Small-scale business enterprises in the Philippines: survey and empirical analysis.ABSTRACT
This paper is a two-part study of small-scale business enterprises in the Philippines: survey and empirical analysis, both of which are combined in an attempt to understand what determines entrepreneurial motivations and success in the Philippines. The survey was conducted in order to study entrepreneurship development and motivations in the Philippines and also to understand the challenges and sacrifices faced by Filipino entrepreneurs. In particular, this survey is quite comprehensive in scope and comprised 202 questions. Aside from data on the general characteristics of the business enterprise and the entrepreneur, the survey also asks questions about important issues in the study of entrepreneurship such as entrepreneurial intensity, sacrifice, motivation, business plans, the business' effect on the entrepreneur's quality of life, the entrepreneur's personal beliefs and attitudes, and difficulties and problems that the entrepreneur encountered at different stages of operating the business enterprise. This study also presents an empirical analysis of the determinants of success by Filipino small businesses. This analysis made use of the survey data and is based on the estimation estimation
In mathematics, use of a function or formula to derive a solution or make a prediction. Unlike approximation, it has precise connotations. In statistics, for example, it connotes the careful selection and testing of a function called an estimator. of a regression model using Ordinary Least Squares technique.
Since the 1990s, there has been a resurgence re·sur·gence
1. A continuing after interruption; a renewal.
2. A restoration to use, acceptance, activity, or vigor; a revival. of interest on the role of small-scaled business enterprises or small and medium enterprises (both will be referred to as "SMEs" hereafter In the future.
The term hereafter is always used to indicate a future time—to the exclusion of both the past and present—in legal documents, statutes, and other similar papers. ) in national and international economic and social development. This is consistent with the overall shift of development strategies in many countries toward a more decentralized de·cen·tral·ize
v. de·cen·tral·ized, de·cen·tral·iz·ing, de·cen·tral·iz·es
1. To distribute the administrative functions or powers of (a central authority) among several local authorities. , even localized, approach. As such, many scholars, practitioners, and institutions involved in economic development have begun to recognize the important roles that smaller-scale business entities play in the economy and society. More and more people are becoming convinced that these entities can be a very effective means of achieving, not only economic progress, but social goals (e.g., a more equal income and a greater appreciation for diversity in gender and race) as well. All of these suggest a greater need to increase our understanding of the nature and capabilities of family businesses and SMEs and the kinds of policies and incentive systems that would be appropriate, necessary, and effective in encouraging and strengthening them.
REVIEW OF ISSUES AND RELATED STUDIES
Like those in other countries, SMEs in the Philippines make significant contributions to the overall economy and the country's pursuit of economic development. Data show Filipino SMEs to make up more than 99% of all businesses in the country, provide more than two-thirds of the country's employment, and is responsible for almost one-third of the country's income (Philippine Department The Philippine Department (Philippine Garrison -- The Battling Bastards of Bataan) was a regular US Army unit, defeated in the Philippines, during World War II. The mission of the Philippine Department was to defend the Philippine Islands and train the Philippine Army. of Trade and Industry, 2003). Given their economic importance (others also highlight their social significance), Filipino SMEs are an interesting subject of study. Consequently, one would expect to find numerous studies on them. This, however, is not the case, most probably because of a number of issues that complicate com·pli·cate
tr. & intr.v. com·pli·cat·ed, com·pli·cat·ing, com·pli·cates
1. To make or become complex or perplexing.
2. To twist or become twisted together.
1. their study.
One of these issues has to do with the different perspectives on different aspects related to SMEs. Depending on which perspective the researcher uses as the primary source of insight and information, one gets a very different picture. In the study of Filipino SMEs, at least 3 different perspectives could be identified: that of policymakers, SME (1) (Small and Medium-sized Enterprise) See SMB.
(2) (Subject Matter Expert) An individual who is well-versed in the policies and procedures of a particular department or division. owners, academician and scholars.
In Philippines, government support to SME looks very good on paper. Specific legislation (Republic Act 6977: Magna Carta Magna Carta or Magna Charta [Lat., = great charter], the most famous document of British constitutional history, issued by King John at Runnymede under compulsion from the barons and the church in June, 1215. for Small Enterprises, signed in 1991; amended as Republic Act 8289 in 1996), institutions (such at the Department of Trade and Industry/Bureau of Small and Medium Business Development, University of the Philippines-Institute for Small-Scale Industries, and institutions that provide credit or credit guarantee to SMEs); publications give the impression that the government pays careful attention and takes sufficient action to encourage SMEs. That the government would purposely pur·pose·ly
With specific purpose.
USAGE: See at purposeful.
Adv. 1. choose to give such impression is not surprising for a number of reasons.
First, there is a "bandwagon effect Noun 1. bandwagon effect - the phenomenon of a popular trend attracting even greater popularity; "in periods of high merger activity there is a bandwagon effect with more and more firms seeking to engage in takeover activity"; "polls are accused of creating a ". Since other countries in the region and elsewhere have similar programs (again, at least on paper), the Philippines or for that matter any other country would look very bad should it choose not to have an SME program.
Second, because it is difficult to deny how important SMEs are as an effective means to achieve both economic and social goals, no government would choose to appear unsupportive of SMEs.
Third, the government might also have a tendency to "maximize external support", including those provided by international organizations to support SME development. To the extent that these programs allow the government access to resources (often, financial and technical) whose use could not be perfectly monitored, acting in a way to attract these resources give the impression of being supportive of SMEs.
In reality, however, policymakers' intention to assist SMEs tends to be less than genuine. "Conflict of interest" among government officials gets in the way. Since a number of policymakers are linked to large enterprises by ownership or production relation (either as supplier or customer), one would expect policymakers to use their political influence to channel support toward their own commercial interests and away from SMEs.
SME Owners' Perspective
During the study period, I came across three prior surveys of Filipino SMEs, as namely:
Asia Pacific Economic Cooperation (APEC), Survey on Small & Medium Enterprises, Coordinated by the Medium and Small Administration, Ministry of Economic Affairs, Chinese Taipei (1993). http://www.actetsme.org/archive/smesurvey.html Hooley, Richard and Muzaffer Ahmad, Small and Medium-SizeEnterprises and Development Process in Four Asian Countries: An Overview (1980s) ASEAN-EU Partenariat '97 is supported by the European Commission within the framework of Asia-Invest, one of whose aim is to help encourage networking among SMEs from Europe and Asia. It became fully operational in September 1997. http://aeup.brel.com/sme/sme6.html
Although the above three surveys provide useful insights and direction for this study, all of them lack the depth that this study would like to reach. All three are most useful in highlighting the difficulties encountered by SMEs surveyed as well as in laying out the overall importance of SMEs in economic development. While these surveys could be useful in studying SMEs at a macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. level, they provide limited insights into the entrepreneur's characteristics and decision-making process. Questions that pertain per·tain
intr.v. per·tained, per·tain·ing, per·tains
1. To have reference; relate: evidence that pertains to the accident.
2. directly to the entrepreneur himself/herself, what the motivation was in starting the enterprise, the extent of sacrifice that the entrepreneur would be willing to bear, and others that are more microeconomic mi·cro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the operations of the components of a national economy, such as individual firms, households, and consumers. in nature are beyond the scope of the above surveys.
Several sources were found that particularly look into Filipino SMEs at a more theoretical and empirical levels. Rodriguez and Tecson (1998) looked at the impact of liberalization lib·er·al·ize
v. lib·er·al·ized, lib·er·al·iz·ing, lib·er·al·iz·es
To make liberal or more liberal: "Our standards of private conduct have been greatly liberalized . . . on Filipino SMEs in the manufacturing sector while Rebullida (2000) highlighted the area of human resource development as one where SMEs and the government need to focus in order to enhance productivity and quality.
Other sources covered the topic of entrepreneurship in general while allotting a section or chapter on business conditions and SME development in the Philippines. These include the works of Fajardo (1994) and Orcullo (2000).
There are also works that look at stories of successful entrepreneurs in the Philippines. Works by Fajardo (1994) and Orcullo (2000) both included section that features case studies of Filipino entrepreneurs. In addition, the University of the Philippines-Institute of Small-Scale Industries published a book in 1998 based entirely on 24 case studies of successful Filipino entrepreneurship in five different industries.
Other works that provided useful background materials for this study are listed at the end of this paper.
Another important issue in the study of SMEs questions the motivation for SME development. Existing studies show the need to distinguish between micro-enterprises and SMEs as each group responds differently to changes in economic conditions. In particular, while SME startups do not usually occur when the economy is performing poorly, many micro-enterprises startups do occur during the same period. Researchers point out that this shows how creation of micro-enterprises tends to reflect a "coping strategy" by their owners--since there are less opportunities for remunerative work during periods of economic recessions or stagnating economic development, some are forced to find a livelihood by starting their own small business.
Ideally, one must make a distinction between micro-enterprises and SMEs. Unfortunately, given the small sample size of Filipino SMEs participating in this survey, it is not possible to make this distinction at this time, that is, the sample included both types of business enterprise and that "SME" used in the subsequent sections covers both SMEs and micro-enterprises.
PLAN OF THE PAPER
This paper is a two-part study of Filipino SMEs: survey and empirical analysis, which are combined in an attempt to understand what determines entrepreneurial motivations and success in the Philippines. In what follows, the survey instrument and process are first described, then the survey results are summarized. This is followed by a section that presents the empirical analysis of the determinants of success by Filipino SMEs. This analysis is based on using OLS OLS Ordinary Least Squares
OLS Online Library System
OLS Ottawa Linux Symposium
OLS Operation Lifeline Sudan
OLS Operational Linescan System
OLS Online Service
OLS Organizational Leadership and Supervision
OLS On Line Support
OLS Online System method to process survey data.
SURVEY OF FILIPINO SMEs
The Survey Questionnaire
The questionnaire used in this survey was originally put together by several faculty at Alfred University's College of Business, located in Southwestern New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Prior to use in this survey, the same instrument has been used in surveys conducted in China, Germany, New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. , Romania, Turkey, Tunisia, Venezuela, and Southwestern New York State.
The survey questionnaire has 202 questions, categorized cat·e·go·rize
tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es
To put into a category or categories; classify.
cat into the following sections (number in parenthesis shows number of question for that section):
General characteristic of enterprise and entrepreneur (41) Entrepreneurial intensity (11) Extent of entrepreneur's sacrifice (21) Motivation for starting own business (38) Plans for next two year (19) Business' effect on entrepreneur's quality of life (11) Personal beliefs and attitudes of entrepreneur (21) Difficulties and problems encountered (40)
This survey was targeted toward SMEs that conduct business in the Philippines. An SME is usually defined according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. volume of sales, value of capital/physical assets, and/or number of employees. Countries define SMEs differently. In the context of the Philippines, an SME would be a business enterprise that has total assets valued between one and forty million Philippine Pesos (or approximately $20,000-800,000 using exchange rate during the survey period) or having between 10 and 199 employees. A further distinction among micro, small, and medium enterprises uses the following definition:
Micro-enterprises have $2,000-$20,000 in total assets and 1-9 employees Small-enterprises have $20,000-$200,000 in total assets and 10-99 employees Medium-enterprises have $200,000-$800,000 in total assets and 100-199 employees
SMEs surveyed were located in the capital city of Metro-Manila, nearby provinces of Bulacan and Laguna, and the southern province of Cotabato. Surveys were conducted between the year 2000 and 2002. 88 survey questionnaires were returned and efforts were made to include each returned survey in summarizing the results of the survey. However, only 65 of these returned surveys were judged complete and usable for empirical analysis in the latter half of this paper.
Problems Encountered While Conducting Survey
During the survey, it was found that respondents' willingness to participate and cooperate were limited by a number of factors:
The questionnaire was too long (11-13 pages) Some questions are repetitive Some answers are not easy to recall Respondents already participated in a number of previous survey Respondents expected to receive some benefits (usually financial and, in some cases, to be received immediately) from participating in the survey. Respondents were worried about disclosing certain information (especially financial figures) for fear that competitors or government tax authority might have access to survey
Due to these problems, on several occasions, surveyors ended up interviewing respondents, going through each question, and literally filling out the entire questionnaire for them. In some cases, surveyors had to visit the same respondent In Equity practice, the party who answers a bill or other proceeding in equity. The party against whom an appeal or motion, an application for a court order, is instituted and who is required to answer in order to protect his or her interests. more than once as many respondents became impatient im·pa·tient
1. Unable to wait patiently or tolerate delay; restless.
2. Unable to endure irritation or opposition; intolerant: impatient of criticism.
3. with the survey or felt that they had given as much time that particular day accommodating the survey. Other respondents who filled out the questionnaires themselves returned incomplete surveys, in which case the surveyors had to return to their place of business to fill out portions of the questionnaire left unanswered. Even then, respondents refused to reveal some information (as above noted).
Other problems encountered during the survey were heavy traffic congestion The condition of a network when there is not enough bandwidth to support the current traffic load.
congestion - When the offered load of a data communication path exceeds the capacity. around Metro-Manila, which made travel to one survey respondent a whole-day event. Bad weather presented another problem, with heavy rains and flooding experienced on a number of occasions.
For the particular year 2000, the economic and political situation in the Philippines also made conducting the survey more difficult. The economy was destabilized by a series of hostage-taking in the Southern provinces of the country and the prolonged pro·long
tr.v. pro·longed, pro·long·ing, pro·longs
1. To lengthen in duration; protract.
2. To lengthen in extent. negotiations to release hostages Persons taken by an individual or organized group in order to force a state, government unit, or community to meet certain conditions: payment of ransom, release of prisoners, or some other act. that resulted from them. This was later (in October) followed by corruption charges against then-President Estrada that led to impeachment impeachment, formal accusation issued by a legislature against a public official charged with crime or other serious misconduct. In a looser sense the term is sometimes applied also to the trial by the legislature that may follow. hearings in December, related episodes of bombings of several public places, and in early 2001, persistent mass demonstrations to pressure then-president Estrada to resign. Finally, by a Supreme Court decision, power was turned over to the former vice president and current president, Arroyo.
In addition, even if surveys could have been conducted in 2000, one would worry about the "accuracy" of responses, given an overall mood of restlessness restlessness
a state manifested by increased motor activity, constant walking, vocalizing, lying down and getting up. May be caused by psychological factors, e.g. separation from young, or by pain, or deprivation of water. , unease, frustration, and fear. Under the circumstances, responses would be more negative and pessimistic pes·si·mism
1. A tendency to stress the negative or unfavorable or to take the gloomiest possible view: "We have seen too much defeatism, too much pessimism, too much of a negative approach" than they otherwise would have been.
SUMMARY OF SURVEY DATA
Characteristics of Enterprises
Of the 88 enterprises surveyed, only 70 provided information on number of employees, which revealed that 42 are actually classified as micro-enterprises (with less than 9 employees) and 28 are SMEs (with between 10 and 199 employees) (In fact, only one enterprise is medium-sized, with more than 100 employees while 27 are small-sized enterprises (with 10-99 employees). The average number of employees is 18.3.
Because of the sensitive and private nature of financial information, very few respondents provided information on value of sales or business assets so it was not possible to classify clas·si·fy
tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies
1. To arrange or organize according to class or category.
2. To designate (a document, for example) as confidential, secret, or top secret. SMEs using the SME definition based on total assets.
The survey represents ten economic sectors: service, retail, finance, transport, professional, distributor, manufacturing, construction, computer, and all others. The sector most represented is retail, with 38 (or 45%) SMEs surveyed, followed by 12 (or 14%) in the manufacturing sector (Table 2).
By type of enterprise, survey shows 83% are sole proprietorships, 19% partnerships, and 8% corporations (Table 3).
When asked how the entrepreneur came to own the business at the present time, 64% said that they originated them, 19% inherited inherited
received by inheritance.
inherited achondroplastic dwarfism
see achondroplastic dwarfism.
inherited combined immunodeficiency
see combined immune deficiency syndrome (disease). them, and 16% purchased them (Table 4).
In terms of SME's "age" or survival, the majority (57%) were started in 1990 or later while a significant proportion of SMEs (35%) were started in 1970s and 1980s (Table 5).
Most SMEs surveyed have between one and three family members involved in the business, with more than one-third of the total having two family members involved.
As to the extent that family members are investors in SMEs, survey shows the mode for this number to be either one or two family member(s) (Table 7).
In almost two-thirds of SMEs surveyed, only one family member is involved with the management of the business and 24% said two family members are involved (Table 8).
Characteristics of Entrepreneurs
The average age of entrepreneurs surveyed is 43.7 years, with almost 75% belonging to age group 30-59. Along gender lines, there seems to be an even split between men and women entrepreneurs. Along marital status marital status,
n the legal standing of a person in regard to his or her marriage state. , 82% are married. The average number of children is 3.4, with those having five or more children, accounting for 24% of the distribution.
Our survey reveals that Filipino entrepreneurs attained relatively high levels of education. On average, entrepreneurs had 14 years of education, which is equivalent to 2 years of post-high school education. Only 11.5% of entrepreneurs had less than a high school education (Table 13).
As regards entrepreneurs' experience in their line of business, the average is 13 years, with more than 50% having from one to nine years of business experience (Table 14). When asked about the number of years of work experience, 24 % of entrepreneurs have between one and four years of experience and almost less than 14 years of experience. The average length of work experience is 19 years (Table 15).
In the following sections, answers to the survey questions or statements (e.g., "My business is the most important activity in my life") are from 1 to 5, with 1 representing a situation where the respondent strongly disagrees with the statement being answered and 5 where the respondent strongly agrees. Questions are grouped according to the sub-headings below and, for each question, a simple average is taken.
Entrepreneurs surveyed indicate that it is important for their businesses to make a contribution to society. They also value the idea of "being their own boss" and would be willing to pass up working for someone else, even if they expect to earn more in the latter. The survey also reveals that entrepreneurs give higher priority to their family over their business, placing more value on time spent with family.
Extent of Entrepreneur's Sacrifice
The survey reveals the extent to which entrepreneurs will bear sacrifices for their businesses. Examples of these include acquiring additional skills at their own expense and performing any task that would be helpful to their businesses. Entrepreneurs said they would be least willing to sacrifice their marriage, families, and friends.
Motivation for Starting Business
When asked what motivated them to start their own businesses, many conveyed a sense of optimism by believing that their own business will be a source of higher income and financial security for them and their families. A second reason for starting their own businesses is that it offers them a more flexible (perhaps more manageable) schedule between family and work life. Not many started their businesses because of frustration from previous job or desperation (that is, doing business is the only thing they could do).
Entrepreneur's Plan in Next Two Years
The most commonly cited business plans in the next two years are introducing new product or service and expanding the scope of current activities. Entrepreneurs surveyed are least likely to engage in offsite training of employees, replace existing equipment and upgrade their computer systems in the next two years.
SME's Effect on Entrepreneur's Quality of Life
When asked about businesses' effect on the quality of their lives, entrepreneurs replied that their businesses provided sufficient income and financial stability, as well as improved standard of living and offered a sense of having fulfilled some personal goals.
Entrepreneur's Personal Attitudes and Beliefs
Most entrepreneurs gave greater importance to the government's role of meeting everyone's needs, as well as providing employment for the masses and keeping prices stable, even at the expense of government-imposed restrictions on their businesses. Along side this view of the government's role in the economy, most entrepreneurs agreed that a good economy depends on the ability of businesses to operate profitably. Many expressed ethical concerns about making money by all means or the presence of social differences.
Difficulties Faced by Entrepreneur
Entrepreneurs surveyed found stiff market competition, fatigue from long work hours, and having to balance work and family activities as the most serious difficulties they faced while operating their businesses. Many expressed comfort in having received family encouragement.
EMPIRICAL ANALYSIS OF FILIPINO SME SUCCESS
In an attempt to study factors that affect the business success of Filipino entrepreneurs, a simple regression Noun 1. simple regression - the relation between selected values of x and observed values of y (from which the most probable value of y can be predicted for any value of x)
regression toward the mean, statistical regression, regression analysis was performed using data obtained from the above survey. Largely due to limitations in data, the proxy used to measure SME success is the number of years an SME has been in business, using the year 2001 as the benchmark year and subtracting from it the year when the business was started.
On the one hand, this measure works well in distinguishing surviving SMEs from failing SMEs, at least as far as it is able to exclude SMEs that were not in existence by year 2001. On the other hand, this proxy has problems or limitations. Using this definition, although an SME that has been in business the longest may be viewed as most successful, the converse (logic) converse - The truth of a proposition of the form A => B and its converse B => A are shown in the following truth table:
A B | A => B B => A ------+---------------- f f | t t f t | t f t f | f t t t | t t is not necessarily true, i.e., a new or start-up SME cannot be necessarily viewed as less successful but perhaps simply not having existed long enough to show whether it will succeed or fail. Ideally, profit rates will make a better measure of business success. Unfortunately, privacy issues and the delicate nature of this type of information make them unavailable and difficult to obtain. For these reasons, the reader must exercise caution in interpreting the regression results below. In some cases, the limitations of the SME success variable affect the interpretation of the results.
As for sample size, although 88 surveys were completed, some observations were incomplete (the respondents declined to answer some survey questions) so that only 65 observations were actually included in the regression model.
The regression equation Regression equation
An equation that describes the average relationship between a dependent variable and a set of explanatory variables. is as follows:
SME SUCCESS = [a.sub.0] + [a.sub.1]AGE + [a.sub.2]MALE + [a.sub.3]MARRIED + [a.sub.4]EDUC EDUC Education
EDUC Commission for Culture and Education (COR) + [a.sub.5]PURCHASE + [a.sub.6]ORIGINATE o·rig·i·nate
1. To bring into being; create.
2. To come into being; start. + [a.sub.7]SOLO + [a.sub.8]PARTNER + [a.sub.9]INTENSITY + [a.sub.10]SACRIFICE
The next section discusses each explanatory ex·plan·a·to·ry
Serving or intended to explain: an explanatory paragraph.
ex·plan or independent variable of the above regression model and the expected sign of the corresponding regression coefficient Regression coefficient
Term yielded by regression analysis that indicates the sensitivity of the dependent variable to a particular independent variable. See: Parameter.
regression coefficient .
The variable "AGE" indicates the age of primary entrepreneur, and its regression coefficient, [a.sub.1], may be either positive or negative: Older entrepreneurs have more experience and tend to be more successful. Younger entrepreneurs are more energetic, dynamic, and perhaps creative, all of which contribute to the success of the business. Keep in mind that the average age of entrepreneurs is 43 years old.
"MALE" is a dummy variable This article is not about "dummy variables" as that term is usually understood in mathematics. See free variables and bound variables.
In regression analysis, a dummy variable used to indicate the gender of the primary entrepreneur, where male entrepreneur (=1) or female entrepreneur (=0). The corresponding regression coefficient, [a.sub.2] may be positive, negative, or zero.
"MARRIED" is a dummy variable that captures that marital status of the primary entrepreneur where married entrepreneur (=1) or non-married entrepreneur (=0). Non-married entrepreneurs include both never married and separated (Note that divorce is not legal in the Philippines). The regression coefficient, [a.sub.3], may be either positive or negative: single entrepreneurs have more time to devote to their business, which will help them be more successful while married entrepreneurs have more stake on their businesses (as they and their families rely more on their businesses) and a greater determination to make their businesses successful.
"EDUC" represents the primary entrepreneur's number of years of education, and its regression coefficient, [a.sub.4], is expected to be positive: a more educated entrepreneur is more likely to be successful than a less educated one.
"PURCHASE" is a dummy variable that indicates whether the SME was acquired through purchase (=1) or not (=0). "ORIGINATE" is a dummy variable for whether SME was founded by the primary entrepreneur (=1) or not (=0). SMEs that are neither purchased nor originated are mostly inherited, which serves as the control variable. There are no a priori a priori
In epistemology, knowledge that is independent of all particular experiences, as opposed to a posteriori (or empirical) knowledge, which derives from experience. reasons to expect the regression coefficients [a.sub.5] and [a.sub.6] to be either positive or negative.
"SOLO" is a dummy variable that represents whether the SME is a sole proprietorship A form of business in which one person owns all the assets of the business, in contrast to a partnership or a corporation.
A person who does business for himself is engaged in the operation of a sole proprietorship. (=1) or not (=0). Similarly, "PARTNER" is a dummy variable for whether SME is a partnership (=1) or not (=0). SMEs that are neither sole proprietorship nor partnership are corporations (the control variable). The regression coefficients [a.sub.7] and [a.sub.8] may be positive or negative. Although a sole proprietor proprietor n. the owner of anything, but particularly the owner of a business operated by that individual.
PROPRIETOR. The owner. (q.v.) might work hard because all gains accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. to him/her and, as a result, be more successful, a partnership or corporation has more resources available for the business to support the business' operation and expansion and make it more successful.
The variable "INTENSITY" is intended to capture the primary entrepreneur's drive toward or determination to start and operate his/her own business. Its regression coefficient, [a.sub.9], is expected to be positive: a more determined entrepreneur is more likely to succeed.
"SACRIFICE" is the explanatory variable that represents the trade-offs that the primary entrepreneur is willing to make or the additional resources (such as hours, efforts) that he/she are willing to supply in the desire to start and operate a successful business. The regression coefficient, [a.sub.10], is expected to be positive: a rational entrepreneur weighs the costs ("sacrifice") of his/her business relative to the benefits from it. An entrepreneur is willing to make greater sacrifices if these are rewarding and compensated by greater business success.
An OLS regression model is performed and the following results are obtained (Table 16):
The regression results suggest the following profile of a successful entrepreneur: older, male, less educated, one who inherited or originated the business, a sole proprietor, and one who has a strong drive toward owning his business. Although the majority of this profile is consistent with one's expectations, some require further explanations.
First, the result that male entrepreneurs are likely to be more successful than female entrepreneurs might not be accurate. The question of who owns the business does not correspond perfectly with who makes the business successful. It is possible that the ownership was determined by who took care of processing the required paperwork (such as obtaining a business license) through government offices. Casual observation of married entrepreneurs suggests that the wife are more likely to run the business while the husbands are more likely (and perhaps are more effective) to deal with the bureaucracy associated with taking care of the legal requirements of the business.
Second, successful entrepreneurs tend to be less educated is opposite of what one might expect. We suspect this to be due to the limitation associated with how SME success is defined in this study. What this result might be suggesting is not so much that the more educated entrepreneurs are less successful but rather that newer businesses are started and operated by more educated entrepreneurs. This is consistent with a more optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op economic and political environment since 1986 and moreso in the 1990s, owing partly to the effects of advancements in computing computing - computer and the business opportunities that stem from them, which require a higher level of education. Such opportunities were obviously not available in the past (say, ten or more years before the survey was taken). In short, older businesses (which are proxied as being more successful) are more traditional and required less education of the entrepreneur while newer businesses are more high-tech and require a more educated entrepreneur
Third, entrepreneurs that inherited or originated their businesses are more successful than those who purchased their businesses from someone else. For inherited businesses, entrepreneurs have greater determination and will work harder to preserve the family tradition and nurture NURTURE. The act of taking care of children and educating them: the right to the nurture of children generally belongs to the father till the child shall arrive at the age of fourteen years, and not longer. Till then, he is guardian by nurture. Co. Litt. 38 b. the family name or association with the business. For originated businesses, entrepreneurs also work harder to make a success of their businesses as they consider their businesses as their own creation, perhaps an extension of themselves, or a future legacy they could leave their family. Hence, these businesses are more likely to succeed than those businesses that were purchased from someone else.
Fourth, our results show that a sole proprietorship is likely to be more successful that a partnership or corporation. This might be suggestive sug·ges·tive
a. Tending to suggest; evocative: artifacts suggestive of an ancient society.
b. that an entrepreneur who is solely responsible for both gains and losses of the business has a greater incentive and determination to make a success of the business in order to fully enjoy its rewards and to avoid the alternative, which is to fully bear the liability of a business loss.
That the age of the entrepreneur is found to be a significant determinant determinant, a polynomial expression that is inherent in the entries of a square matrix. The size n of the square matrix, as determined from the number of entries in any row or column, is called the order of the determinant. of SME success may be because of the definition of SME success, the number of years that the business has been in operation. Obviously, businesses that have been around longer are likely to have older owners, although one might still argue that older entrepreneurs have greater experience in the business and are more likely to be successful (The correlation coefficient Correlation Coefficient
A measure that determines the degree to which two variable's movements are associated.
The correlation coefficient is calculated as: between entrepreneur's age and years of experience is positive and high (0.73)). Hence, caution must be taken in interpreting this result.
POST-SURVEY CHANGES IN SME CLIMATE IN THE PHILIPPINES
Since the survey of Filipino SMEs presented in this study was completed in 2002, changes have taken place in the area of what was referred to in a previous section as "Policymakers' Perspective on SME". In mid-2002, the National SME Development Agenda was introduced (this agenda is known in the Pilipino language-Tagalog dialect as "Sulong Pinoy", where "Sulong" means move forward and "Pinoy" is a affectionate short-cut for the Filipino people Filipinos are the citizens of the Philippines, located in Southeast Asia. The term (feminine: Filipina) may also refer to people of Philippine descent, regardless of citizenship (i.e. ). This agenda was a statement by the Philippine government to explicitly include SME development and support as a top priority of its strategy to pursue overall economic development for the country.
One and a half years later and with the support of from the Japan International Cooperation Agency The Japan International Cooperation Agency (独立行政法人国際協力機構 dokuritsu gyōseihōjin kokusai kyōryoku kikō , the National SME Development Agenda was further reinforced and formalized for·mal·ize
tr.v. for·mal·ized, for·mal·iz·ing, for·mal·iz·es
1. To give a definite form or shape to.
a. To make formal.
b. by the preparation of a 125-paged document entitled en·ti·tle
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.
2. To furnish with a right or claim to something: "SME Development Plan (2004-2010)". These and related documents, including examples of individual SME stories, can now be accessed from the Philippine Department of Trade and Industry website (www.dti.gov.ph). This document also provides an updated definition of SMEs, which was effective since January 2003. While SME definition based on the number of employees remains the same, SMEs definition by value of total assets increased to the range of between three and one-hundred million pesos from the former range of between one and forty million pesos. In particular, the following SME definitions as well as micro-enterprise definitions are currently in use:
Micro-enterprises have up to three million pesos in total assets (or $56,844, at the exchange rate of 52.776 pesos to the U.S. dollar on July 5, 2006, information provided by the Central Bank of the Philippines) Small-enterprises have between three and fifteen million pesos (or $56,844 - $284,220) in total assets Medium-enterprises have between fifteen and one-hundred million pesos (or $284,220 - $1.89 million) in total assets
Also in 2002 (in November), the Barangay Micro-Business Enterprises Act (also known as Republic Act 9178) was passed ("barangay" is an administrative unit Noun 1. administrative unit - a unit with administrative responsibilities
Inland Revenue, IR - a board of the British government that administers and collects major direct taxes equivalent to town or village). This act is designed to replace a previous law and to encourage micro-enterprise development and continue operation through fiscal incentives and simplified procedures. The above law, together with the Magna Carta for Small Enterprises of 1991/1996, makes up the cornerstone of the Philippine government's SME policies.
To what extent these policy changes have had an impact of Filipino SMEs is yet to be seen. At the time of this writing, casual observation and anecdotal anecdotal /an·ec·do·tal/ (an?ek-do´t'l) based on case histories rather than on controlled clinical trials.
anecdotal adjective Unsubstantiated; occurring as single or isolated event. references do not seem to indicate any noticeable impact of the above policy changes. A skeptic might draw from this the conclusion that these policy changes are just as ineffective as those before them and that the timing of their introduction was anticipatory of a presidential election and hence suspicious (President Arroyo was vice president to Estrada and took office to serve Estrada's unfinished term. Arroyo won the presidential election in May 2004 but her victory was later contested on grounds of election fraud). In due time, it will be of particular interest to the three perspectives on SME above noted (namely, those by policymakers, by the SME owners, and by academicians and scholars) to evaluate and quantify Quantify - A performance analysis tool from Pure Software. , if possible, any impact that the above changes might have on SME development and performance in the Philippines.
Abdullah, Moha Asri and Mohd. Isa Bin Baker (eds.) (2000), Small and Medium Enterprises in Asian Pacific Countries, Volume I-III, Huntington NY: Nova Science Publishers, Inc.
Asia Pacific Economic Cooperation (APEC) (1993), Survey on Small & Medium Enterprises, Chinese Taipei Chinese Taipei (Traditional Chinese: 中華臺北; Simplified Chinese: 中华台北; Hanyu Pinyin: : Medium and Small Administration, Ministry of Economic Affairs The following nations have a Ministry of Economic Affairs:
ASEAN-EU Partenariat '97 (1997), "Small and Medium Industries in the Philippines". Retrieved from http://aeup.brel.com/sme/sme6.html
Asian Development Bank Asian Development Bank
A financial_institution established in 1966 to reduce poverty in the Asia-Pacific region. The bank is headquartered in Manila, Philippines and consists of 61 member countries. and Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD), (in French: Organisation de coopération et de développement économiques; OCDE) is an international organisation of thirty countries that accept the principles of representative democracy and a free market (2000), Workshop on Small- and Medium- Sized Enterprise Financing in Asia: Conference Papers, Philippines.
Bangko Sentral ng Pilipinas The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. It was rechartered on July 3, 1993, pursuant to the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993. (Central Bank of the Philippines), "Daily Pesos Per U.S. Dollar Rate". Retrieved July 7, 2006 from http://www.bsp.gov.ph/statistics/keystat/day99.htm
Fajardo, Feliciano R. (1994), Entrepreneurship, Philippines: National Bookstore.
Hooley, Richard and Muzaffer Ahmad (1985), Small and Medium-Sized Enterprises and Development Process in Four Asian Countries: An Overview
Orcullo, Norberto A. Jr. (2000), Contemporary Entrepreneurship, Philippines: Academic Publishing Corporation.
Rebullida, Maria Lourdes G. (2000), "Prospects for Better Productivity and Quality of SMEs", in chapter 1, Volume III, of Abdullah, Moha Asri and Mohd. Isa Bin Baker (eds.) (2000), Small and Medium Enterprises in Asian Pacific Countries, Huntington NY: Nova Science Publishers, Inc.
Republic of the Philippines, Department of Trade and Industry The Department of Trade and Industry was a United Kingdom government department which was disbanded with the announcement of the creation of the Department for Business, Enterprise and Regulatory Reform on 28 June 2007. (2003), National SME Development Agenda, Philippines. Retrieved July 2, 2006 from http://www.dti.gov.ph/contentment/66/69/671.jsp
Republic of the Philippines, Department of Trade and Industry (2003), SME Development Plan (2004-2010), Philippines. Retrieved July 2, 2006 from http://www.dti.gov.ph/ contentment/66/69/files/plan_2004-2010.pdf
Republic of the Philippines, Department of Trade and Industry (2003), SME Stories, Philippines. Retrieved July 2, 2006 from http://www.dti.gov.ph/contentment/66/69/856.jsp
Rodriguez, Edward R. and Gwendolyn Tecson (1998), "Liberalization and Small Industries: Have Manufacturing SMEs in the Philippines Benefited?" Small Enterprise Development, 9(4), 14-22.
Small Enterprises Research and Development Foundation, Inc. and University of the Philippines In 2004, the University's seal and the Oblation were registered in the Philippine Intellectual Property Office to prevent unauthorized use and multiplication of the symbols for the centennial of the University in 2008. Institute for Small-Scale Industries (1998), Dreamers, Doers, Risktakers: Entrepreneurial Case Stories, Philippines: SERDEF SERDEF Small Enterprise Research and Development Foundation .
Maria Claret claret: see wine. M. Ruane, Alfred University Alfred University, at Alfred, N.Y.; state and private support; coeducational; opened as a school 1836, chartered 1857 as Alfred Univ. It is especially known for the College of Ceramics, which is among the few institutions in the United States offering a doctoral
Table 1: Average Number of Employees Number of Employees Number of SMEs Percent of Total 01 to 09 42 60.0% 10 to 19 13 18.6% 20 to 29 8 11.4% 30 to 39 3 4.3% 40 to 49 1 1.4% 50 + 3 4.3% Number of Respondents = 70 Table 2: SMEs by Type of Industry Type of Industry Number of SMEs Percent of Total Service 6 7.1% Retail 38 45.2% Finance 2 2.4% Transport 4 4.8% Professional 4 4.8% Distributor 10 11.9% Manufacturing 12 14.3% Construction 2 2.4% Computer 1 1.2% Other 5 6.0% Number of Respondents = 84 Table 3: SMEs by Type of Business Type of Business Number of SMEs Percent of Total Sole Proprietorship 72 82.8% Partnership 8 9.2% Corporation 7 8.0% Number of Respondents = 87 Table 4: How Entrepreneur Came to Own the Business Method of Acquiring Business Number of SMEs Percent of Total Purchase 14 16.3% Originate 55 64.0% Inherit 16 18.6% Other 1 1.2% Number of Respondents = 86 Table 5: Year When Business Was Started Year Number of SMEs Percent of Total 1900-1959 2 2.4% 1960-1969 5 5.9% 1970-1979 13 15.3% 1980-1989 17 20.0% 1990-1994 17 20.0% 1995-1999 28 32.9% 2000 + 3 3.5% Numbers of Respondents = 85 Table 6: Family Members Involved in the Business Number of Family Member(s) Number of SMEs Percent of Total 0 2 2.5% 1 16 20.0% 2 27 33.8% 3 12 15.0% 4 10 12.5% 5 7 8.8% 6+ 6 7.5% Number of Respondents = 80 Table 7: Family Member who Provided Financing in the Business Family Member(s) who Provided Financing Number of SMEs Percent of Total 0 4 7.0% 1 23 40.4% 2 21 36.8% 3 2 3.5% 4 2 3.5% 5 2 3.5% 6 0 0.0% 7+ 3 5.3% Number of Respondents = 57 Table 8: Family Member(s) Involved in Management Number of Family Member(s) as Manager(s) Number of SMEs Percent of Total 0 2 2.9% 1 44 64.7% 2 16 23.5% 3+ 6 8.8% Number of Respondents = 68 Table 9: Entrepreneur's Age Age Group Number of Entrepreneurs Percent of Total 20-29 13 15.3% 30-39 19 22.4% 40-49 24 28.2% 50-59 21 24.7% 60-69 6 7.1% 70+ 2 2.4% Number of Respondents = 85 Table 10: Entrepreneur's Gender Gender Type Number of Entrepreneurs Percent of Total Female 43 50.6% Male 42 49.4% Number of Respondents = 85 Table 11: Entrepreneur's Marital Status Marital Status Number of Entrepreneurs Percent of Total Single 12 13.6% Married 72 81.8% Separated 4 4.5% Divorced 0 0.0% Number of Respondents = 88 Table 12: Entrepreneur's Children Number of Children Number of Entrepreneurs Percent of Total Zero 9 9.8% One 18 19.6% Two 16 17.4% Three 18 19.6% Four 9 9.8% Five + 22 23.9% Number of Respondents = 82 When asked whether either at least one parent is an entrepreneur, 53% answered "no". Table 13: Entrepreneur's Education Years of Schooling Number of Entrepreneurs Percent of Total Less than 9 4 5.8% 9 0 0.0% 10 3 4.3% 11 1 1.4% 12 (high school) 18 26.1% 13 4 5.8% 14 6 8.7% 15 3 4.3% 16 (college) 21 30.4% 17 1 1.4% 18 1 1.4% 19 7 10.1% Number of Respondents = 69 Table 14: Years of Business Experience Years of Experience in Line of Business Number of Entrepreneurs Percent of Total 01 to 04 22 26.5% 05 to 09 20 24.1% 10 to 14 11 13.3% 15 to 19 5 6.0% 20 to 24 14 16.9% 25 to 29 4 4.8% 30 to 34 3 3.6% 35 to 39 0 0.0% 40 + 4 4.8% Number of Respondents = 83 Table 15: Years of Work Experience Years of Work Experience Number of Entrepreneurs Percent of Total 01 to 04 18 23.4% 05 to 09 11 14.3% 10 to 14 8 10.4% 15 to 19 2 2.6% 20 to 24 11 14.3% 25 to 29 7 9.1% 30 to 34 6 7.8% 35 to 39 2 2.6% 40 + 12 15.6% Number of Respondents = 77 Table 16: Regression Results (Dependent Variable: SME SUCCESS; Sample Size: 65 Observations) Independent Variables Coefficient Std. Error t-Statistic p-value CONSTANT -27.54 ** 12.69 -2.17 0.03 AGE 0.65 *** 0.11 5.91 0.00 MALE 4.46 * 2.42 1.84 0.07 MARRIED -3.72 3.27 -1.14 0.26 EDUCATION -0.67 * 0.39 -1.73 0.09 PURCHASE -7.26 * 3.89 -1.87 0.07 ORIGINATE -4.87 3.03 -1.61 0.11 SOLO 8.45 ** 4.19 2.02 0.05 PARTNER -1.09 5.74 -0.19 0.85 INTENSITY 3.21 ** 1.46 2.20 0.03 SACRIFICE 3.59 2.47 1.45 0.15 R-squared 0.52 Mean 12.95 dependent variable Adjusted R- 0.43 S.D. 11.32 squared dependent variable S.E. of 8.57 Akaike info 7.29 regression criterion Sum squared 3965.95 Schwarz 7.66 residual criterion Log likelihood -225.84 F-statistic 5.76 Durbin- 1.99 Prob 0.00 Watson (F-statistic) statistic In Table 16, note that *, **, *** indicate that coefficients are statistically significant at the 10%, 5%, and 1% level. Regression analysis is processed using the latest version of E-views.