Researchers at Memorial’s business faculty are hoping to provide a new way of thinking about small- and medium-sized businesses.
The approach could help them gain worldwide prominence and greater government support.
Dr. Chansoo Park, an associate professor of international business and strategy at the Faculty of Business Administration, and Mitchell Joyce (BBA’18), a student in the master of science in management program, are conducting a research project focused on “hidden champions,” or small- and medium-sized enterprises (SMEs) that are lesser known by the public but have an outsized impact in global markets.
Hidden champions is a concept first developed in Germany in the 1990s by scholar Hermann Simon, who defined them as companies that are in the top three in market share in global markets (or number one within the company’s continent); have revenue of less than $5 billion; and a low level of public awareness.
To date, the bulk of research on hidden champions has been focused on Germany with some expansion into Asian countries such as South Korea, Japan and China.
Dr. Park points to Nvidia as an example. The company began designing graphics processing units in Delaware in 1993 and is now a multinational giant that develops technology solutions for a variety of industries, including gaming, artificial intelligence and autonomous cars.
Nvidia’s trio of founders started the company with $40,000. It’s currently ranked seventh in the world, just behind Google and recently surpassing Meta (formerly known as Facebook).
“Stories like Nvidia — a hugely successful company with humbler beginnings as a small business — inspire research on the key success factors of strong SMEs that are unheralded in the global market,” said Dr. Park.
Understanding what makes hidden champions successful is important, as is bringing this research to Canada where few hidden champions have been identified, he adds.
“Small [and] medium firms definitely contribute to the national economy so they can create the jobs and stimulate the economy,” he said. “Our project will be particularly impactful for Canadian businesses looking to expand globally.”
Dr. Park and Mr. Joyce have spent the past eight months researching hidden champions around the world while also identifying potential hidden champions in Newfoundland and Labrador.
“The South Korean government selects 200 potential hidden champions every year.”
They hope to create a database of Canadian hidden champions as part of their research.
They also presented a research paper at the European International Business Academy Conference in late 2020, and are planning an in-depth study of a local hidden champion as part of the next research phase.
Visibility, agility, flexibility
The COVID-19 pandemic also provided an opportunity to further focus their research within the context of a crisis, an area which had not previously been studied, and they’ve developed case studies on global hidden champions in the pandemic era.
“Times of crisis can be detrimental to the survival of countless small- and medium-sized businesses, which is an important issue considering how key SMEs are in virtually every market,” said Mr. Joyce.
“I believe that finding an approach to teach SMEs [on how to become a hidden champion] can help them survive not only the pandemic, but any future crisis that may occur. It’s vital to the continued success of a strong, local SME presence.”
Dr. Park and Mr. Joyce have identified three key success factors that are important for the success of SMEs during a crisis.
They call it visibility, agility and flexibility – that is, having strong international focus, being able to seize and be innovative with opportunities and being sufficiently agile to pivot the business model, respectively.
Government support is key
In addition to providing strategies for SMEs, Dr. Park hopes their research will encourage governments to create education and training programs to support them.
According to a 2019 report by Industry Canada, 99.8 per cent of Newfoundland and Labrador’s 16,952 businesses are SMEs. Yet only two per cent of the province’s companies export goods or services.
“This suggests our provincial government would benefit from supporting local SMEs in their globalization efforts, and by developing hidden champions,” said Dr. Park.
“In comparison, the South Korean government selects 200 potential hidden champions every year. These companies receive benefits and enter supportive programs that provide consulting, finance, trade fairs and training for up to four years, allowing them to better compete in global markets.”
The end result of such investment in SMEs could be more jobs, increased trade and investment in the Canadian economy and greater success in international markets by Canadian firms, they say.
“If we have more companies like Verafin, Mysa, Seafair Capital and CoLab, it can definitely stimulate the Newfoundland and Labrador economy and create jobs,” said Dr. Park.
Dr. Park’s and Mr. Joyce’s research is funded by Mitacs and Memorial’s Husky Centre of Excellence in Sales and Supply Chain Management.