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An Explanation of the Life Span of New French Firms

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18 pages
Niveau: Supérieur, Doctorat, Bac+8
An Explanation of the Life Span of New French Firms Small Business Economics 23: 237–254, 2004. ? 2004 Kluwer Academic Publishers. Printed in the Netherlands. ABSTRACT. In contrast to previous studies on firm survival which tend to focus on features related to the structure of the firms and their area of activity, our aim here is to widen the perspective usually adopted in the field, taking into account a larger and more qualitative set of variables. Among these variables, features related to the individual characteristics of the entrepreneur, to the context of entrepreneurship and to the insertion in entrepreneurial networks are significant to explain the life span of new firms. The empirical material is drawn from two surveys, which provide detailed data about a group of new firms created in France in 1994 and closed down before 1997 or still running in 1997. Our empirical approach on qualitative data is based on data analysis methods (linear discriminant analysis, barycentric discriminant analysis, analysis of variance). According to the characteristics of the entrepreneur, the main explanatory factors for the survival of new firms are the fact that they are entrepreneurs who have taken over firms, that they have acquired during their previous occupational activity an experience in the same branch of activity and that they experience a successful integration into the entrepreneurial networks. These three factors show that the survival of young firms is indirectly conditioned by the existence of an initial custom, by the mastery of a job and by the know-how in the entrepreneurial function.

  • selected variables

  • small sized

  • nationality french

  • firms

  • affecting small

  • french population

  • unemployed

  • people among

  • up


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   An Explanation of the Life Span of New French Firmsfavourable to SMEs because they are more flexibleand adaptable (Birch, 1983). This could partlyexplain the surge in entrepreneurship in the indus-trial and tertiary sectors2in France. Furthermore,when unemployment is increasing, a growingnumber of unemployed people will decide tofound their own firms. The growth in the number of start-ups3inFrance results from both the greater possibilitiesto start up a firm and a greater supply of entre-preneurs. On the one hand, new opportunities forthe creation of new firms have appeared both inthe tertiary and the industrial sectors thanks torestructuring, to the scattering policy of largeindustrial groups and also to the development ofnew needs in the tertiary sector. On the other hand,a high level of unemployment4and a strong cultureof entrepreneurship in some French regions haveled to a growing supply of entrepreneurs. The level of entrepreneurial activities is never-theless much less important in France than in mostindustrialized countries.5The difference in thepropensity for creating new firms refers mainlyto the gap between an entrepreneurial society,which values private initiative and a wage society,which increases the opportunity cost for someonewho wants to create a new firm. In an entrepre-neurial society, being salaried does not give theinsurance of a stable situation because of the largepossibility for the employer to lay off and becauseof the poor unemployment benefits. In a wagesociety like in France, salaried workers have greathistorical advantages, with the social security,relative stability with preservation of jobs and thepossibility to benefit from many public goods. In the French economy, about fifty per cent ofnew firms disappear before five years. So it seemsto be particularly important to examine thestrengths and weaknesses of the specific popula-tion that is creating firms so as to elaborate appro-ABSTRACT.In contrast to previous studies on firm survivalwhich tend to focus on features related to the structure of thefirms and their area of activity, our aim here is to widen theperspective usually adopted in the field, taking into accounta larger and more qualitative set of variables. Among thesevariables, features related to the individual characteristics ofthe entrepreneur, to the context of entrepreneurship and tothe insertion in entrepreneurial networks are significant toexplain the life span of new firms. The empirical material isdrawn from two surveys, which provide detailed data about agroup of new firms created in France in 1994 and closed downbefore 1997 or still running in 1997. Our empirical approachon qualitative data is based on data analysis methods (lineardiscriminant analysis, barycentric discriminant analysis,analysis of variance). According to the characteristics of theentrepreneur, the main explanatory factors for the survival ofnew firms are the fact that they are entrepreneurs who havetaken over firms, that they have acquired during their previousoccupational activity an experience in the same branch ofactivity and that they experience a successful integration intothe entrepreneurial networks. These three factors show thatthe survival of young firms is indirectly conditioned by theexistence of an initial custom, by the mastery of a job and bythe know-how in the entrepreneurial function.1. IntroductionSince the eighties, the renewal of the productivesystem has shown a growing importance of smalland medium sized enterprises (SMEs) as regardsjob creation.1Indeed, a period of economic reces-sion characterized by an increased uncertaintyand an intense technological renewal is moreFinal version accepted on October, 2002GEMMA Department of EconomicsUniversity of CaenEsplanade de la Paix14032 CaenCedex, FranceE-mails: abdesselam@econ.unicaen.frbonnet@econ.unicaen.frlepape@econ.unicaen.frSmall Business Economics23: 237–254, 2004.2004 Kluwer Academic Publishers. Printed in the Netherlands.Rafik AbdesselamJean BonnetNicolas Le Pape
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