Immigrant entrepreneurship is taking centre stage in Canada
6-minute read
Immigrants1 make up an increasing proportion of Canada's population, rising from 16% in 1991 to about 24% in 2023, according to BDC estimates based on 2021 census data. With the country welcoming more immigrants each year and the birth rate at an all-time low, the immigrant population will continue to grow in the coming years.
This will change the face of entrepreneurship in the country since immigrants have a higher rate of entrepreneurship than non-immigrants. Overall, 2.9% of the immigrant population aged 15 and over are entrepreneurs in Canada, compared to 2.0% for non-immigrants.
What will be the impact of historically high levels of immigration on the Canadian entrepreneurial landscape? And what challenges are these new immigrant entrepreneurs likely to meet once they create companies Canada?
This blog attempts to answer these questions while also detailing the current and future contributions of immigrant entrepreneurs to the Canadian economy.
Immigrants are more entrepreneurial, especially men
The overrepresentation of immigrants among entrepreneurs is mainly driven by male immigrants, who have the highest entrepreneurship rate in the country (4.4%). Immigrant women remain under-represented among entrepreneurs (at 1.5%), even though they have a higher entrepreneurship rate than non-immigrant women.
Overall, the entrepreneurship rate is almost three times higher for men than for women, meaning that women are significantly under-represented among entrepreneurs, a fact that is already well documented.
Figure 1: Canadian entrepreneurship rates in 2023
| All | Female | Male | |
|---|---|---|---|
| Immigrants | 2.9% | 1.5% | 4.4% |
| Non-immigrants | 2.0% | 1.1% | 3.0% |
| Total population | 2.3% | 1.2% | 3.4% |
Source: BDC calculations using special labour survey computations from Statistics Canada
Reading grid: 2.9% of immigrants in Canada aged 15 and above are entrepreneurs. A group with an entrepreneurship rate below average (2.3%) is underrepresented.
In ten years, half of Ontario and B.C. entrepreneurs should be immigrants
Immigrant entrepreneurs are more predominant in Canada than in most other developed economies. According to the most recent data available, the proportion of immigrant entrepreneurs is 22% in the U.S., 19% in the U.K. and in Germany, 12% in France and 15% on average in Europe, according to the American Immigration Council and Eurostat.
However, since immigration is not evenly distributed across the country, the share of immigrants in the entrepreneurial population varies significantly from region to region.
In 2023, 34% of entrepreneurs in Canada were immigrants, while in Ontario and British Columbia, this share was over 40%. On the other hand, they represented only 10% of entrepreneurs in the Atlantic provinces. The share of immigrants among entrepreneurs was also lower in Quebec and the Prairies.
The situation will change rapidly in the next 10 years as immigrants are expected to represent more than 40% of Canadian entrepreneurs in 2034. This implies an increase of 15 points over 20 years (from 27% in 2014) and 8 points over 10 years (from 34% in 2024).
Figure 2: Share of immigrants among entrepreneurs in Canada
Source: Statistics Canada, BDC’s projections.
The regional situation is even more telling. In 2034, half of all entrepreneurs in Ontario will be immigrants, and they will represent close to the majority of entrepreneurs in British Columbia.
Their share will rise in every region, but the increase will be moderate in the Atlantic provinces and in Quebec, as comparetively fewer immigrants settle there.
Figure 3: Share of immigrant entrepreneurs by Canadian region, 2023 and 2034
Source: BDC calculations using Statistics Canada’s population projection (reference scenario) and adjusted entrepreneurship rates observed in 2023. For this projection, entrepreneurship rates were recalculated for the population aged 15-74 years old.
Reading grid: According to a BDC estimate, 42% of entrepreneurs in Canada will be immigrants in 2034.
Immigrant entrepreneurs have a strong economic contribution
The growing presence of immigrant entrepreneurs will make a significant contribution to the Canadian economy.
One study found that net job creation was higher among immigrant-owned firms than among Canadian-born owners. They accounted for 25% of net job creation, while representing 17% of all firms studied. This difference was mainly explained by the younger age of immigrant-owned firms, as younger firms tend to have higher job creation rates.
Another Statistics Canada analysis showed that businesses owned by immigrants are more innovative and own more intellectual property. This is good news given the positive impact of these factors on productivity. Based on a recent survey, 10.9% of immigrant-led firms intend to increase their R&D spending in the next three months, compared to 6.7% of all private sector firms.
Figure 4: Innovation and intellectual property rates among immigrant and Canadian-born owners of SMEs
Source: Yuri Ostrovsky and Garnett Picot, Innovation in Immigrant-owned Firms in Canada, Statistics Canada, 2020
In addition, immigrant-owned firms have a significant positive impact on Canada’s trade diversification, more specifically with the region of origin of immigrant owners. For instance, compared with Canadian-owned firms, immigrant-owned firms in the manufacturing sector have, on average, a higher probability of importing from (by 6.7 percentage points) and exporting to (by 2.1 percentage points) the immigrant owners’ region of origin, according to Statistics Canada.
Immigrant-led firms tend to be more financially fragile
Despite positive business performance and the fact that their survival rate is the same as that of Canadian-born businesses, immigrant-owned businesses are less optimistic about the future.
In fact, according to Statistics Canada's Business Condition Survey, immigrant-owned businesses were less likely to report an optimistic outlook for the next 12 months (60.3% compared to 68.4% for all private sector businesses).
This may be due to the financial situation of immigrant-owned businesses, which seems more fragile, as shown in Figure 5.
Figure 5: Financial expectations of immigrant-led firms compared to all private firms in Canada
| Immigrant-led firms | All private firms | |
|---|---|---|
| Expect a decrease in sales over the next three months | 21.6% | 16.4% |
| Expect a decrease in profitability over the next three months | 39.9% | 33.3% |
| Have the cash or liquid assets required to operate | 67.8% | 73.9% |
| Can take on more debt | 41.0% | 59.8% |
| Have been highly impacted by interest rate levels | 36.8% | 28.0% |
Source: Statistics Canada, Canadian Survey of Business Conditions, 2024 Q1.
Lower levels of optimism and greater financial fragility could be explained by the fact that immigrant-owned enterprises are generally smaller. Among businesses with 50 or more employees, only 5% are majority immigrant-owned, compared to 59% that are owned by Canadian-born entrepreneurs (the other 36% are minority immigrant-owned).
Another potential explanation is that immigrant-led firms were more affected by the COVID-19 pandemic than other businesses because they are more concentrated in industries that require face-to-face contact, according to a study by Statistics Canada.
That same study found that businesses that are majority-owned by immigrants were more likely to receive the Canada Emergency Business Account (CEBA), the Canada Emergency Commercial Rent Assistance (CECRA) or the Canada Emergency Rent Subsidy (CERS). However, immigrant-owned businesses received slightly higher values than those owned by Canadian-born individuals.
With respect to financing from traditional financial institutions, there is little evidence to suggest that access to financing is more of a problem for immigrant entrepreneurs than for Canadian-born entrepreneurs once the results are adjusted for firm characteristics (for example company size or sector of activity). However, immigrant-owned firms were slightly less likely to apply for financing than Canadian-born firms. Yet, immigrant-owned firms were just as likely as Canadian-born firms to have their applications approved in full, according to a Statistics Canada study.
A growing force in the Canadian economy
Immigrant entrepreneurship will become increasingly important in Canada. In some provinces, one in two entrepreneurs will have been born outside the country in 2034.
This entrepreneurial dynamism is a good news for the Canadian economy. The share of entrepreneurs in Canada’s population has been declining for two decades. This has likely contributed to Canada’s sluggish productivity growth.
The entrepreneurial dynamism of immigrants could probably help our economy become more innovative and dynamic.
We should, however, keep in mind that these businesses face unique challenges and that we must help them overcome these challenges.
This blog defines entrepreneurs as self-employed individuals with paid help. Businesses are described by majority ownership. Immigrant refers to a person who is, or who has ever been, a landed immigrant or permanent resident.