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• Results
• Manufacturing firms in the value chain of the resource sectors
• Firms in resource-reliant communities
• Summary

Results

In 2007 at the Canada level, there were 60 thousand manufacturing firms (as noted in Box 1, these are firms with employees). This represents a decrease of 6% compared to the level in 2003 (Table 1). This decline may be contrasted with the change in the total number of firms in all sectors (i.e. manufacturing and non-manufacturing sectors) which increased by 4% during the same period.

Within RST areas, the number of manufacturing firms declined by 7% from 2003 to 2007 – reaching a level of 12 thousand manufacturing firms in 2007. Over this period, the number of firms in all sectors located in RST areas declined by 1%, to a level of 233 thousand firms.

Table 1 Number of firms in all sectors and number of manufacturing firms by geographic area, Canada, 2003 and 2007

Within RST areas, manufacturing firms represent 5% of all firms¹. There is a slight gradient across the MIZ in terms of the number of manufacturing firms as a percent of all firms. Within Strong MIZ and Moderate MIZ, 6% of all firms are manufacturing firms whereas the shares are lower in Weak MIZ (4%) and No MIZ (3%) (Figure 1 and Table 1). Rothwell (2010, Table 3) shows that a relatively higher share of firms in Weak MIZ is distributive services firms (i.e. largely retail stores) and in both Weak MIZ and No MIZ, a higher share of firms is social and personal service firms.

Figure 1 In Strong MIZ and Moderate MIZ, 6% of all firms are manufacturing firms, Canada

As already noted, between 2003 and 2007, the number of firms in all sectors increased for Canada as a whole. The total number of firms increased by 5% in LUC but declined by 1% in RST areas (Figure 2 and Table 1).

This was not the pattern for firms in the manufacturing sector. Among manufacturing firms between 2003 and 2007, there was a decline in each type of geographic area. The decline was more pronounced in rural and small town areas (a decline of 7%). There appears to be a gradient as we move from RST areas with a strong linkage to LUCs (a decline of 4% in Strong MIZ) to more remote areas (a decline of 12% in No MIZ).

Figure 2 Within rural and small town areas, the decline in manufacturing firms was larger in Weak and No MIZ, Canada, 2003 to 2007

In addition to this, there was a decline in the number of manufacturing firms, in each size class within each type of geographic area (Table 2). Generally, in LUC and overall in RST areas, the decline in the number of manufacturing firms with 1 to 4 employees was generally smaller, with Moderate MIZ and No MIZ areas being exceptions.

Table 2 Change in the number of manufacturing firms within each size class, Canada, 2003 to 2007

This pattern of decline in manufacturing firms is in the context of an overall increase in the total number of firms in each size class (except the group with 5 to 9 employees) at the Canada level (Appendix A). Within RST areas, the total number of firms (in all sectors) declined from 2003 to 2007 in each size class, except the group with 1 to 4 employees.

Manufacturing firms in the value chain of the resource sectors

One objective of our study is to document the number and the change in the number of manufacturing firms in the  value chain of a resource sector.

A "value chain" can be defined as "the full range of activities which are required to bring a product or service from conception, through the intermediary phases of production, delivery to final consumers, and final disposal after use" (Kaplinsky ,1999, p. 21). These activities can include input and services to the primary producer, primary production, processing, handling, transportation, storage and retail, and services activities related to processing and marketing, including financial, insurance, etc. (Porter, 1985).

Over the last decades, the economy of rural regions has become increasingly diversified and service-oriented. This transformation is largely associated with major changes in the value chains of traditionally rural and remote resource sectors (agriculture, forestry, fishing, mining, and energy). There are two salient features of these changes which are relevant for rural development initiatives. First, there has been a continuous shift of employment from primary production to processing and to service activities; for instance, from farming to services to farmers and to processing of agricultural products. Second, there has been a spatial reorganization of some of the activities in the value chains, between and within rural and urban areas; for example, some of the services to farmers that were located in small villages have been relocated into larger towns or cities (See, for example, Desmets and Fafchamps [2005]).

Both processes of change are ongoing. New technologies keep reducing the amount of labour per unit of output in primary production—and increasingly also in the service sector. Similarly, the process of spatial reorganization has gone through rapid development at the national and global level. Notably, after decades of concentration of processing activities in core urban areas, many countries are now experiencing a reverse core-periphery pattern in which manufacturing activities relocate into rural regions (See, for examples, Baldwin et al. [2001] and Chatterjee and Carlino [2001]).

The analysis of a value chain, from a regional perspective, requires mapping and understanding of the ways in which specific economic activities of a region are linked to the rest of the national and global economy. The nature of these linkages can determine, to a large extent, the distributional outcomes along the chain and the capacity of a region to upgrade and sustain its economic base (Kaplinsky and Morris, 2001). Part of the success of a region in adding value to their primary production lies in the ability of such a region to access and to reap the benefit of specific value chains (UNCTAD, 2000). Being cut off from a specific value chain may have severe consequences for a region. Therefore, an analysis of the structure and nature of the rural component of value chains can help us to understand the nature of widening or narrowing regional inequalities (Kaplinsky and Morris, 2001).

Manufacturing firms in the value chain of a resource sector process the products from a primary resource sector (agriculture, forestry, fishing, mining and oil and gas). The delineation of manufacturing firms to the value chain of each resource sector is specified in Appendix B.

Within RST areas, two-thirds (67%) of all manufacturing firms are classified as part of the value chain of a resource sector (Figure 3 and Table 3). This mirrors the findings of Beshiri (2010) where 68% of the RST manufacturing workforce is employed in manufacturing in the value chain of a resource sector.

The share of manufacturing firms that is in the value chain of a resource sector is somewhat higher in Weak MIZ and No MIZ.

Figure 3 In rural and small town areas, about 2/3 of the manufacturing firms are part of a resource sector value chain, Canada

Within each type of geographic area over the 2003 to 2007 period, there was a decline in the number of manufacturing firms in the value chain of a resource sector (Figure 4). The rate of decline was somewhat larger in Weak MIZ and No MIZ. Within each type of geographic area, the rate of decline was essentially the same for all manufacturing firms and for manufacturing firms in the value chain of a resource sector.

Figure 4 From 2003 to 2007, manufacturing firms in the value chain of a resource sector decreased at the same pace as for all manufacturing firms, Canada

Table 3 Number of manufacturing firms by geographic area, Canada, 2003 and 2007

Firms in resource-reliant communities

Another objective of our analysis is to investigate the situation in communities that are "reliant" or "dependent" on a primary resource sector and/or the value chain associated with a resource sector. The methodology for delineating a community² as "reliant" on a resource sector value chain is outlined in Appendix C.

If we select all communities with more than 30% of the economic base being contributed by a resource sector value chain, we find that these communities represent 37% of all the communities in RST areas (Appendix C, Figure C.1). Among Weak MIZ communities, 60% are reliant on a resource sector value chain.

Compared to the 37% of RST communities being "resource-reliant", we observe that 53% of the population of RST areas is living in a community that is reliant on a resource sector value chain (Appendix C, Figure C.2). This proportion varies across the geographic groups, from a high of 60% in Weak MIZ to a low of 44% in No MIZ and 25% in the RST Territories.

Among all firms in RST areas, one-half of them are located in a community that is reliant on a resource sector value chain (Appendix C, Figure C.3).

In terms of the change in the number of firms (in all sectors), RST resource-reliant communities showed a larger decrease in the number of firms, compared to the change in the number of firms in all RST communities (Appendix C, Figure C.4). Note that the number of firms in LUC resource-reliant communities increased more than the number of firms in all LUC communities³.

Similar to the finding that one-half of all RST firms in all sectors are located in a resource-reliant RST community, we see that one-half of RST manufacturing firms are located in a resource-reliant community (Figure 5).

Figure 5 Among the manufacturing firms in rural and small town areas, 50% are located in communities reliant on a resource sector, Canada

Within RST areas, the rate of decline of manufacturing firms was larger in resource-reliant communities than the decline in manufacturing firms in all RST communities (Figure 6). Thus, the loss of manufacturing firms in non-resource-reliant communities was somewhat slower.

Figure 6 There was a 10% decline from 2003 to 2007 in the number of manufacturing firms in rural and small town communities that were reliant on a resource sector

Summary

Within rural and small town areas, 5% of the business enterprises are manufacturing firms, slightly lower than the 6% share of business enterprises that are manufacturing firms in larger urban centres.

In rural and small town areas close to larger urban centres, the share of all firms that are manufacturing firms matches the share in larger urban centres (6%).

Between 2003 and 2007, the number of manufacturing firms in Canada declined by 6%. The decline in rural and small town areas (-7%) was slightly more than the decline in larger urban centres (-6%).

The further the community was far from a larger urban centre, the larger was the rate of decline of the number of manufacturing firms.

In rural and small town areas, two-thirds of the manufacturing firms are part of the value chain of a primary resource sector. These firms are processing the products of the primary sector. This may be compared to larger urban centres where one-half of the manufacturing firms are part of the value chain of a primary resource sector.

In each geographical group, the rate of decline of manufacturing firms in the value chain of a resource sector was the same as the rate of decline for all manufacturing firms.

Within rural and small town areas in 2001, 37% of the communities (representing 53% of the population) were resource-reliant communities. As defined by Natural Resources Canada, a resource-reliant community has more than 30% of the economic base contributed by the value chain of a primary sector (agriculture, fishing, forestry, mining or energy).

In rural and small town areas, the number of manufacturing firms declined more rapidly in resource-reliant communities than in non-resource-reliant communities.

Notes

1. As noted by Rothwell (2010, Table 3), the distribution of RST firms across the various sectors was social and personal service firms (27%), distributive services firms (23%), primary sector firms (18%), producer service firms (15%), construction firms (12%) and manufacturing firms (5%).The data for 2001 to 2008 are presented using the 2001 delineation of rural and small town areas (Box 2).

2. In this study, a "community" is represented by a census subdivision. A census subdivision is an incorporated town or municipality. For details, see Statistics Canada (2002).

3. In 2001, there were 140 census metropolitan areas (CMAs) and census agglomerations (CAs) in Canada. These are "functional labour market areas" as any neighbouring census subdivision (i.e. incorporated town or municipality) with more than 50% of their workforce commuting to the CMA/CA urban core is included in the given CMA or CA. In 2001, there were 995 census subdivisions included in a CMA or CA in Canada. Census subdivisions are referred to as "communities" in this bulletin.