A study by the Conference Board of Canada found that small (and medium) sized enterprises owned by recent immigrants to Canada, are more likely to export, and they are also among the fastest-growing SMEs. This series highlights some of their stories.
Immigrants to Canada who become entrepreneurs are more likely to include exporting to other countries in their business models, and when they do, they’re more likely to export outside the U.S.
Why? Danielle Goldfarb, of the Conference Board of Canada’s Global Commerce Centre, says they have natural advantages compared to non-immigrants.
“A Canadian-born and raised person might find it challenging when they go to a foreign market, with language and cultural barriers, but those are exactly the kinds of things that immigrants don’t find challenging because they have connections and they have the language,” she says. “Second-generation Canadians also have cultural connections, but the reality is that immigrants do tend to have a natural advantage when it comes to trade because they understand what it’s like to live and work in other places and they understand the business culture and they have relationships as well.”
The findings were borne out in a Conference Board of Canada report, Selling Beyond the U.S.: Do Recent Immigrants Advance Canada’s Export Agenda? by Horatio Morgan and Sui Sui of Ryerson University. It looked at the exporting experiences of businesses owned by recent immigrants — those who’ve lived in Canada for five years or fewer — compared to similar Canadian businesses owned by non-immigrants. The authors looked at data on 15,000 small- and medium-sized enterprises (SMEs).
The report found that 12 per cent of immigrant-owned businesses are exporters that sell goods and services to non-U.S. markets compared with 7 per cent for non-immigrant businesses. In addition, while these companies sell less in dollar value they are, nonetheless, among the fastest-growing SMEs.
“This study was specific to Canada and we compared immigrant-owned firms to non-immigrant-owned businesses,” Goldfarb said. “We boiled it all down and we found exports among immigrant-owned companies account for a greater share of sales than those of non-immigrant-owned companies.”
Syed Ali, founder of Riz Global Foods, which exports Canadian food products such as beef, eggs and chicken as well as prepared desserts, says the findings match his experience.
EDC resources to help you export
“Basically, we came from a different country and we know that country better than Canada,” says Ali, who was born in India. “I finished an MBA and then moved to the Middle East. I was there from 1995 to 2007. I knew the business culture and I understand basic Arabic. Canada was new. The first thing that comes to your mind when you arrive is ‘What can I send back there?’”
Goldfarb also credits the exporting prowess to the personality profiles of immigrants.
“I suspect it comes down to the characteristics of immigrants,” she said. “Immigrants uproot themselves from where they were living and, for whatever reason, come to a new place, so they are probably more risk-taking and are more comfortable with the idea of going international.”
Research on trade has looked at key factors for success in global markets, she said, and one of those factors is international experience.
“Having leadership with international experience, whether they’re immigrants or not, is a key determinant of whether companies are going to succeed in global markets. So let’s say you’re Canadian born and you’ve never travelled anywhere else. If you hire someone who’s had international experience or is a new immigrant, you can tap into that and your chances for success are greater, all else remaining equal, of course.”
The report looked at the exporting immigrants’ business connections in Canada and their access to financing and found relatively weak connections here. Although they were generally able to get financing through formal channels, from organizations such as Export Development Canada, for example, they had weak access to informally funding, such as venture capital funding.
“They generally had pretty good rates of getting loan approvals through banks, but we did find that for knowledge-based exporters, there may be a gap because they don’t have, say, a factory that can be used for collateral through formal channels. That specific group would be one of the groups we would want to nurture and encourage.”