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Determinants of small business survival: The impacts of capital intensity and the collateral value of fixed assets

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  • Guimarães Barbosa, Evaldo
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    The major claim of this article is twofold, that is, that fixed assets in small manufacturing enterprises in developing countries have to be seen with respect to two roles. The first is capital intensity. The second is the collateral value of these assets. The former is associated with the small manufacturing firms’ hazard of exit in a U-shaped fashion. The latter takes up a wave-shaped relationship. Failure in the extant empirical literature to fit a binomial specification for capital intensity results in either a negative or a positive relationship, or even, lack of statistical significance. All these three outcomes are the results of a misguided attempt to fit an “artificial” monotonic specification to an actual U-shaped relationship. The trinomial specification for the collateral value of the small manufacturing enterprises’ fixed assets has never been attempted. Thus, the present article proposes a new framework for the study of the impact of the small manufacturing enterprises’ fixed assets investment strategy upon their hazard of exit.

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    File URL: https://mpra.ub.uni-muenchen.de/76434/1/MPRA_paper_76434.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 76434.

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    Date of creation: 26 Jan 2017
    Handle: RePEc:pra:mprapa:76434
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    1. Guimarães Barbosa, Evaldo, 2016. "Determinants of Small Business Survival: The Case of Very Small Enterprises of the Traditional Manufacturing Sectors in Brazil," MPRA Paper 72304, University Library of Munich, Germany.
    2. Nguyen Minh Ha, 2012. "The Effect Of Growth On Firm Survival In Vietnam," Working Papers 18, Development and Policies Research Center (DEPOCEN), Vietnam.
    3. Howell, Anthony, 2015. "‘Indigenous’ innovation with heterogeneous risk and new firm survival in a transitioning Chinese economy," Research Policy, Elsevier, vol. 44(10), pages 1866-1876.
    4. Yang, Qing Gong & Temple, Paul, 2012. "Reform and competitive selection in China: An analysis of firm exits," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 286-299.
    5. Kimura, Fukunari & Fujii, Takamune, 2003. "Globalizing activities and the rate of survival:: Panel data analysis on Japanese firms," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 538-560, December.
    6. Winter, Joachim, . "Investment and Exit Decisions at the Plant Level: A Dynamic Programming Approach," Monographs in Economics, University of Munich, Department of Economics, number 19732.
    7. Ana M. Fernandes & Caroline Paunov, 2015. "The Risks of Innovation: Are Innovating Firms Less Likely to Die?," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 638-653, July.
    8. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
    9. Pakes, Ariel & Ericson, Richard, 1998. "Empirical Implications of Alternative Models of Firm Dynamics," Journal of Economic Theory, Elsevier, vol. 79(1), pages 1-45, March.
    10. Anna Ferragina & Fernanda Mazzotta, 2015. "Agglomeration economies in Italy: impact on heterogeneous firms’ exit in a multilevel framework," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 395-440, December.
    11. Doms, Mark & Dunne, Timothy & Roberts, Mark J., 1995. "The role of technology use in the survival and growth of manufacturing plants," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 523-542, December.
    12. Guimarães Barbosa, Evaldo, 2016. "The relationships between, on the hand, size, growth and age of the firm and, on the other hand, small business survival – a constructive critique and a proposal of a new framework," MPRA Paper 72111, University Library of Munich, Germany.
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