Labour Productivity of Immigrant-Owned Businesses and Its Determinants

This chapter undertakes a comparative analysis of labour productivity between immigrant-owned firms and non-immigrant-owned firms in Canada, utilizing nearly 4.5 million records between 2001 and 2020 from the Canadian Employer-Employee Dynamic Database (CEEDD). Understanding labour productivity is important as it is one of the key sources of job creation and economic growth. The findings indicate that on average immigrant-majority-owned firms (immigrants holding 50% or more of ownership shares) demonstrated significantly lower labour productivity than firms without immigrant owners over the study period after controlling for firm-level characteristics. This labour productivity gap also increased with firm employment size. In contrast, immigrant-minority-owned firms (immigrants holding less than 50% of ownership shares) exhibited comparable levels of labour productivity as firms without immigrant owners on average. This better average performance of immigrant-minority-owned firms underscores a potential positive impact of collaboration and diversification between immigrant and Canadian-born owners on labour productivity particularly for small and medium firms. Moreover, the analysis among immigrant-owned firms suggests a significant correlation between the level of labour productivity and the characteristics of immigrant owners at admission. For example, immigrant-owned firms whose immigrant owners held a bachelor’s degree or above were more productive, highlighting the importance of human capital of immigrant owners.