Which Entrepreneurs Expect to Expand Their Businesses? Evidence from Survey Data in Lithuania

Abstract

This paper presents an empirical study based on a survey of 399 small and medium size companies in Lithuania. Applying bivariate and ordered probit estimators, we investigate why some business owners intend to expand their firms, while others do not. Our main findings provide evidence that the characteristics of the owners matter. Those with higher education and 'learning by doing' attributes either through previous job experience or additional entrepreneurial experience are more likely to expand their businesses. In addition, the model implications include that the intentions to expand are correlated with exporting and with size of the enterprise: medium and small size companies are more likely to grow than micro enterprises and self-employed entrepreneurs. We also analyse the link between the main perceptions of constraints to business activities and growth expectations and find that the factors, which are perceived as main business barriers, are not necessary those, which are associated with low growth expectations. In particular, perceptions of both corruption and of inadequate tax systems are main barriers to growth.

Keywords: SME, employment, human capital, taxes, corruption

JEL Classification: P37, D21, L21