Determinants Of Small Business Performance: An Econometric Approach Using Stata
Abstract
The performance of small businesses which are indispensable for development is determined by many economic, social and institutional forces. We employ econometric methods to provide insight into the stability and sustainable growth of small business performance. Existing literature focuses largely on factors contributing to the failures, such as accessibility to financial funds to initiate and expand business, taxation on small businesses, and market contradictions that drive small businesses towards failure; while there is a need to empirically study the interplay of these factors and their impact on sustenance at both local and regional level. Based on a cross-sectional survey of 1,299 small businesses, the study employs factor analyses and regression models using the Stata software. Household income, labor participation, access to finance, taxation, market conditions, and government support are important variables in the context of this paper. And that can have a major effect on income growth, with the analysis showing that job creation by stable small business, competitiveness, and infrastructure in a metro region have a much more salient role to play. To measure these impacts, they created the "Small Business Stability Index." Business stability had a strong, positive association with monthly income (Coef. = 0.582, p < 0.01). The results highlight the socio economic importance of small business resilience, despite the modest 2.4% of the variation in income that this model explains. This will require policy measures that aid small business access to financing as well as measures to provide institutional support and encourage the development of infrastructure vital for their stabilization. Model should also include wider socio-economic factors to assess contribution of households towards income dynamics in small enterprises and for strengthening the model further it is suggested for future studies.
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