3 This dynamic process of innovation was called “creative destruction” by the economist Joseph Schumpeter in the 1930s. Data collected by Statistics Canada show that there has been a surprising and sustained decline in the entry rate of new firms since the early 1980s. Relative to total active firms, the entry rate of new firms was 24 per cent in 1984.
It has decreased by half since then, which is a considerable drop (Chart 1). The firm exit rate has also declined—but by less—from almost 17 per cent in 1984 to about 11 per cent, according to the most recent data. The decline in entry and exit rates is also reflected in the weaker rate of labour reallocation.