Determinants of Survival of Newly Created SMEs in the Brazilian Manufacturing Industry: an Econometric Study

The year 2014 holds signs of economic recovery and growth for small businesses. On average there has been an increase in employment per business which

The variables upon which indicates economic growth are created using quantitative methods, as stated above, using various data from the WTO , the UK Data service, WDI and the IMF . By analyzing data between the time period 2000-2013 (latest available data), I aim to show the main causations of growth in Brazil, as ultimately growth occurs over time. Ultimately current and past policies will be analyzed and the effectiveness of these will be proven throughout the paper.

Small and midsized companies thrive by growing, but few businesses demonstrate a capacity to grow in a meaningful way. Only 4 percent of the companies in the United States have annual sales that exceed $1 million. Of the 27 million businesses operating in this country, fewer than 700,000 have 20 or more employees, and 21 million of those businesses are operated as sole proprietorships without any employees.

The question is what happened with the Brazilian economy? Why emerging economies are so vulnerable when developed economies change the “strategy of the game”?

As much as the masses champion small businesses and denigrate big ones, large organizations are essential to a modern economy. For all their missteps, businesses with thousands of employees enjoy economies of scale that let them fulfill crucial economic functions. Replacing FedEx or UPS with a plethora of tiny businesses, for example, would undoubtedly hurt America’s logistics networks. Replacing the Big Three automakers with smaller ones would likewise cause cars to become unaffordable to most. To be clear, small businesses play a vital

McClave, J. T., Benson, P. G., & Sincich, T. (2011). Statistics for Business and Economics (11th ed.). Boston, MA: Prentice Hall.

Conclusion: This paper is intended to give clarity on the depths of small businesses, how they plan to succeed and get through possible adversity. The surviving mechanism it takes to maintain in a world where large businesses are expected to exist longer than small business.

This paper deals with the explanation of performance of small business startups. Strategies employed, forms of uncertainty encountered and alternative determinants are used as explanatory concepts.

Economies of scale: - if economies of scale come into play in the industry, then a new firm

One idea that has received increasing attention by economists is the role of increasing returns to scale in the production process. When allowing for increasing returns to scale, firms will have incentives to expand their output. The expansion by some firms will eventually force others to exit the market, causing the number of firms in the market to decline. In monopolistic competition, there are many firms, and entry into the industry is free, unrestricted and each producing a variety of differentiated goods. So, opening up trade between two countries in monopolistic competition models results in the decline in the number of firms on the market, while the remaining firms, and output increases, exploiting economies of scale (Brobely, 2006, pp.

(Michael E Porter, 1998) proposed that there is some analysis on why this industry become down due to lack resources or skills of existing firms, existence firms are prejudiced or careless and lack of attention by outside firm. According to (Kevin Johnston, 2012), the advantage of fragmented industry to the small business are no big players, low entry barriers, smaller is preferred and differentiation

Small firms are good for those people who have experience in particular field but do not have a necessary amount of resources, in the terms of resources contain land, labour, capital and enterprise. Small firms not require more space to start production so require less amount of land same as land in production small firms require less number of people. Enterprise is the risk taking ability of the owner.

The idea is not primarily for new businesses to create jobs on a small scale but to enhance maximum growth in such businesses through creation of ideas that may enable them grow into larger firms thus, creating more jobs on a larger scale and leading in the industrial world (Grabowski, 1968). This essay is going to compare big firms and small firms in terms of their innovation; the comparison will be based on their economies of scale, scope and spillovers, research and development.

In Williams paper “Resources and Failures of SMEs: Another Look,” he studied the possible reasons for failure by analyzing failed companies. This was a unique approach to that of previous research that looked at failure from successful firm’s point of view, where he hypothesized several possible areas of concern (networks, location, age and size). He determined that spending too much time on developing and maintaining networks (formal and informal) led to a negative return on investment (ROI). As well, firm size, measured by export sales, growth, profitability and internationalization, concluded that large firms are less likely to exit the market. They have the ability to achieve economies of scale (competitive advantage) because they have the ability to absorb fixed costs. Although, there is research to support the fact that

Third, we test the robustness of our results by re-regressing equation (1) and equation (2) using weighted RDI as alternative risk disclosure index. The results reported in Table 7 are mostly the same with those results reported in Table 6 with slight different in the coefficients significant, therefore these findings indicates that our results are robust whether RDI is un-weighted or weighted. Finally, and to test potential endogeneity problems which have been debated to be a common problem in CG studies (Elshandidy & Neri, 2015; Larcker & Rusticus, 2010; Mollaha & Zamanb, 2015; Ntim et al., 2013; Ntim & Soobaroyen, 2013), we uses 3SLS because it is more efficient than 2SLS (Belsley, 1988; Larcker & Rusticus, 2010; Zellner & Theil, 1962). Three-stages least squares (3SLS) methodology consist of three steps: estimates MLG instrumental values in first step, estimates the covariance matrix for MLG instrumental values based on the residuals in second step and finally, performs GLS regression based on covariance matrix (Dennis & Taisier, 2014; Mollaha & Zamanb, 2015). Therefore, the model to be estimated is specified as: