Small Business and City Life
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Municipal governments like to court big, headline-generating corporations to their jurisdictions. But truly strong and vibrant cities are built from the bottom up, one shop at a time.
Big business and the promise of urban growth
Ikea is coming back to Halifax, Nova Scotia. It’s a big deal.
The buzz started a few days before the furniture retailer’s official announcement – a social media flurry whipping up into a full-blown storm as locals shared memories of Swedish meatballs and futons that had supported them through university.
It was more than nostalgia, too. There was a sense that the company’s decision to replant roots in the Atlantic Canada region nearly 30 years after leaving it behind, was a sign of both hope and vindication. In many circles, Ikea is Swedish for “world-class city.”
It’s not unreasonable for Haligonians to feel this way. With a population of roughly 400,000, Halifax isn’t the size of market in which Ikea typically sets up shop (although the company clearly hopes its full-size store is a magnet for customers across the region) so the news brought an understandable jolt of excitement.
It also brought with it the promise of 350 jobs, in addition to 100-150 during the store’s construction and an additional 350 in indirectly related positions. This probably explains why Halifax mayor Mike Savage joined Ikea Canada president Stefan Sjostrand to break the official news.
A cautionary tale
All of this is great, of course. More choice for the consumer, more jobs for the local economy, and a sexy retail status symbol for a small city on Canada’s East Coast.
But people need to keep their expectations in check.
The same week that Ikea announced its return to Halifax, an article in Canadian Business catalogued the surprising failure of another iconic retail company, Target, whose Canadian invasion stalled out with its 2015 bankruptcy and the loss of more than 17,000 jobs.
This is not to say that there’s any connection between the two companies. Comparing Target and Ikea is a case of apples and Allen keys. But the stories of each represent both the seductive allure that major corporate chains hold over municipalities, and the inherent danger in making them the sole anchors of an economic and urban development strategy.
A walk down main street
In our book, Small Business & the City: The Transformative Potential of Small-Scale Entrepreneurship, we argue that small, local and independent businesses make a far more critical contribution to the economic fortunes and social vitality of cities than we often think. They do so by establishing critical neighbourhood level infrastructure (broadly defined) that enables social-economic connections to take place.
We looked at this contribution from both an academic and personal perspective, reaching out to business owners, Business Improvement Associations (BIAs) and community members to find out how entrepreneurship and urban life were inextricably interwoven in three Canadian cities: Toronto, Vancouver and Halifax.
What we found was that small, local, independently owned businesses collectively form a stronger socio-economic foundation for successful cities than the “footloose” scaffolding of larger corporations.
- By small we meant physically fitting in within denser urban environments;
- By local we meant being close and accessible for neighbourhood residents;
- By independent we meant having the autonomy to make decisions at the shop level and the freedom to experiment far from the constraints of a large corporate entity.
As documented in the book, small independently operated businesses generate more jobs in their community, per dollar of revenue, than large, non-locally owned firms. This is just one of the many benefits cities reap from having a smaller but more diversified business sector.
The value of small, independent and locally owned business to city life
The other economic benefits of distributing jobs and financial risk among a diverse group of smaller locally owned companies include:
- Greater resistance to global economic shocks
- Faster employment growth
- Higher per capita income growth
The social benefits of “small, independent and local,” while more difficult to assess numerically, are evident in the stories we heard when we ventured out onto our urban main streets and spoke to the local business community.
In our research we came across:
- Small businesses working collectively, via BIAs, to put on cultural events and organize street beautification initiatives;
- A social worker, employed by local small businesses, with a mandate to assist street-involved individuals in finding shelter and employment;
- A clothing store owner who makes personal phone calls to loyal customers to let them know about new items;
- Locally based businesses partnering, through neighbourhood BIAs, with government on sustainability initiatives such as green space and bicycle transportation, and
- Countless newcomers and immigrants whose businesses helped to create a recognizable neighborhood identity…the list goes on.
It’s not surprising that the positive effects of small business ripple through local economies and social structures much more quickly and effectively than larger farther removed entities. Smaller businesses have to work harder to attract customers, so they’re more likely to develop unique products and services and bring a personal touch to their work.
Local ownership almost always means a strong connection to a neighborhood, city or region, which brings with it a desire to contribute to the surrounding social fabric.
Independence means that local employers don’t yank jobs away at the slightest hint of an inter-jurisdictional cost advantage determined from a corporate head office based thousands of miles away. It also ensures another hard thing to quantify; “uniqueness” a key selling point in any tourist destination.
Small businesses also tend to shape public spaces in ways that better encourage human scale design, lively street life, and more vibrant urban spaces –all of which positively contribute to ecological sustainability and innovative connections that drive today’s creative and circular urban economy.
The flipside is also true in that city design can foster a vibrant small, independent and local business culture by preserving the small commercial and retail spaces (less than 2,000 sq ft) that allow small mass flourishing to occur. On the other hand, zoning laws that permit too low a density of development and allow for the construction (almost anywhere) of large windswept power center developments will inevitably shut the door on small, local enterprise.
Take the case of The Darkside Gallery and Café in Halifax’s North Dartmouth neighborhood. The owners of this establishment provide employment and a dose of coffee and culture in a growing part of town. One would think the city would be heralding these new entrepreneurs. Instead, they are embroiled in a legal dispute with the owners, aiming to impose a fine of more than $47,000 for infringement of arcane and outmoded zoning bylaws that do not permit a small “food” establishment from locating on that particular stretch of the street.
Small, local and independent businesses are, by design, simply more committed to succeeding where they were founded and often still located. Supporting these types of enterprises just seems like common sense, but like a lot of things one might describe that way, it’s not actually common at all.
Hunting big game
The key decision-makers in each of the cities we looked at have, to varying degrees, been guilty of treating their small business sector with indifference while constantly looking to big business as an economic panacea. Certainly Halifax has endured several decades of chasing corporate white whales while starving its productive minnows.
Since the middle of the 20th Century, the city has lured big-box retailers and large industrial companies to its malls and quasi-rural business parks with cheap rent and property taxes, while its downtown core, once a bastion of local entrepreneurship, was hollowed out.
A younger entrepreneurial class has breathed some life back into the urban centre with an influx of exciting small businesses in recent years, but the jury is still out as to whether they’ll be supported by government over the long run.
Just last year, the provincial government of Nova Scotia axed a $24 million film tax credit that, by drawing production to the province, supported small businesses in the creative industries and beyond, including restaurants and shops in the municipalities that hosted casts and crews. The once-thriving local film industry has virtually disappeared, along with its long list of indirect benefits for the local economy.
Meanwhile, that same government is subsidizing one of the nation’s largest banks, Royal Bank of Canada, to the tune of $22 million, to open a financial services centre in the city. Once again, the prospect of 500 new jobs (over as many as 10 years) was the carrot dangled in front of the local population to provide this taxpayer handout.
Thinking big often means acting small
Let us be clear: businesses of all sizes and corporate forms have an important role to play in the economic and social development of cities. It’s what Chris Kennedy has referred to as the “economic ecology” of city life.
However, our argument in Small Business & the City is that small, independent, locally-based business owners, with their deep connections to customers, employees and communities, are on the whole more invested in succeeding – and helping others succeed – in the places they operate. It’s in this sense of “investing”, this turning of hundreds of hands at the same wheel, that produces neighborhoods and cities that are both socially strong and economically resilient.
Ikea is returning to Halifax, and it truly is a big deal. If it succeeds in keeping its furniture and hundreds of jobs in the city over the long haul, the city will benefit.
But the real benefits will appear when citizens and government can muster the same amount of excitement and support for small businesses. New ones open every week, and while they may not generate headlines, they’re what make our cities interesting places to visit, live and work.
The city, to paraphrase an old 1960s cop drama, has millions of stories to tell; this book tells some of them, at least as they relate to the value that small businesses bring to the cities they inhabit. We hope that some of those stories act as beacons for urban economic development projects that are both economically vital and socially inclusive.
About the Authors:
Rafael Gomez is an associate professor of employment relations at the University of Toronto, Director of the Centre for Industrial Relations and Human Resources and the co-founder of ThinkTankToronto Inc.
Andre Isakov is the manager of Park Planning & Design with the City of Coquitlam, British Columbia. He is actively involved in his community and has served on numerous municipal and provincial committees and boards.
Matt Semansky is an award-winning journalist based in Dartmouth, Nova Scotia. His work has appeared in publications such as This Magazine, the National Post, the Halifax Chronicle Herald, and The Coast and Marketing. He has reported on issues of urban revitalization and is interested in how BIAs function as a tool of economic and social transformation within cities.
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This book has given me great insight and perspective into a cause that I have been passionate about for a while. Thank you for your work Rafael, Andre, and Matt.
An excellent article. Local governments too often embrace the faraway, big corporate solution when often the soliton to economic stability is under their noses! Strengthen local business and the foundation will support future growth. Without a foundation communities are open to the corporate decisions that have no vested interest in a community’s social stability.
Thanks both for your encouraging comments.