The prosperity of industries significantly contribute to the socio-economic makeup of a region’s economy. Ensuring the continued growth of existent industries and fostering an ideal environment for the formation of complementary industries is paramount to a regions’s competitiveness. It also contributes to its attractiveness in the eyes of qualified workers who are an important ingredient for economic growth. Thus, to secure a continued inflow of capital and labour, policymakers, economic developers and industry stakeholders need to have a comprehensive understanding of the patterns of industry growth in their region.
Analyzing the patterns of a region’s industry life cycles can offer meaningful insights that can be incorporated into strategies for fostering growth, mitigating decline and enhancing regional competitiveness. To put it plainly, industry life cycles measure the emergence, growth, maturity and decline of industries based on metrics such as revenues, market capitalization, firm entry and exits. Using data on firm entry and exits to measure industry life cycles captures the underlying health of the region’s economy which in itself is directly and indirectly affected by a wide range of variables.
The SLGL dataHub will make it possible to visualize industry life cycles within the St. Lawrence and Great Lakes (SLGL) region, allowing users to not only study the size and composition of industries within the two Canadian provinces and eight US states but also compare the performance of specific industries across sub-national boundaries. In addition, firm level data will be used to map the location of the constituent firms within an industry to enable an analysis of its spread. When viewed through the lens of economic clusters, users will be able to identify clustering patterns of related industries and investigate their shifting geographic footprint over time.
We use data from the Registre des entreprises (REQ), published by the government of Quebec, to visualize industry life cycles and perform geospatial mapping of industries in Quebec. Within the context of the study of industrial life cycles, REQ provides longitudinal data on enterprises registered in Quebec with information of their address, industry, number of employees (within a range), date of registration and date of exit. We use this data to analyze the number of firms within an industry, the average life span of firms within an industry and the rate of growth or decline within an industry both in spatial and temporal terms.
Firms in the REQ dataset are each given a four-digit industry code, with the industry classification offering three levels of granularity. This granularity ranges from 75 groups of industries at the two-digit level, to 1,116 industries at the four-digit level.
The computation of active firms in an industry during a year opens up the possibilities for data transformation. This can be found by adding the number of firms that have entered an industry during a year and subtracting the number of firms that have exited the industry over the same time period. Depending on the requirements of the researcher, the firms can also be further categorized by their number of employees.
The above chart shows the shifting sectoral composition in the province from 1990 to 2022. It is pertinent to note that the chart represents the weight of active firms (with one or more employees) in an industry as a percentage of the whole economy during that year. Crucially, the total number of active firms has increased from 23,406 in 1990 to 98,913 in 2022. While we have only visualized industries at the two-digit level accounting for more than 1.5% of the overall industrial composition for the year, over all the years of study, this analysis underscores the potential for deriving valuable insights from this dataset.
This visualization reveals how industries have evolved in response to external factors such as competition induced by globalization, targeted economic policies and technological change. As an example, it shows how the services aux entreprises industry has risen in importance from 1990 to 2022, doubling its share from about 7% to 14% of the total industrial composition. Policymakers can use this data to analyze the impact of industry specific policies, using the resultant insights to inform future policy interventions. The granularity of this dataset's industrial classification is matched with its geographic granularity, enabling the study of an industry at the provincial level, all the way down to the municipal level. In fact, policymakers can practically study the evolution of an industry within a specific neighbourhood in a municipality.
To demonstrate this, we study the restaurant industry's life cycle at the municipal level. Since over half of Quebec's population live in just 16 municipalities, analyzing the pattern of the restaurant industry's life cycle within this geographical context becomes particularly interesting1. At the face of it, this industry would be particularly affected by factors such as population growth, density, economic development, tourism and changing lifestyles. However, external shocks and disruptions such as the COVID-19 pandemic can also have a significant impact on the aforementioned factors and consequently, on the industry.
We can study the impact of these factors on the number of active firms in the restaurant industry at the three-digit level which includes firms in Services de restauration, Restaurants avec permis d'alcool, Restaurants sans permis d'alcool, Services de mets à emporter, Traiteurs and Cabanes à sucre. Visualizing this data reveals the particularly unique patterns of growth within the industry in each municipality. Interestingly, the industry seems to have peaked in 2016, with the COVID-19 pandemic having had an insignificant impact on the number of active restaurants since 2020. This provides an additional data point for the study of the pandemic's impact on this industry.
This data can also be used to reveal the geographic shift of the restaurant industry in the province over time. The above maps reveal the geographic footprint of the industry at the municipalités régionales de comté (MRC) level between 2012 and 2022. At the MRC level, municipalities are grouped into 104 regions, rendering an optimal compromise between the macroscopic nature of administrative regions and the microscopic nature of municipalities. The tooltip over each MRC provides a four-digit level break down of the restaurant industry, providing insights into the changing composition of the industry over 10 years.
As an example, the makeup of the restaurant industry in Montreal has significantly changed between 2012 and 2022. While the total number of active firms has grown from 1,544 in 2012 to 1,904 in 2022, restaurants avec permis d'alcool comprise only 46% of Montreal's restaurant industry, down from 66% in 2012. Restaurants sans permis d'alcool have grown their industry share from 21% in 2012 to 35% in 2022. Such insights not only unlock greater awareness for policymakers on matters relating to regulations, economic impact, public health and urban planning but also helps industry stakeholders gauge opportunities and spot changing consumer preferences.
The overarching insights offered through the study of industry life cycles on the SLGL dataHub is as a consequence of crucial importance for regional economic development. In the face of dynamic global challenges, policymakers, economic developers and industry stakeholders can leverage this information to pave the way for sustained prosperity.
(This article incorporates a portion of forthcoming research by Lucien Chaffa and Thierry Warin titled “Mapping economic evolution: Data science techniques unveil the impact of geographic clustering on industry life cycles in Quebec”)
References
1. Institut de la statistique du Québec (n.d.)