Entry and exit rates of firms, 2017
What is this metric and why is it important?
The firm entry and exit rates are the number of firms created or shut down in a given year, expressed as a percentage of active firms in that year. The entry rate shows us how much entrepreneurial activity has resulted in new business, and the exit rate shows us how stable businesses are.
How is Canada doing?
- Canada’s enterprise entry rate is one of the lowest in the OECD, at 8.0%; however, most are not far off, with the average at 10.5%.
- Countries often thought of as entrepreneurial engines, such as Japan, Germany and Switzerland, have even lower rates, which may imply that Canada's low rate indicates stability rather than poor entrepreneurship.
- While there are extreme cases in terms of exit rate, such as Belgium at 1.0% or Hungary at 48.8%, 19 out of 32 comparator countries are within 2 percentage points of the median exit rate at 9.3%.
Metric discussion
A business enterprise is a firm or company carrying out projects or ventures for financial gain. Every year, business enterprises open their doors, and every year businesses close down. The entry rate of business enterprises is the number of businesses that start up in a year as a percentage of the total number of operating businesses that year. The exit rate is the number of businesses that have shut down as a percentage of total operating businesses. We count enterprises in all industries (ISIC4 codes).
Limitations
Unfortunately, the United States does not seem to be included in OECD data, possibly because they use different industry definitions. Survival rates of enterprises would also be useful, but the data is incredibly spotty and, more importantly, not collected for Canada.
