Seizing Opportunities: Small Businesses, Social Capital, and Banks

69 Pages Posted: 14 Apr 2022 Last revised: 8 Sep 2023

See all articles by Vojislav Maksimovic

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Jing Xue

University of Maryland, Robert H. Smith School of Business

Liu Yang

University of Maryland, Robert H. Smith School of Business

Date Written: August 21, 2023

Abstract

Why do small businesses exploit business opportunities better in some areas than others?
In a sample of 1.2 million consumer-facing establishments, social capital predicts the take-up of risk-free loans controlling for nearby bank branches, income, and education. One standard deviation in the social capital metric accounts for 20 percent of the variation in take-up rates across zip codes, surpassing the impact of a bank branch within 1000 yards. Strong social capital benefits larger, low-growth stores in less-dynamic areas, whereas bank branches help smaller, fast-growing stores in more dynamic areas. Virtual connections have the greatest effect in already advantaged locations.

Keywords: Social Capital, Reciprocity, Business Dynamism,Small Business, Local Banks, PPP, Virtual Connections

JEL Classification: G32, G20, Z1

Suggested Citation

Maksimovic, Vojislav and Xue, Jing and Yang, Liu A., Seizing Opportunities: Small Businesses, Social Capital, and Banks (August 21, 2023). Available at SSRN: https://ssrn.com/abstract=4078042 or http://dx.doi.org/10.2139/ssrn.4078042

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

Jing Xue

University of Maryland, Robert H. Smith School of Business ( email )

Van Munching Hall
Smith School of Business, Un
College Park, MD 20742
United States
20740 (Fax)

HOME PAGE: http://www.sophiajingxue.com/

Liu A. Yang (Contact Author)

University of Maryland, Robert H. Smith School of Business ( email )

4420 Van Munching Hall
Robert.H.Smith School of Business
College Park, MD 20742
United States
3014058794 (Phone)

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