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Canadian SME Exporters

3. Research Methodology

The empirical work draws on data from a stratified large-scale comprehensive survey conducted in 2005 regarding the financing and export experiences of Canadian small and medium enterprises, using 2004 as the reference year.^{Footnote 13} The population of Canadian SMEs comprises approximately 1.3 million enterprises from which a sampling frame of 34,509 SMEs was randomly selected from the Business Register. The Business Register is a Government of Canada administrative database that contains the universe of enterprises in Canada, constructed from business number records assigned and collected by the Canada Revenue Agency. In selecting the sampling frame the following types of firms were excluded: enterprises with 500 or more employees; enterprises with over $50 million in annual gross revenues; enterprises coded as being non-profit (for example schools, hospitals, charities), co-operatives, joint ventures, municipal/federal government bodies and subsidiaries. Such companies were also screened out at the data collection phase.

Data collection was undertaken in two phases. In phase 1 computer-assisted telephone interviews were administered that gathered firm demographic data, and information concerning the businesses' latest financing request. In phase 2, a fax-based questionnaire was employed to collect detailed financial information from income statement and balance sheet data. The sample was stratified to ensure minimum numbers of responses from particular regions, sectors, and firm size categories. The response rate for the survey as a whole was 47 percent of eligible respondents, resulting in 12,047 cases of which data on Phase 1 were complete for 8,112 respondents and for which financial data (Phase 2) were completed by 3,141 respondents.

Several key related questions posed to respondents were:

• "During what year did the business first start selling goods and services?";
  
  
• "Did the business sell or export any of its goods and services outside Canada during the past 12 months?";
  
  
• "What percentage of your revenues came from sales outside of Canada"; and
  
  
• "What percentage of your total investment expenditure was devoted to research and development?"

Of particular interest to this study was the extent to which firms were engaged in exporting and whether or not the firm was a new venture. Accordingly, the following categories of firms were defined:

• Established firms that did not report exporting. These are firms that were established prior to 2001 and which did not report exports during 2004.
  
  
• Established exporter firms (EEs). These are firms that were established prior to 2001 and which did report exports during 2004.
  
  
• New firms. These are firms that were founded during 2001 or later. These are further categorized as:
  • International new ventures (INVs), new firms that reported exports during 2004. and
  • Domestic new ventures (DNVs), new firms that reported no exports during 2004.

The Survey of Financing of Small and Medium Enterprises included data from 2004 on the dependent variable, whether a firm was an exporter or not, as well as a variety of variables that could be used as potential determinants of the export propensity such as measures of labour inputs (number of employees), capital (balance sheet and income statement data), sector, technology orientation, and other potential determinants of export propensity.

Table 2 shows the breakdown of the firms in the sample across these categories and the corresponding estimates of firms in these categories in the population, based on the sample weighting scheme.

*Employing the definition of "intensive" SME exporters (defined as those firms that derived more than 25 percent of sales revenues from export sales), of the 368 INVs in the sample, 194 were intensive exporters; 371 of the 865 established exporters were "intensive exporters".
**Missing data resulted from a randomized skip pattern in the survey designed to reduce respondent burden.

^{Footnote 13} Readers are encouraged to review the description of the research methodology employed in this study at SME Financing Data Initiative, Survey on Financing of Small and Medium Enterprises, 2004.

^{Footnote 14} For the most part, missing data resulted from a randomized skip pattern in the CATI survey designed to reduce respondent burden.

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