Institutional determinants of profitable commercial forestry enterprises among First Nations in Canada

This paper uses survey information to examine several common assertions about the institutional prerequisites for successful profitability when a First Nation enters an economic enterprise either independently or in joint effort with an outside firm. In the winter of 2004-2005, we interviewed managers on both the First Nations and private sides of joint ventures and other business alliances in Canada, to determine what affected their recent profitability experience. We gathered information on the ages, sizes, and activities of the firms. We also gathered information about the firms' management structures and relationship with the First Nation, and the characteristics of the government of the First Nation. With a sample size of 40 firms that responded, we found that several institutional characteristics affected profit positively: strong separation of management from band governance, participation in management planning, and the use of staggered terms in band council elections. We found that the likelihood of profitability decreased if the band had been in third party management as well as if there was formal participation of elders or hereditary chiefs in decision making. We offer interpretations of these results.