Study: The Entry into and Exit out of Self-employment and Business Ownership in Canada

Released: 2018-07-09

Entrepreneurial activity has long been seen as an important driver of innovation, job creation, and productivity growth. However, entrepreneurial activity is heterogeneous. Incorporated self-employment, often termed business ownership, differs from unincorporated self-employment in many respects. However, because of the lack of comprehensive, longitudinal data on business owners and the self-employed in Canada, differences in their entry and exit processes and rates of survival could not previously be studied in detail.

The study "The Entry into and Exit out of Self-employment and Business Ownership in Canada," released today, distinguishes incorporated self-employment from unincorporated self-employment using a novel matched database, the Canadian Employer–Employee Dynamics Database. It then compares the entry and exit dynamics of the two types of self-employment from 2001 to 2013.

Overall, business ownership was found to be more male-dominated than self-employment. Over the study period, the vast majority of business owners were employers, while only a small percentage of the self-employed had employees. Business owners also received much higher income than the self-employed.

Business ownership and unincorporated self-employment differed in entry and exit processes. Self-employment had higher entry and exit rates and lower survival probabilities than business ownership. Self-employment was dominated by short-term entry (i.e., less than one-half of all entrants to self-employment survived for longer than two years after entry). In contrast, business owners were dominated by long-term entry. About 63% of all entrants into business ownership survived at least three years.

For both self-employment and business ownership, males had higher entry rates and lower exit rates than females. However, the male–female difference in the entry and exit rates became smaller over time, especially for self-employment.

The entry rates by age into both self-employment and business ownership were lowest for those aged 15 to 34, increased to a peak for the 35 to 54 age group, and then declined for those aged 55 and older. By contrast, the exit rate was highest for the youngest age group and lowest for the oldest age group. As well, important regional variations exist, especially with respect to entry rates: the western regions had higher entry rates, while the central and eastern regions had lower rates. Exit rates were broadly similar across the country.

Self-employment and business ownership also differed by origin of entry. While the largest source of entry into both self-employment and business ownership was from paid employment, non-employment was the second-largest source of entry into self-employment, and self-employment was the second-largest source of entry into business ownership.

Products

The research paper "The Entry into and Exit out of Self-employment and Business Ownership in Canada," part of the Analytical Studies Branch Research Paper Series (Catalogue number11F0019M), is now available.

Contact information

For more information contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).

To enquire about the concepts, methods or data quality of this release, contact Huju Liu (613-407-0589; huju.liu@canada.ca), Economic Analysis Division.