Aug 19, 2020
“Law and the Development of Entrepreneurial Regions,” the latest research project by Assistant Professors Camden Hutchison and Li-Wen Lin, which recently won SSHRC Insight Development Grant funding, examines the economic and legal environment for startup companies in Vancouver. In framing their research, Professors Hutchison and Lin focus on three questions: How does Vancouver compare to other North American cities in terms of startup activity and venture capital investment? Does the policy environment in British Columbia (regulation, taxation, etc.) benefit or disadvantage startups? And finally, how might lawmakers improve the environment for startups in Vancouver (and across Canada)?
Answering the first question requires a quantitative comparison of Vancouver with other major tech hubs. Professors Hutchison and Lin use data collected from a commercial database to compare the number of startups and amount of venture capital investment across several North American cities. “We find that, on a per capita basis, Vancouver performs better than other cities in Canada (including Toronto and Montreal), but lags many U.S. tech hubs, including not only leading tech centers like Silicon Valley, Boston, and Seattle, but also smaller regions such as Austin and Raleigh-Durham-Chapel Hill. In the next stage of our project, we hope to extend our comparison to cities around the world,” they explain.
Their second research question involves comparing legal rules in British Columbia to those in California, the jurisdiction that they use as their benchmark. They assess the law across a number of areas, including corporate law, securities regulation, business taxation, labour, bankruptcy, immigration, and intellectual property. Rather than identifying any major disadvantages, Professors Hutchison and Lin find that BC law compares favorably to California in many of these areas, and that legal differences do not explain Vancouver’s weaker entrepreneurial performance. “Instead, we attribute Vancouver’s weaker record to broader economic factors. Most notably, the Canadian economy is smaller and less competitive than the U.S. economy, an issue that cannot be easily addressed by lawmakers,” they add.
Although they find British Columbia’s legal environment mostly favorable, Professors Hutchison and Lin do offer certain reform recommendations. For example, they recommend liberalizing Canadian bankruptcy law, which penalizes debtors more than bankruptcy law in the United States. Reducing the punitive consequences of bankruptcy may encourage startup formation, because it would reduce the economic risk assumed by entrepreneurs.
“Startups are a new research topic for both of us,” Professor Hutchison explains. “Our interest in the subject comes from our teaching experiences at the Allard School of Law as well as our personal experiences living in Vancouver. Both of us teach the law school’s business organizations course, which addresses — among other things — the legal formation of new businesses. Many of our students are interested in representing, joining, or even founding startup companies. Living in Vancouver has reinforced our interest, as Vancouver often markets itself as a leading technology and startup hub, a self-image we’re interested in interrogating. As is often the case with urban boosterism, we find Vancouver’s entrepreneurial image is partially exaggerated,” he adds.
“We are also drawn to this topic due to the close links between entrepreneurship and immigration. Immigrants play an outsized role in the development and commercialization of new technologies, and we find that one of Canada’s major advantages in promoting entrepreneurship is its welcoming immigration policies. Both of us are immigrants to Canada ourselves, so we can speak to these polices from personal experience,” Professor Hutchison states.
“We expect this project will contribute to the theoretical literature on law and entrepreneurship, and hopefully influence federal and provincial policymaking in Canada. Our primary work product will be a series of academic articles published in peer-reviewed journals. We also plan to disseminate our research to broader audiences through op-eds, blog posts, and other nonacademic outlets. We believe our research will be of significant interest to entrepreneurs, lawmakers, and the Canadian public, and we look forward to discussing it with interested constituencies,” Professor Lin concludes.
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