An analysis of growth in new firms and the impact of liquidity constraints
- Document type
- Working Paper
- Hay, Graham; Mole, Kevin
- Warwick Business School
- Date of publication
- 1 May 2004
- Warwick Business School’s Small and Medium Sized Enterprise Centre Working Papers
- Small business & enterprise: the practicalities of running a small business and the theory of entrepreneurship, Trends: economic, social and technology trends affecting business
- Business and management
- Material type
This paper analyses growth for a sample of 624 firms located in three English counties. Using 52 variables, heteroskedasticity adjusted OLS is used to estimate their role in generating growth in new firms for the period 2000 to 2001 and for 1997 to 2001. Summary statistics show constrained founders own slightly more businesses; make greater use of external finance and are equally like to survive. Estimation results show liquidity constraints are significant over four years but not one. The evidence is consistent with learning models of both the entrepreneur and bank. Growth appears deterministic but Gibrat’s law cannot be rejected.
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