The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms It is argued that when founders of SMEs perceive the probability of a successful and lucrative venture to be greater, they are more likely to provide a greater proportion of the start-up capital. This paper provides an empirical examination of two concurrent hypotheses. Firstly, that the size of the debt or equity is affected by factors influencing perceived entrepreneurial risk. Secondly, that the location of the market for the firm’s output is a major factor reducing perceived entrepreneurial risk and increasing equity of the start-up capital. A statistical analysis based on the simultaneous tobit model is used. Results show that significant factors influencing risk perception include the size of the new business and the sector of economic activity, as well as entrepreneurial experience and the location of the markets for the firm’s output. The results highlight implications for the design and implementation of rural development policies and especially for the instruments supporting rural business creation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2005 by Springer
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-003-6456-6
Publisher site
See Article on Publisher Site

Abstract

It is argued that when founders of SMEs perceive the probability of a successful and lucrative venture to be greater, they are more likely to provide a greater proportion of the start-up capital. This paper provides an empirical examination of two concurrent hypotheses. Firstly, that the size of the debt or equity is affected by factors influencing perceived entrepreneurial risk. Secondly, that the location of the market for the firm’s output is a major factor reducing perceived entrepreneurial risk and increasing equity of the start-up capital. A statistical analysis based on the simultaneous tobit model is used. Results show that significant factors influencing risk perception include the size of the new business and the sector of economic activity, as well as entrepreneurial experience and the location of the markets for the firm’s output. The results highlight implications for the design and implementation of rural development policies and especially for the instruments supporting rural business creation.

Journal

Small Business EconomicsSpringer Journals

Published: Aug 21, 2003

References

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