Long and Short Run Determinants of Small and Medium Size Enterprise Share: The Case of Venezuelan Manufacturing

Alan Mulhern and Chris Stewart

Economic Change and Restructuring, 1999, vol. 32, issue 3, 209 pages

Abstract: Two recent studies of SME share determination have employed a partial adjustment model which specifies disequilibrium as the sole means of explanation. Contemporaneous information is found to be crucial in both analyses and suggests forward looking behaviour in the equilibrium specification. Time series data available for Venezuela allows the testing of such an equilibrium using the Engle and Granger (1987) error correction methodology. We find that current dated variables are important in the short rather than long run determination of SME shares and that only information known at the time the equilibrium is formed enters the long run component. The primary factors explaining equilibrium share are barriers to entry, factor mix, enterprise modernisation and a new exogenous proxy variable, GDP. The main determinants of short run movements are factor mix and enterprise modernisation. Copyright 1999 by Kluwer Academic Publishers

Date: 1999
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