Fast-growing firms as elements of change in Canada’s headquarters city system

Abstract

This research explores the factors that shape the evolving geographic distribution of business headquarters (HQ) activity. We address an understudied influence on HQ geographies: metropolitan HQ changes driven by the process of small, rapidly expanding businesses growing into mature companies. This investigation focuses on the developmental paths followed by fast-growing firms (FGFs) and the geographic distinctions that can be observed in a FGF tracking study of Canada’s metropolitan regions from 1987 to 2005. Our research findings indicate that geography plays an important role in this development, as FGF tracking records throughout Canada’s metropolitan areas diverge sharply. We find that most FGFs that emerged in Vancouver and Toronto continued as ongoing businesses following their rapid growth phase, while a high proportion of FGFs based in Montréal and Calgary did not. These results contribute to a greater understanding of metropolitan economies, business development, and HQ location in Canada

Keywords:

• fast-growing firms (FGFs)
• headquarters
• economic geography
• Canadian cities

Acknowledgements

We acknowledge the constructive comments of the anonymous reviewers. Any remaining errors are ours alone.

Notes

1. FGFs have been studied under a variety of names, including “gazelle” (Birch, 1981; Stam, 2005), “next wave firm” (Rice, 2004; Rice & Lyons, 2007), “10 percenter” (Storey, 1994), and “high-growth firm” (Moreno & Casillas, 2007). These terms have a wide range of definitions that vary in focus and in degree of specificity, but all center broadly on rapid business growth. Rather than focusing on a highly specific definition, our study uses FGF as an overall designation to denote the fastest-growing businesses in a given economy.

2. It is important to acknowledge that firm relocation (or acquisition together with relocation) may be in the best interests of some businesses, such as a firm whose growth is constrained by a small local market or labor force but which has the potential to expand in a larger urban area. Regardless, given the regional development focus of this article, we interpret high levels of firm continuity as having some positive connotation for the region and its business community.

3. A likely factor in Vancouver’s success may relate to its access to markets beyond North America, particularly in the Asia-Pacific region.

4. It is possible to interpret firm discontinuation as a sign of regional strength. Business failure in Montréal could be seen as the result of a dynamic and competitive environment in which only strong firms are surviving, and not necessarily the result of an inherent problem with the regional economy. However, to convincingly make such an argument, more evidence would be needed to account for the much greater success of FGFs in Toronto’s highly competitive business community and to provide an explanation for the degree to which Montréal-based FGFs fall in the “defunct/no records” category at a rate far above the national average (38.1% of FGFs in Montréal vs 23.7% nationally).

Additional information

Funding

This work was completed with Canadian Studies Research Grant assistance from the Government of Canada/avec l’appui du gouvernement du Canada.