The optimal number of jobs realized by a single investment is material to most fund directors and officers. When there is a range of potential deals available, employment quantity is frequently a guiding criterion in the selection process. Many labour-sponsored funds, for instance, target companies in labour-intensive manufacturing and processing. The quality of employment is also meaningful to the funds. In this case, an investment may be preferred where a firm's current or projected jobs are well-paying and reflect high educational attainment and skills. Hence, knowledge-based enterprises, which may represent future economic advantage, are also compelling from a jobs standpoint.
Labour-sponsored funds also seek to reinforce other economic fundamentals through investment, such as export capacity and expenditure on research and development. Such qualities strengthen the competitiveness of the investee company - and, by extension, national competitiveness in a global economy - that can, in turn, fuel growth and employment over time.
As venture capital institutions, the funds contribute to the general macro-economic effects of this market. Because of its application to industrial activity that frequently involves new goods and services, innovation, and value-added production, venture financing has a impact on the economy that is out of proportion with its small size. 1993 research published by the Federal Business Development Bank (FBDB) showed that between 1987 and 1992, 259 enterprises backed by venture capital created over 23,000 Canadian jobs. In fact, despite recessionary pressures, the work forces of investee firms increased at a compounded rate of 40 percent. Equally impressive growth rates in sales, research and development spending, and exports were also reported.
Such outcomes, which outstrip performance in the rest of the Canadian economy, are typical for projects receiving venture capital infusions in the first years, as most of the 259 were. However, the study concluded that more positive outcomes were just as likely down the road.Endnote 30
As an investor type, labour-sponsored funds are a critical contributor to this effort. By specifically concentrating on employment sectors with particularly high value-added (the difference between production value and costs), labour-sponsored funds attempt to maximize the probable economic spin-offs, including the spin-off of indirect and induced jobs, to local communities and environs.
There are as yet few studies on the economic impact of labour-sponsored funds. Existing studies, using different methodologies, have reached different conclusions. Additional research on this subject would be very helpful in clarifying effects in the longer term.
1994 saw some empirical consideration of the economic effects of labour-sponsored funds. A study done by the Institut national de la recherche scientifique (INRS) of the Université du Québec a Montréal (and supervised by Pierre Lamonde) found that the Fonds de solidarité has had a positive employment impact in Québec. To illustrate, 167 investee companies (representing the 1993 investment portfolio) produced 15,372 direct, indirect and induced jobs that are clearly attributable to the involvement of the fund. From these data, the INRS concluded that for every one job created by an investment of the Fonds de solidarité, another job was realized elsewhere in the provincial economy.