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How does firm size affect the perceived benefits of Internet business?

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by Mark Uhrbach, SIEID, Statistics Canada

Although small firms were less likely than large firms to identify benefits from conducting business online, there has been growth in the proportion of firms indicating perceived benefits over the past five years in all size categories.

About this article
About the author

About this article

The Survey of Electronic Commerce and Technology (SECT) asks Canadian firms about four particular perceived benefits of conducting business over the Internet:  lower costs, reaching potential customers, better co-ordination with suppliers/customers/partners and reducing time to market. Respondents may select all that apply. Conversely, respondents may also answer that they have perceived no benefits from conducting business over the Internet.

For the purposes of this study, small firms are defined as those with less than twenty employees. Large firms are those with more than 100 employees, with the exception of the manufacturing industry, where this covers firms with more than 500 employees.

More information about the Survey of Electronic Commerce is available here.


Over the past five years, substantial changes have occurred in the way many aspects of business are conducted. The instigator for many of these changes has been the emergence of the Internet as a mainstream business tool for firms of all sizes.

During this time period, not only have business processes changed, but so too have the perceptions firms have about conducting business over the Internet. This article examines these changes with a focus on the differences in perceptions held by small and large Internet-using firms. While a gap has been identified between small and large firms in their perceived benefits of using the Internet for business, the two size classes are generally moving in the same direction.


Small firms less likely to perceive benefits of business over the Internet

Overall, large firms were more likely to perceive benefits from Internet business than their smaller counterparts. In accordance with this finding, small firms were more likely to identify no benefits to e-business than large firms. In 2006, 9% of small firms responded that there were no perceived benefits while only 3% of large firms did so.

While many of the early expectations surrounding the Internet were about cutting costs for firms of all sizes, this reality does not seem to have played out for the majority of firms. In 2006, only 27% of small firms felt that their costs were lowered by doing business over the Internet. Just over 40% of large firms perceived lower costs to be a benefit (Chart 1).

Chart 1 Perceived benefits for Canadian firms by size, 2006. Opens a new browser window.

Chart 1
Perceived benefits for Canadian firms by size, 2006

Another expectation at the turn of the century was that the Internet would allow private firms to attract consumers from around the globe as their physical location would be supplemented, or replaced, by a virtual one. More than 55% of large firms in Canada believed that conducting business over the Internet has allowed them to reach potential customers while 34% of small firms felt this was a benefit.

The greater ability of larger firms to reach out to potential customers may be explained by a number of factors, including greater resources for the development of web sites, brand name recognition, and the use of web advertising in conjunction with traditional means.

Perceived benefits grow across size classes

Although small firms were less likely than large firms to identify benefits from conducting business online, there has been growth in the proportion of firms indicating perceived benefits over the past five years in all size categories.

In 2002, only 20% of all firms believed that the Internet provided better coordination with their suppliers, customers and/or partners. By 2006, this had risen to 35%. Likewise for large firms, the proportion that recognized better coordination with suppliers rose from 34% to 43%. The increased levels of coordination between suppliers, customers and partners can be explained by the greater number of Canadian firms using the Internet to communicate and transact. 

In a similar vein, both large and small Canadian firms perceive that they were able to reach new customers by using online means for business practices. From 2001 to 2005, this proportion had stagnated for all firm sizes, as about 29% of small firms and 45% of large firms perceived it to be a benefit. However, in 2006, 34% of small firms and 56% of large firms thought this was a benefit to having an online presence. It should be noted that no information is available on how firms are reaching these new customers, but it may be through web advertising, providing information on a website, conducting sales through an online portal, or a combination of these elements.

Nearly all firms recognize benefit of business online

In 2006, less than one in ten small firms conducting business online perceived no benefit from this activity. This has fallen slightly since 2002 when 16% of small firms who used the Internet for business activities indicated that they perceived no benefit. This falling trend line is the same for large firms, of which only 3% perceived no benefit from conducting business over the Internet in 2006.

About the author

Mark Uhrbach is with the Science, Innovation and Electronic Information Division (SIEID) at Statistics Canada. For more information about this article, please contact