Research / Understanding Rates of Farm-based Agri-business Start-up, Failure and Growth in Rural Canada

Understanding Rates of Farm-based Agri-business Start-up, Failure and Growth in Rural Canada

Researchers: Spencer Henson, University of Guelph

Research Summary

Recent research by Statistics Canada (Baldwin et al., 2000) highlights the relatively high rates of failure of new small and medium-sized enterprises in rural Canada, most notably those associated with natural resources, including agriculture. At the same time, however, the promotion of farm-based agri-businesses is seen as a potentially effective mechanism through which farm incomes can be enhanced and diversified away from reliance on agricultural production. Further, rural small and medium-sized enterprises are seen as a means through which higher-waged rural employment can be promoted. Such businesses are often closely associated with the productive activities of the farm, such as food processing, but can also be related to farming activities more broadly, for example tourism.

Interestingly, such arguments, that are being increasingly recognised by policy-makers in a number of Provinces, mirror the micro-enterprise development perspectives adopted in agricultural development within low and middle-income countries. Unlike the latter, however, there is a paucity of literature on rates of new enterprise start-up, failure and growth in rural Canada, especially in the context of farm-based agri-businesses. Perhap more troubling, we have a very limited understanding of the factors that influence rates of enterprise start-up, failure and growth, especially the role of entrepreneurial alertness (Harper, 1998) and the constraints that can limit the ability of entrepreneurs to capitalise on their initiatives. Thus, this proposal focuses on the role of farm-based agri-businesses as a means to enhance farm incomes, aiming to estimate the rate of new enterprise start-up, failure and growth across rural Canada and the role of access to finance, entrepreneurial alertness and other factors as determining factors. In so doing, it will provide guidance to policy-makers on the most effective means through which farm-based agri-businesses can be promoted.

Significance of Research

As described above, farm-based agri-enterprises are being increasingly recognised as a potentially effective mechanism through which farm incomes can be enhanced and diversified away from reliance on agricultural production across rural Canada. Indeed, a number of Provinces have taken initiatives to encourage and support rural enterprise start-ups. However, rates of business failure are known to be high, and exceed those of comparable urban-based enterprises, although there is a paucity of research on the factors that determine rates of enterprise start-up, failure and growth, including the role of entrepreneurial alertness. This makes policy formulation problematic; there are crucial questions over where policy-makers should focus their efforts in terms of enterprise infrastructural development and business development services. These questions are addressed by the current proposal, aiming to identify those factors that have the greatest impact on rates of enterprise start-up, failure and growth among farm-based agri-businesses, in turn relating these to concrete policy recommendations. In so doing, the research aims to play a key role in guidng policy-makers towards more effective strategies for farm-based agri-business development in rural Canada.

Summary of Research Results: Yet to come.