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Since 2010, the team of experts at Investissement Québec’s International Subsidiaries Department have been working to foster the growth, long-term viability and success of subsidiaries operating in Québec. “The better we get to know these businesses, the better we can help them,” explains Éric Dequenne, Vice-President, International Affairs. “That’s why we decided to carry out our survey.”

Conducted by Pierre Emmanuel Paradis, an economist and the President of AppEco, the survey provides a snapshot of Québec’s subsidiaries and gauges their contribution to the province’s economy. All in all, 213 subsidiaries with a total of 60,000 employees answered the survey.

Substantial regional spin-offs
Not surprisingly, the results showed that 59% of the jobs that subsidiaries create are concentrated in the Montréal region. “However, outside the urban centres of Montréal and Québec, subsidiaries supply one third of all jobs,” says Paradis. “Their impact in the regions is significant.”

When respondents were asked to describe their degree of decision-making autonomy, only 10% of subsidiaries said it was “substantial” or “total.” It appears most decisions are made abroad. Another finding: 70% of Québec-based subsidiaries are cost centres. “This fact encourages them to innovate and increase their productivity to maintain their place within their group,” notes Dequenne.

Excellent clients for Québec SMBs
Subsidiaries have considerable economic weight, since they generate 12.4% of Québec’s GDP. That works out to an average of $118,700 per employee, 7% higher than Québec-owned businesses. When you factor in their impact on Québec suppliers, their contribution to the province’s GDP jumps to 19%. “This is a very positive finding,” adds Paradis. “We estimate that subsidiaries purchase $15.8 billion of goods and services from our SMBs.”

In the analyst’s view, the fact that subsidiaries are firmly focused on exports is another important finding: “Our results show that manufacturing subsidiaries, for instance, earn 72% of their revenue outside Québec, including 51% from international exports.”

Specific challenges
The survey also looked at the risks that subsidiaries face. Nearly 30% of them described three of the four internal risks assessed as “high” or “very high.” “These subsidiary-specific risks—such as transferring operations to other plants in the same group, for example—are very real,” stresses Dequenne. In terms of external risks, over half the subsidiaries see their competition as the biggest risk, while debt risk is perceived as very low.

“The survey confirms subsidiaries’ special nature and their importance for the Québec economy,” concludes Dequenne. “These findings encourage us to continue helping them make their business projects a reality and resolve the strategic challenges that can pose obstacles.”

See the AppEco presentation