Complex Actions and Simple Outcomes: How New Entrepreneurs Stay in Business

Complex Actions and Simple Outcomes: How New Entrepreneurs Stay in Business In this paper, the entrepreneur within the new small firm is regarded as taking complex rather than simple actions, which determine whether he or she will remain in business. Thus, instead of simply choosing output, as in the standard analysis of the competitive firm, the entrepreneur may take actions which involve choices about markets, finance, organisation, innovation, and much else besides. To explore this approach, very detailed information on actions within small firms is required. It is shown how this was obtained by a fieldwork study of new business starts. Using data from this fieldwork, a rich statistical picture was created of actions within the new small firm. In turn this permitted econometric analysis of actions that help a new small firm to stay in business over a three year period. This indicates that the crucial actions which enable a small firm to stay in business are: the rapid repayment of debt and the willingness to sacrifice short-run profit for growth. There is also evidence that staying in business is fostered by tight control of the wage bill, especially by substituting other labour inputs for full time employees. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Complex Actions and Simple Outcomes: How New Entrepreneurs Stay in Business

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1023/A:1008145403262
Publisher site
See Article on Publisher Site

Abstract

In this paper, the entrepreneur within the new small firm is regarded as taking complex rather than simple actions, which determine whether he or she will remain in business. Thus, instead of simply choosing output, as in the standard analysis of the competitive firm, the entrepreneur may take actions which involve choices about markets, finance, organisation, innovation, and much else besides. To explore this approach, very detailed information on actions within small firms is required. It is shown how this was obtained by a fieldwork study of new business starts. Using data from this fieldwork, a rich statistical picture was created of actions within the new small firm. In turn this permitted econometric analysis of actions that help a new small firm to stay in business over a three year period. This indicates that the crucial actions which enable a small firm to stay in business are: the rapid repayment of debt and the willingness to sacrifice short-run profit for growth. There is also evidence that staying in business is fostered by tight control of the wage bill, especially by substituting other labour inputs for full time employees.

Journal

Small Business EconomicsSpringer Journals

Published: Sep 30, 2004

References

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