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Drivers of SME Formation in Indian States: The Empirics

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  • Pradhan, Jaya Prakash
  • Husain, Tareef

Abstract

The development of small and medium enterprises (SMEs) sector is a key policy priority as these enterprises play a critical role in the growth and development process of any economy. The present study is motivated to explore the regional dimensions of entry of new SMEs across Indian states and sectors covering an extensive study period 1980─2007. It further expands the literature on formation of firms from the sub-national perspective, empirically uncovering regional factors that significantly determine the formation of new firms. Findings suggest that new SME formation in India is characterized by a concentrated regional pattern during the study period with a few regions accounting for disproportionate share of the number of new SMEs formed. Also, Indian sub-national entities exhibited considerably disparity in the entry rate of new SMEs. Regional factors like local market size, availability of skills, technological specialization of manufacturing sector, land transportation networks, and entrepreneurial culture tend to play positive role in the formation rate of SMEs in Indian states.

Suggested Citation

  • Pradhan, Jaya Prakash & Husain, Tareef, 2021. "Drivers of SME Formation in Indian States: The Empirics," MPRA Paper 25061, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25061
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    More about this item

    Keywords

    SMEs; India; Regions; Entry Rate;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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