The Foundations of Small Business Enterprise: An Entrepreneurial Analysis of Small Firm Inception and Growth

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This volume is an excellent addition to Routledge’s Studies in Small Business series. In this extended and novel entrepreneurial analysis of small firm inception and growth, a leading authority in the field develops a new kind of ‘micro-micro’ analysis, applying rigorous methods from economics, accounting and finance to gain a deeper understanding of micro-firms. Reid examines performance, hierarchy, capital structure, monitoring and control, flexibility, innovation and information systems.

Using statistical, econometric and qualitative methods of empirical research, Foundations of Small Business Enterprise tracks and analyses the evolution of 150 small firms from their early years through to maturity.

This title will appeal to a wide range of students, specialists and practitioners in economics, accounting and finance.

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Table of Contents

Figures     xiii
Tables     xiv
Preface     xvi
Acknowledgements     xx
Abbreviations     xxi
Background     1
Small firm inception and growth     3
Introduction     3
Sampling     4
Summary evidence from first year     5
Summary evidence from second year     8
Summary evidence from third year     11
Summary evidence from fourth year     14
The structure of this book     16
Conclusion     18
Endnotes     18
Fieldwork and database     20
Introduction     20
Fieldwork activity     20
The sample and population     21
The typical micro-firm     23
Key statistics from the database     26
Conclusion     27
Endnotes     27
Main quantitative features of the database     28
Introduction     28
Markets     28
Finance     30
Costs     31
Strategy     32
Human capital     34
Organisation     35
Technical change     36
Conclusion     38
Appendix     38
Endnotes     40
Existing evidence     41
Growth and profitability of micro-firms     43
Introduction     43
The neglect of the micro-firm     44
Variants of Gibrat's Law     45
Classical vs. managerial theories     47
Conclusion     51
Endnotes     52
Funding shortages     54
Introduction     54
The funding constraint     55
The data and the questionnaire     57
Probit analysis     58
Conclusion     66
Endnotes     67
Finance     69
Modelling financial structure     71
Introduction     71
Analytical underpinning: statics     71
Analytical underpinning: dynamics     73
The dynamic model     74
Some illustrative examples from the literature     78
Conclusion     82
Endnotes     82
Capital structure at inception and the short-run performance of micro-firms     84
Introduction     84
Continuing or ceasing to trade      85
Econometric estimates     92
Conclusion     96
Appendix     96
Endnotes     97
Trajectories of financial structure     99
Introduction     99
The dynamic approach     100
Evidence     102
Results     105
Conclusion     112
Endnotes     113
Performance     115
Performance rankings and cluster analysis   Julia A. Smith     117
Introduction     117
The data     117
Performance ranking     119
Cluster analysis     120
Conclusion     128
Endnotes     128
Performance and business strategy   Julia A. Smith     130
Introduction     130
The data     131
Explaining performance rank by business strategy     133
The estimates     138
Conclusion     140
Appendix     140
Endnotes     142
Actions and outcomes     143
Introduction     143
Background     144
Determinants of survival     147
A parsimonious model of survival      152
Conclusion     156
Appendix     158
Endnotes     159
Information and contingency     161
Information and performance     163
Introduction     163
Information needs     163
Guiding decisions     165
Using information systems     167
Performance and IS development     168
Statistical analyses of IS and performance     171
Conclusion     172
Endnotes     173
Contingency and information system development   Julia A. Smith     174
Introduction     174
Contingency theory     175
Methodology     177
Timing of contingencies and IS development     178
Conclusion     184
Endnote     184
Small firm type, organisational form and contingency   Julia A. Smith     185
Introduction     185
Cluster analysis of small firm types     186
Regression analysis of organisational form and contingency     189
Conclusion     195
Appendix     196
Endnotes     197
Flexibility     199
Flexibility, growth and survival   Bernadette Power     201
Introduction     201
Growth and viability     201
Flexibility and performance     202
Measuring performance     204
Performance, flexibility and firm-specific turbulence     205
Conclusion     205
Endnotes     206
Scale flexibility     207
Introduction     207
Variants of Gibrat's Law     207
Regression estimates     209
Passage to equilibrium     211
Conclusion     214
Endnotes     215
Market niche flexibility     216
Introduction     216
The Markovian model     217
The transition matrix     218
Passage to long-period equilibrium     219
Conclusion     221
Principal theorems of Markov chains     222
Endnotes     223
Flexibility, firm-specific turbulence and the performance of the long-lived small firm   Bernadette Power     224
Introduction     224
Data     224
Variables     226
Estimates     233
Selection equation      235
Performance equations     236
Conclusion     240
Appendix     241
Endnotes     242
Epilogue     244
Appendix on instrumentation     247
Pre-letters     249
References     255
Administered questionnaire 1     271
Administered questionnaire 4     341
Index     399
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