What factors make micro-firms sustainable? a proposal for a model

Drawing on resource-based view (RBV) and dynamic capability view (DCV) of firm, we suggest that the growth of micro-firms (MFs) does not take place in a vacuum; rather, it is a function of various resources and capabilities. However, the existing literature does not adequately address the association between these resources and capabilities. Thus, the objective of this paper is to propose a model for the MFs by critically examining the literature. We use a literature analysis approach. This approach starts with literature selection. The literature selection includes several phases and picks 22 papers. The selected papers are analysed by using the content analysis method. This method helps to identify key variables, factors and the links between factors. The content analysis is applied in two phases. The initial step deals with individual papers and the later step involves the integration of these individual papers. Both inductive and deductive logical thinking skills are applied to extract and classify the factors. Based on content analysis, a graphical and a mathematical model are developed respectively. The proposed model is hierarchical, multifactor, second-order model, consists of five factors and 13 subfactors in the antecedents’ phase and one factor and three subfactors in the outcome phase. This study suggests that entrepreneurial orientation (EO) and sustainable performance construct as reflective while human capital, social capital, financial capital and business environment as formative construct. The conceptualization of reflective and formative factors is based on a theoretical foundation. The study finding also recommends to run both the measurement and structural model by using exploratory factor analysis (EFA), confirmatory factor analysis (CFA) and multiple regression model respectively to verify the variables and hypotheses. The model that emerges from the analysis embodies a new understanding of the factors that make for growth of MFs. The study and the new model together enable policy makers to better understand the significant resources and capabilities that affect sustainable growth of MFs. Because these factors and their links is becoming increasingly important due the MFs contribute in poverty alleviation and employment generation. And developing countries are focusing their needs for inspiring economic development through MFs.