Determinants of Small Business Survival: The Case of Very Small Enterprises of the Traditional Manufacturing Sectors in Brazil

28 Pages Posted: 2 Jul 2016

Date Written: June 30, 2016

Abstract

This article reports results from an empirical search for the determinants of the very small firms’ survival prospects. Research in the area seems to be excessively concentrated in new firms and fails to include measures related to the investment policies and market strategies of the small firms. Making use of information from balance sheets and perceptual data collected through a survey of a small sample of incumbent small manufacturing enterprises of the traditional sectors in Brazil, the Cox proportional hazard model, new variables and new and unconventional model specifications, the study achieves striking results. The many identified determinants of the small businesses’ hazard rates concern the financing, working capital and production technology policies, the matching of investment and financing maturities, the market strategies, the characteristics of the entrepreneur, business risk, profitability and the economic climate. Results are suggestive that the small manufacturing enterprises’ viability is highly dependent on keeping under control the elements of the running of the businesses whose judicious administration is advocated by the management science. Whether the successful choices are conscious or the corresponding enterprises are selected in the way predicted by the organizational ecology approach remains unsettled.

Keywords: Small firms; Business survival determinants; Business strategies; Cox regression

JEL Classification: M13, M21

Suggested Citation

Barbosa, Evaldo, Determinants of Small Business Survival: The Case of Very Small Enterprises of the Traditional Manufacturing Sectors in Brazil (June 30, 2016). Available at SSRN: https://ssrn.com/abstract=2802706 or http://dx.doi.org/10.2139/ssrn.2802706

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