A person walks past closed businesses on Spadina Avenue in Chinatown in Toronto on May 13, 2021.Nathan Denette/The Canadian Press
Scott Stirrett is the founder and chief executive of Venture for Canada.
The famed management consultant Peter Drucker once said that “culture eats strategy for breakfast.” While this saying originated in the corporate world, it also influences the fate of countries.
An entrepreneurial culture, which encourages people to identify and act upon opportunities to create value for others, is essential to improving a country’s quality of life. Entrepreneurial behaviour creates economic growth and innovation, which enhances our capacity to tackle challenges such as an aging population and climate change. But Canada’s insufficiently entrepreneurial culture poses an existential risk to our country’s future.
Countries rise and fall based on their economic vitality and entrepreneurial spirit. At the turn of the 20th century, Argentina was significantly wealthier per capita than Canada, and Singapore was substantially poorer. Now, 125 years later, Singapore is a marvel of innovation and Argentina is an economic basket case.
While some data, such as the Global Entrepreneurship Monitor, show that Canada’s level of entrepreneurship is increasing, much more evidence suggests that we are backsliding. Canada scores poorly in surveys that measure entrepreneurial values, especially the acceptance of competition and teaching children to be independent.
That’s partly because of Canada’s good fortune in terms of natural resources, stability and ready access to the American market, which influence Canadians to have a culture of complacency. Necessity is the mother of invention, and our lack of necessity has made us risk averse. We need an entrepreneurial culture that recognizes there are also tremendous risks in not taking risks.
Canadians now lead citizens of other G7 countries in citing “fear of failure” as a roadblock to becoming an entrepreneur. Canada’s affordability crisis, in which housing, transportation and food are becoming much more expensive while incomes are stagnant, constrains a whole generation from taking entrepreneurial risks. It is therefore no surprise the share of Canadian business owners under the age of 50 decreased from 53 per cent in 2004 to 38 per cent today. This has enormous economic consequences.
Another part of the problem is that Canada does not have a culture that adequately celebrates entrepreneurial leaders. Too many Canadians have a “tall poppy syndrome,” in which we try to tear down our successful entrepreneurs rather than celebrate their successes. As journalist Paul Wells recently pointed out, “in Canada, if you run a successful business, you are made to feel you have done something wrong.”
Global innovation rankings show that Canada performs abysmally compared with its peers in key entrepreneurial competencies. According to a survey by the Conference Board, Canada ranks 13th out of 16 peer countries in terms of its innovation index, which assesses 21 measures such as patents by population and new firm creation.
Also, while Canada is a global leader in research, we do an exceptionally poor job at commercializing our scientific discoveries. For instance, while many of the fundamental breakthroughs in generative artificial intelligence took place in Canada, most of the economic benefits are going to other countries.
Canada’s lack of entrepreneurial culture results in companies being too risk averse, and investing too little in research and development. In real terms, Canada’s research spending decreased by approximately 6 per cent last year. In 2020, 1.7 per cent of the country’s gross domestic product went to R&D, well below the 3.2 per cent of Germany, 3.1 per cent of the United States and 2.2 per cent of China, according to the Organization for Economic Co-operation and Development.
In place of invention, too many Canadian companies derive their profits from oligopolistic rent-seeking behaviours. This persistent lack of investment means Canadian companies are losing out on developing the intellectual property that is essential to building globally competitive firms. A recent Financial Times list of the world’s 100 leading companies included only one Canadian firm: Shopify. Without global champions, Canada will be a branch plant economy, in which we may have local offices of American firms, but all the profits of our labours will flow out of the country.
In short, we are losing ground in the cutthroat world economy. Canadian labour productivity, defined as real economic output per labour hour, decreased in 10 of the 11 most recent quarters. Essentially, Canadians are earning less for each hour worked. The OECD ranked Canada last among all advanced economic countries in its forecast of real per capita GDP from 2020 to 2060.
As Argentina’s trajectory teaches us, past prosperity is not a guarantee of future success. Canada can have extremely well-thought-out policies that foster innovation, but if we don’t have an entrepreneurial culture, those strategies will not amount to much. Culture really does eat strategy for breakfast.
All Canadians shape culture through their daily actions and choices. Our systemic economic challenges will only be fixed if Canadians choose to take more risks and be more entrepreneurial. We need to act collectively with a sense of entrepreneurial urgency. Canada’s future depends on it.