Research from the Munk School of Global Affairs highlights the unique ways small companies are scaling internationally in the digital economy.
Much of what we know about the presence of Canadian companies in foreign markets is not comprehensive or easily accessible. Fortunately Deanna Horton, a Fellow at the University of Toronto’s Munk School of Global Affairs and Public Policy, has been working to address and solve this issue through interactive, multi-layered maps.
“We need to move beyond the traditional way of looking at innovation to see that, in the digital economy, there’s a lot happening that may not be counted,” says Horton.
She believes that visualizing location-based data will give us an “entirely different perspective” on what Canadian companies are doing in foreign markets.
Horton and her team of students at the Munk School have developed two mapping projects over the past five years that track Canada’s presence in the American and Asian markets, by pulling together and analyzing publicly available country- and Canadian company-level data.
I sat down with Deanna to discuss what the data is telling her about Canadian companies.
Finding #1: Small Businesses Are Going Global Earlier Than You’d Think
Because large firms operate on a larger scale and utilize more resources, people often assume that a company has to be a certain size to export or move into foreign markets.
“Not so,” says Horton.
Her research shows that of all the Canadian high-tech firms in the U.S. and Asia, more than three-quarters are small- or medium-sized enterprises.
“One always thinks that companies, especially small companies, need to be a certain size before they expand to other markets,” Horton says. “But the digital economy is different. Canadian tech companies in particular are going global from a very early-stage. For them, going global means opening a small office with a few people in another country. So, it’s not always as complex as it can be for manufacturers.”
Horton’s research is still ongoing in this area but she says there are a few reasons why small tech firms are going global early: “They’re following their clients.” And they have the ability to partner with local organizations in their target country.
Finding #2: Almost Half of All First Locations for Small Tech Firms Outside of Canada are in Asia
Canadian companies, including those in the digital economy sphere, are already choosing Asia as their first overseas location.
“On average, larger firms enter the Asian market earlier, with the greatest difference being in the mobile, web, and cloud integration sector. However, SMEs entered Asia before large firms in the telecommunications sector,” says Horton.
Further broken down by sector, on average, telecommunications and wireless technology firms entered Japan and South Korea earliest, while advanced manufacturing firms entered ASEAN member states earlier than China or Hong Kong.
Finding #3: Ontario Leads All Other Provinces in Asia
The Munk research notes that Ontario is the “clear leader” with 914 locations in Asia compared to other 9 provinces (1,074).
“I think almost everyone assumed that British Columbia’s corporations would have the largest number of locations in Asia because they are the largest provincial exporter in Canada. And that’s not true for any part of the data set. Ontario is the clear leader.”
Horton says that Ontario is out in front because of its strength in technology and other service companies. But it’s also about the size of the Ontario economy. “Other provinces have a strong tech sector as well but Ontario is the largest economy in Canada, so it’s not surprising that they have the largest presence in Asia.”
Goal: Interactive Maps Will Help Guide Decision-Making
Horton hopes that businesses, job seekers, and governments will use her interactive maps to help with their decision-making.
Businesses looking to expand internationally could use these maps to find out which other companies in their industry are already in specific markets or to seek out potential partners or clients in target countries.
If you’re looking for a job, the map can tell you which Canadian companies are based where.
And Horton says that the information is important from a public policy perspective too because it showcases Canadian firms.
“It’s in our interest and it’s in Canada’s interest that our companies scale up. But the Canadian market is too small for them to do that here. To get the scale that they need, they need to go into international markets and they need to see who else is out there and be inspired to do the same.”
“Now we need more Canadian companies to follow the opportunities found in the world's growing and innovative markets — these companies represent the future of the Canadian economy and Canada will only benefit from scaling internationally,” says Horton.