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

Evaldo Guimarães Barbosa

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Small firms; Business survival determinants; Capital intensity; collateral value of fixed assets; Cox regression (search for similar items in EconPapers)
JEL-codes: M21 (search for similar items in EconPapers)
Date: 2017-01-26
New Economics Papers: this item is included in nep-ent and nep-sbm
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