Study: Growth of Large Firms in Canada, 2001 to 2008

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Large businesses, those with 500 employees or more, made the biggest contribution to the growth of gross domestic product (GDP) in Canada's business sector between 2001 and 2008.

Their contribution increased from 45.0% in 2001 to 47.9% in 2008. In contrast, the contribution of small businesses, those with fewer than 100 employees, fell from 41.9% to 40.6%.

The contribution of medium-sized businesses declined from 13.1% to 11.5%.

The changing contribution of small, medium-sized, and large businesses during the decade is of interest, given the difference in the remuneration of workers between large and small firms and differences in labour productivity across different-sized firms.

Between 2001 and 2008, the total GDP of large firms in Canada increased at an annual rate of 6.5% from $356.6 billion to $554.2 billion as the economy expanded.

In contrast, total GDP of medium-sized firms rose from $104.2 billion to $133.0 billion, at an average annual rate of 3.5%. That of small firms increased from $331.7 billion to $469.5 billion, or 5.1%.

The share of business-sector GDP accounted for by large businesses varied widely by industry. Large firms had more than 50% of business-sector GDP in utilities, information, mining and oil and gas, manufacturing, finance and insurance and management of companies, and transportation and warehousing. They had less than 15% in construction, other services, education, health, and agriculture, forestry, and fishing.

The resource boom that started in 2003 and the appreciation of the Canadian dollar during much of the 2000s were accompanied by several changes in the Canadian economic landscape. In particular, there was a shift in the relative performance of the manufacturing sector and the mining and oil and gas industry.

The mining and oil and gas industry accounted for about half of the increase in business-sector GDP for large firms between 2001 and 2008. Of the $95.3 billion increase in nominal GDP in the oil and gas industry during this period, 91.3% or $87.0 billion came from large businesses.

In the manufacturing sector, nominal GDP fell by $6.3 billion during the decade. This decline was entirely the result of a $12.9 billion drop in manufacturing GDP among large businesses, which are the manufacturers most likely to be exporters. At the same time, the share of large firms in manufacturing declined from 61% to 56%.

Smaller-sized firms operated mainly in labour-intensive service-based industries.

As the domestic economy grew during the 2000s, construction produced the largest share of small-business GDP. Between 2001 and 2008, construction GDP in small businesses increased by about $36 billion or 9.3% a year on average. By 2008, construction accounted for 16.7% of GDP among small businesses.