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United States/Canada Free Trade Agreement and Quebec Small Business Behaviour* Pierre-André Julien Université du Québec à Trois-Rivières The term "globalization of the economy" has become very fashionable over the last few years, in particular to explain the development of supranational firms and increasing international trade in goods and services, capital and labour. However, very little research has been done to examine empirically the effect of globalization on small businesses. The research presented here is based on an in-depth survey of a large sample of SMEs directly affected by the USA-Canada Free Trade Agreement in three small regions of Quebec. It attempts to answer many questions concerning the behaviour of this type of firm when faced with the opening up of frontiers. The behavior of these firms after signature of the Agreement was measured. The results show that a high proportion have developed or are developing policies not just to respond to the impact of the FTA, but to face up to economic globalization, by modernizing their production, developing specificities and directing their strategy towards this new trend. Very little research has been done to examine the effects of globalization of the economy on small businesses, except those situated in border regions (Jeanneret, 1985 ; Ratti, 1986 ; Maillat, 1990). The problem of small exporting firms has * This research was funded by the Office de planification et de développement du Québec. An earlier version of the text was presented to the 38th World Conference of the International Council for Small Business, Las Vegas, June 20-23, 1993. Another version has been published with colleagues André Joyal and Laurent Deshaies in the Journal of Small Business Management (Vol. 32, No. 3, 1994, pp. 52-64). The authors thank Richard Lachance and Martin Morin for their work in the field and in compiling the data. 176 Quebec under Free Trade been analysed on a number of occasions (for example, Nelson, 1984 ; Miesenbrock , 1988 ; Kathawala et al., 1989 ; Léo, Monneyer and Philippe, 1990 ; Chenier and Michael, 1990). However, researchers have only recently begun to pay closer attention to the effects of the opening up of national borders on regions (Lesage and De la Rochefordière, 1988 ; Laurencin and Rougier, 1990) and on small business (Lefebvre and Lefebvre, 1988 ; Rugttaman and Verbeke, 1989 ; Filion, 1990 ; OECD, 1991). These latter authors have shown that, compared to most larger firms, SMEs are generally less well-equipped to face increases in international trade. As a result of their lower productivity, many have found it difficult to defend themselves. Also, given their limited resources, they have found it more difficult to take advantage of the removal of tariff barriers. The aim of the research described in this chapter was to examine the impact of globalization on SMEs (less than 250 employees) in three small regions of Quebec, using as a starting point their behaviour with respect to the Free Trade Agreement between Canada and the United States. More specifically, our aim was to discover how small firms in small regions viewed the opening up of the borders. Special attention was paid to how the SMEs reacted, either to face up to the increase in potential competition or to take advantage of reduced customs duties. The methodology used was an in-depth survey of small manufacturing firms in sectors seriously affected by the reduction of tariff barriers between Canada and the United States. The results, initially, were surprising : only a small number of firms knew of and had taken concrete steps to counter or take advantage of the agreement. However, further analysis revealed that different actions had been taken within the wider framework of economic globalization. In other words, more SMEs had taken steps to reinforce their competitive position in terms of general international trade, whether with the United States or elsewhere. A later study of the diffusion of new technologies in small manufacturing firms in Quebec supported this observation, confirming that the reduction of tariff barriers is just one consideration in small business strategy for survival and development. The main purpose is to adapt to world competition. In other words, this research reveals that many more SMEs than might be thought have begun to build up their defences or seek to take advantage of market globalization, positioning themselves differently on markets. The differences lie mainly in (1) some product specificities, (2) the use of new technologies, (3) with, often, the addition of personalized innovations, (4) the creation of marketing and distribution forms...

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