Small Firm Behaviour in Sri Lanka

Jonathan Batten and Samanthala Hettihewa

Small Business Economics, 1999, vol. 13, issue 3, 17 pages

Abstract: This paper investigates the behaviour of small firms in Sri Lanka using a countrywide cross-sectional survey. The 73 responding firms provide information on whether certain variables: the firm's utilisation of assets; labour; technology: family savings: and access to bank financing, vary with four firm-specific factors: industry; family ownership; size; and whether the firm's manager was also an owner of the firm. Sampled small firms are mostly family owned and owner managed although a significant number of family owned firms are managed by non-family managers. Most firm's under-utilise assets, use existing rather than the latest technology, and are reliant upon family savings. Statistical analysis provides evidence of significant cross-sectional variation in small firm practice. The results are explained in terms of the cost of acquiring new technology, asymmetries and opacity in financial information, and the non-value maximising behaviour of firm owners who are also firm managers. Copyright 1999 by Kluwer Academic Publishers

Date: 1999
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