How do entrepreneurs choose where to base their startups?
It’s not all about profit, according to Judy Han, an assistant professor of Strategic Management at DeGroote School of Business.
In fact, Han says, even if business is doing well in a given location, startup founders are unlikely to stay there if they’re unhappy.
Han is working on two research projects focused on location choice. One project looks at “net network effect” — whether an entrepreneur can benefit from a location advantage even if they are not physically located there.
“We find that ‘location effect’ is larger than ‘network effect,’ meaning that your physical presence in the location with advantages will give you more benefit when you’re doing your business,” says Han.
Purely based on these numbers, the U.S. has a huge location advantage regarding funding availability and market size. But entrepreneurs aren’t looking only at the numbers.
Han’s other project asks how personal and economic factors affect startups’ foreign location choice.
To date, Han says researchers looking at this question have mainly focused on economic factors.
“But entrepreneurs are human; they have to live their personal lives. So we are currently exploring whether, and to what extent, personal factors affect entrepreneurs’ decisions on where to locate their startups internationally,” she says.
The study asks: “How do entrepreneurs perceive the tradeoffs between personal and economic factors when they make the decision?”
Canada has a better startup visa system than the U.S., says Han, and it can be easier for entrepreneurs to move to Canada and eventually expand their business into the North American market than to move to the U.S. outright.
That said, entrepreneurs will find fewer resources in Canada than the U.S. So “they have to love Canada first, instead of just looking at the U.S. market from Canada,” she says.
And Canada is not short on advantages for foreign entrepreneurs looking to move here — and stay.
“From my point of view, the biggest advantage we have in Canada is the inclusiveness,” says Han.
“We don’t have a high barrier for foreign entrepreneurs to adapt to our startup ecosystem. And that’s a big ‘yes’ for foreign entrepreneurs.”
“Integrating into our society is easier for many foreign entrepreneurs, because we have diversity here. We are ready to accept foreign entrepreneurs who are smart, who are passionate, and who would like to create a new future.”