing financing for investment in innovation.

The barriers to SME innovation are not insurmountable, and many can be overcome with well‑targeted, well‑funded public policy. However, more clearly needs to be done to ensure that these policies are tailored to the needs of Canada’s entrepreneurs and well communicated to business owners.

But industry can also do more to increase its productivity. Looking at sectors with a high prevalence of SMEs, introducing innovative services and processes can help to reach more customers and increase revenues while cutting costs, thereby boosting profits.

There are five sectors with a high share of employment in SMEs that could dramatically increase their productivity. These are agriculture; accommodation and food services; wholesale and retail trade; construction; and other services (which includes things like house cleaning and auto repair).