Question

Why do you think small business is responsible for so much innovation in the Canadian economy?

Answer 1

In any market, big businesses generally hold a larger market share. Coupled with economies of scale that sets with larger production, the big businesses have a lot of advantage and power in the market. Due to these reasons, they are usually able to enjoy an economic profit, which attracts other new firms into the market. When these now firms try and enter the market, they are generally small initially. At this stage, to survive the competition from the big businesses, they need to create some incentive and capture market share. In order to lower their costs, make their products more likeable in the market and gain significant enough demand, small businesses have to go above and beyond. One of the best ways to do this and to compete with the other big firms is to innovate. This innovation can be in different fields, such as production process, cost structure, pricing structure, product itself, et cetera. Innovation and research in these fields can provide necessary boost to the small businesses in staying afloat and even making profit as well as gaining market share. This makes the small businesses more focused on research and development and innovation and positive changes. Through innovation, firms can even become a monopoly by either cutting their cost and providing lower prices or by providing goods and services which are better than the competition.

These are the reasons why small businesses are so much responsible for innovations in Canadian Economy.