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The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

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  • Demetris Psaltopoulos
  • Sophia Stathopoulou
  • Dimitris Skuras

    ()

Abstract

It is argued that when founders of SMEs perceive the probability of a successful and lucrative venture to be greater, they are more likely to provide a greater proportion of the start-up capital. This paper provides an empirical examination of two concurrent hypotheses. Firstly, that the size of the debt or equity is affected by factors influencing perceived entrepreneurial risk. Secondly, that the location of the market for the firm’s output is a major factor reducing perceived entrepreneurial risk and increasing equity of the start-up capital. A statistical analysis based on the simultaneous tobit model is used. Results show that significant factors influencing risk perception include the size of the new business and the sector of economic activity, as well as entrepreneurial experience and the location of the markets for the firm’s output. The results highlight implications for the design and implementation of rural development policies and especially for the instruments supporting rural business creation. Copyright Springer 2005

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File URL: http://hdl.handle.net/10.1007/s11187-003-6456-6
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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 25 (2005)
Issue (Month): 2 (09)
Pages: 147-158

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Handle: RePEc:kap:sbusec:v:25:y:2005:i:2:p:147-158

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Web page: http://www.springerlink.com/link.asp?id=100338

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  1. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "Does Local Financial Development Matter?," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 929-969, August.
  2. Carling , Kenneth & Lundberg, Sofia, 2002. "Bank Lending, Geographical Distance, and Credit risk: An Empirical Assessment of the Church Tower Principle," Working Paper Series 144, Sveriges Riksbank (Central Bank of Sweden).
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Cited by:
  1. Natário, Maria Manuela & Almeida Couto, João Pedro & Couto de Sousa, Maura Helena, 2012. "Innovation Processes of SMEs in Less Favoured Municipalities of Portugal," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 22, pages 81-103.
  2. José Ernesto Amoros & Christian Felzensztein & Eli Gimmon, 2011. "Entrepreneurial opportunities in peripheral versus core regions in Chile," Global Entrepreneurship Monitor Working Paper Series 1106, Global Entrepreneurship Research Association, revised Sep 2011.
  3. Abd Razak Ahmad & Wan Fauziah Wan Yusoff & Haris Md Noor & Ahmad Kaseri Ramin, 2012. "Preliminary Study Of Rural Entrepreneruship Development Program In Malaysia," Journal of Global Entrepreneurship, Global Research Agency, vol. 2(1), pages 1-8, January.

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