85
Volume 25 | Numbe 01 | 2016 PRAGUE ECONOMIC PAPERS
THE FACTORS OF GROWTH OF SMALL
FAMILY BUSINESSES – AROBUST
ESTIMATION OF THE BEHAVIOURAL
CONSISTENCY IN PANEL DATA MODELS
Vladimí Benáček, E a1Michalíko á*
Abs ac
The pape quan i ies he ole o ac o s associa ed wi h he g ow h (o decline) o mic o and
small businesses in Eu opean economies. The g ow h is ela ed o he le els o employmen and
alue added in en e p ises, as well as, en ins i u ional a iables. We es he da a o consis ency o
beha iou al pa e ns in a ious coun ies and g adually emo e ou lying obse a ions ha can lead
o e oneous conclusions when using he classic es ima o s; his is aqui e unique app oach in panel
da a analysis. In he i s pa o his pape we ou line ahighly obus me hod o es ima ion based
on ixed e ec s and leas immed squa es (LTS). In i s second pa we apply his me hod on he
panel da a o 28 coun ies in 2002–2008 es ing o he hypo hesis ha mic o and small businesses
in Eu ope use di e en s a egies o hei g ow h. We un ase ies o econome ic es s whe e we
eg ess employmen and o al ne p oduc ion in mic o and small businesses on h ee economic
ac o s: g oss capi al e u ns, labou cos gaps in small ela i e o la ge en e p ises and GDP pe
capi a. In addi ion, we es he ole o 10 ins i u ional ac o s in he g ow h o amily businesses.
Keywo ds: amily business, obus es ima o , LTS, ixed e ec s
JEL Classi ica ion: C01, C23, C51, C82, F21, F40
1. In oduc ion
As a consequence o he wo ldwide inancial and economic c isis, he e is a enewed
ising in e es in he pe o mance o small and amily businesses which o many
esea che s and poli icians p esen a c ucial ehicle ha d i es upwa d mo emen s in bo h
employmen and compe i ion le els h oughou he wo ld’s economies. This esea ch is
a ollow-up o he analysis o Benáček, Michalíko á (2010), in which we assessed he
ole o economic and ins i u ional ac o s on he ise and decline o amily businesses
and applied hem o an analysis o da a conce ning mic o- and small businesses in 28
coun ies o Eu ope by means o panel da a o he yea s 2002–2008. We disco e ed ha
his speci ic da a on mic o- and small businesses in so many di e en coun ies did no
demons a e a homogenous pa e n o beha iou in i ms ha di e no only in sizes, bu
also as ega ds he a ious ins i u ional se ups ha also change o e ime. In his esea ch
*1 Vladimí Benáček, Cha les Uni e si y in P ague, FSV-Ins i u e o Economic S udies, P ague
(benacek @ s .cuni.cz);
E a Michalíko á, Facul y o Business and Managemen , B no Uni e si y o Technology, B no
(michaliko a@ olny.cz);
The au ho s a e g a e ul o he i nancial suppo o he G an Agency o he Czech Republic
No. P402/12/0982 and Resea ch P ojec o VUT in B no No. FP-S-15-2787 and Resea ch P ojec
o Ins i u ional De eloping P ojec o FP VUT in B no, No. IS 2014-04.
DOI: 10.18267/j.pep.538
86 Volume 25 | Numbe 01 | 2016PRAGUE ECONOMIC PAPERS
we ha e es ed he po en ial o such a he e ogenei y in he beha iou o small amily
businesses in a ious coun ies ha may be demons a ed by sepa a ing he o iginal panel
da a in o wo subpopula ions. Hence, we ha e concen a ed ou analysis on he echniques
o obus es ima ion.
In his pape , we apply a obus e sion o he classic wi hin-g oup es ima o on da a
o wo g oups o amily businesses. In Sec ion 2, we desc ibe and apply a obus e sion
o he classic wi hin-g oup es ima o on da a o he wo g oups o amily businesses. In
Sec ion 3, we desc ibe he ole o amily businesses a he p esen ime. In Sec ion 4, we
apply a obus e sion o he wi hin-g oup es ima o on economic da a ela ing o amily
businesses and we examine how employmen and ne p oduc ion in amily businesses
depend on wo ela i e indica o s ep esen ing bene i s and cos s in small (o mic o) and
la ge en e p ises. Addi ional explana o y a iables include he GDP pe capi a and en
ins i u ional a iables. Sec ion 5 summa izes ou indings.
2. Robus Es ima o s and Robus Es ima ion o Panel Da a Models
Classic me hods o es ima ion ely hea ily on assump ions, which a e o en no me
in p ac ice. Un o una ely, some alues o a iables o en happen o all a away om
o he obse a ions in he sample. These disc epan alues migh be he esul o epo ing
e o s, di e en me hodologies used by he epo e s o idiosync a icies in he beha iou
o obse ed agen s. The isk o incidence o all hese dis u bances is qui e high in panel
da a in which he ime and he geog aphic discon inui y may lead o da a inconsis ency.
Obse a ions o he la e so a e e e ed o as ou lie s. They a e o en de i ed by e o s
and omissions in he da a collec ion p ocess. Howe e , ou lie s can also be gene a ed
when epo e s mix up wo o mo e subpopula ions o da a ha ep esen agen s, whose
beha iou is mu ually inconsis en . An example o his occu ence is he case when he
analys s p esume ha mic o businesses (such as sel -employed pe sons) and businesses
up o 50 employees ollow iden ical s a egies o hei g ow h in all s udied coun ies,
i espec i e o he a ying ins i u ional a angemen s.
These kinds o inconsis encies which occu when ca ying ou obse a ions a e
ou main conce n. Small amily businesses a e subjec o speci ic ci cums ances ha
inc ease he unce ain y and inconsis ency o hei epo ed da a. Thei accoun ancy need
no always be done by p o essionals and hus mo e open o e o s and omissions. Thei
ue p oduc ion, employmen and cos s can be igged due o much easie ax e asion.
Repo ing o s a is ical o ices is i egula , elying on andom (o en non- ep esen a i e)
samples and he eedback on i s accu acy is limi ed as well, a ying by coun ies. Thus,
a obus echnique o hei es ima ion is a necessa y and adequa e app oach in o de o
a oid he aps and pi alls ha esul om using biased da a.
Since obus es ima ion has no been he s anda d echnique o analysis in his
kind o panel da a, we will i s desc ibe ou app oach o da a p ocessing in which he
cen al issue ocuses on ou lie s. The e m obus es ima o deno es an es ima o ha is
no s ongly a ec ed by ou lie s. I means ha he main aim is o i a eg ession o he
dominan in e ela ions in he da a and hen disco e he ou lie s o u u e ea men .
As a measu e o obus ness we should conside he exis ence o he b eakdown poin o
es ima o s. Gene ally speaking, he b eakdown poin o an es ima o is de ined as he
smalles ac ion o an ou lying obse a ion ha causes a b eakdown o he es ima o
(Rousseeuw, Le oy, 1987).
87
Volume 25 | Numbe 01 | 2016 PRAGUE ECONOMIC PAPERS
Many s a is icians belie e ha ou lie s can be iden i ied simply by eye h ough he
use o g aphs. Howe e , i is di icul o diagnose ou lie s by eye, especially in he case
o panel da a because la ge panels o coun ies, companies, o o he agen s may con ain
a ypical obse a ions o g oss e o s subjec o a mul i ude o exogenous a iables.
Un o una ely, econome ics is limi ed o a scan amoun o li e a u e desc ibing obus
me hods o panel da a1. We will y o ind a obus al e na i e o he wi hin-g oup
es ima o 2 which can be a ec ed by he p esence o ou lying obse a ions. The b eakdown
poin is he measu e o obus ness and he leas immed squa es is he es ima o wi h high
b eakdown poin . We will ocus on he second applicable 50% b eakdown poin es ima o
– he leas immed squa es – LTS (Rousseeuw, 1983). We will desc ibe a high b eakdown
poin es ima o o he ixed e ec s panel da a model based on LTS as an es ima ion
p ocedu e, which is less sensi i e o he p esence o abe an obse a ions.
We conside he ollowing o m o he ixed e ec s linea panel da a model:
yi = αi + xi ΄ β + εi , 1, , ; 1, ,iN T
(1)
whe e i deno es he c oss-sec ion dimension (numbe o coun ies) and deno es he ime-
se ies dimension (numbe o yea s). xi is a column ec o o explana o y a iables wi h
dimension K x 1 while β is a K x 1 ec o o eg ession pa ame e s. αi is he unobse able
ime-in a ian indi idual ixed e ec s and εi is he e o e ms o dis u bance e ms,
unco ela ed h ough ime and h ough c oss-sec ions.
The classical wi hin-g oup es ima o s o ixed e ec panel da a models is based on
cen e ing wi hin e e y ime-se ies:
1
1
ˆ
T
i i i
yy y
T


1
1
ˆ
T
i i i
xx x
T

,
and hen he basic o m o he ixed e ec s panel da a models, desc ibed in (1), can be
exp essed as:
ˆ
ˆˆ ,
i i i
yx


 1, , ; 1, ,iN T
(2)
whe e
1
1
ˆ
T
i i i
T
 


, and he ixed e ec s αi ha e disappea ed om he model (2) by
he cen e ing ope a ion. Then we can eg ess ˆi
yon ˆi
x by OLS and we will ge wi hin-
g oup es ima o deno ed by ˆWG

. O cou se, ixed e ec s pa ame e s can be es ima ed
as well (Bal agi, 1998). Cen e ing has a c ucial ad an age because i eno mously educes
he numbe o pa ame e s.
In o de o ge a obus e sion o his es ima o we ha e o cen e he ime se ies obus ly
and hen a obus eg ession will be applied o he cen e ed da a. The ime-se ies mus be
cen e ed by emo ing he median ins ead o mean because he mean is la gely dis o ed by
ou lie s since he median is known o be min-max obus (Hube , 1981). We will ge :
()
i i i
yymedy
, () () ()
jj
i i i
xx medx

whe e 1, , ; 1, ,iN T
and j = 1, ..., K. x(j)i deno es he j- h explana o y a iable
measu ed a ime in he i- h ime-se ies. The numbe o pa ame e s is educed as in he
1 Kalina (2012) desc ibed obus e sion o ins umen al a iables wi h applica ion o economic da a.
2 Since ou panel con ain all coun ies o in e es , he i xed e ec s model is mo e app op ia e han
a andom e ec s models o ou da ase .
88 Volume 25 | Numbe 01 | 2016PRAGUE ECONOMIC PAPERS
case o de-meaning. This implies ha compu a ion ime o obus eg ession algo i hm
emains easible (B ama i and C oux, 2004). The e o e, we can un a obus es ima o
(and eg ess i
y
on i
x
 o iden i y he ou lie s). Fo his pu pose we will apply he LTS
es ima o on cen e ed da a. LTS es ima o is de ined as ˆLTS

which minimizes he sum
o he smalles h squa ed esiduals:
2
()
1
ˆa g min ( )
h
LTS k k i
k
yx






whe e
22 2 2
(1) (2) ( ) ( )
()() () ()
kk kk kk k kk NT
yx yx yx yx
  
  

   

a e o de ed squa ed esiduals (Rousseeuw, 1983). The alue 1 ≤ h ≤ NT is a imming
alue. As men ioned be o e, his es ima o has a b eakdown poin a aining 50%.
A de aul choice can be h=[3NT/4] o h=[4NT/5], making i possible o cope wi h up
o 25% o ou lie s (o 20%, espec i ely) o we can selec h su icien ly small o each
an accep able coe icien o de e mina ion o he model. The ad an ages o he LTS
es ima o a e i s p ope ies: he LTS es ima o in i s basic e sion is eg ession, scale, and
a ine equi a ian (Rousseeuw, 1983). Howe e , due o he nonlinea i y o he cen e ing
ans o ma ion by he median βLTS is only scale equi a ian (B ama i and C oux, 2004).
We can use his algo i hm di ec ly: cen e ing he da a by median, using leas immed
squa es and disco e ing he ou lie s. Then we can wo k wi h he es o he da a and
eg ess dependen a iable on o he eg esso s (Benáček, Víšek, 2000; Ve a di, Wagne ,
2010). Howe e , i can also be employed in a di e en way by using ou lie s only as
a diagnos ic ool o ecognize “suspicious” beha iou o an agen . In o he wo ds, we can
d op ou whole g oups o agen s ( i ms, coun ies, e c.) whe e mos o he obse a ions
a e ea ma ked as ou lie s and wo k wi h he es o obse a ions (Michalíko á, Galeo i,
2010). In his pape we will iden i y he ou lie s in a cen e ed model, sepa a e hem, and
hen use he LTS on he es o da a.
This echnique makes i possible o ecognize ou lie s which a e no able o be
de ec ed by eye o by means o adi ional eg ession diagnos ics. Once, we ha e sepa a ed
he obse a ions (conside ed o be ou lie s), we can moni o i his subpopula ion o da a
is subjec o ce ain sys emic egula i y. We may, o example, be p ima ily in e es ed i
a g oup o coun ies beha e in an idiosync a ic way. Secondly, we may be wa ching i
he emo al o ou lie s b ings some imp o emen in he es ima ed eg ession model. Fo
example, we may moni o he dec ease in he esidual sum o squa es o he inc ease in
he coe icien o de e mina ion. Fu he mo e we may moni o he s abili y o es ima ed
eg ession coe icien s in he case o inc easing h. Las , bu no leas , we wonde i p- alues
o es ima ed eg esso s a e imp o ing as he ou lie s a e d opped ou om he model.
3. The Fac o s o G ow h o Family Businesses
3.1 Family business and small and medium-sized en e p ises
In he ea ly 1990s, amily-led en e p ises we e supposed o ge a new boos as p o-ma ke
o ces iumphed. This was an e o in judgemen . Au hen ic small-scale amily busi-
nesses we e o en squeezed ou o he ma ke a ena by he apid de elopmen by su i -
ing, o me s a e-owned en e p ises which we e con e ed o co po a ions owned o mally
by housands o mino s ock-owne s and a na ow class o inside s wi h dominan s akes
89
Volume 25 | Numbe 01 | 2016 PRAGUE ECONOMIC PAPERS
(Benáček, 2006). The pa alleled opening-up o egional and in e na ional make s due
o globalisa ion o e ed new windows o oppo uni y o la ge en e p ises domina ed by
manage s. In he la e 1990s, he loodga es o expansiona y mone a y policies opened up
and go e nmen deb g ew. Simul aneously, en ep eneu ship in he majo i y o ad anced
capi alis coun ies led by la ge inancial ins i u ions u ned ei he o asse s, whose p ices
could ise in a icious ci cle o supply and demand, o o an alignmen wi h public admini-
s a o s, in which achie ing social e iciency was an objec i e ha could be sac i iced,
which was a mo e simila o he de elopmen in pos -Communis coun ies. Bo h bubbles
inally bu s , and subsequen ly d o e he economies in bo h de eloped and pos -Commu-
nis coun ies in o a las ing ecession (Lawson, Zimko á, 2009). Rising axes, as a conse-
quence o in e en ions, disc imina ed agains small amily businesses. The expec a ion
is ha a u na ound om he p esen ecession should come om an inc ease in domes ic
agg ega e spending and employmen in small and medium-sized en e p ises (SME) domi-
na ed by amily businesses, which in almos e e y coun y ha e been he main sou ce o
employmen and job c ea ion, bu no he engine o spending dynamics. The main objec-
i e o his pape is o add ess he ques ion: which economic and ins i u ional ac o s a e
associa ed wi h he de elopmen and g ow h o amily businesses?
A i m is conside ed o be a amily business i a membe o one o mo e amilies is
i s con olling owne ; hus, implying a manage ial commi men owa d he businesses’
o e all pe o mance. I was gene ally belie ed ha e en hough SME could p o ide he
majo i y o jobs, hei ole in he p og ess o economies was only o subsidia y impo ance
(Schumpe e , 1942). Fo a long ime, he dominan p esump ion was ha employmen in
small businesses was nega i ely ela ed o GDP pe capi a, causing a bias owa d la ge
en e p ises (Lucas, 1978; Acs e al., 1994). We hink ha hese p esump ions should be
e-conside ed because hey a e no consis en wi h empi ical obse a ions. Acs, Aud e sch
(1988) eached he conclusion ha inno a ions we e nega i ely ela ed o concen a ion and
ha inno a ion inc eased wi h he esea ch and de elopmen (R&D) expendi u es a a less
han p opo ional a e. Symeonidis (1996) concluded his ex ensi e su ey o empi ical
li e a u e on he alleged ad an ages o la ge o e small i ms wi h he inding ha “li e a u e
su ey sugges s ha he e seems o be li le empi ical suppo o he iew ha la ge i m size
o high concen a ion a e ac o s gene ally conduci e o a highe le el o inno a i e ac i i y”
(p. 33). The ou b eak o he wo ld inancial and economic c isis in 2008 b ough a new wa e
o a en ion o ac s e u ing he alidi y o he so-called Schumpe e ian hypo hesis ega ding
he demise o small en ep eneu ship (Schumpe e , 1942: pp.134–143).
Mic o and small businesses (i.e. MB and SB) co e 98.7% o all EU en e p ises.
In addi ion, app oxima ely 50% o MB in he EU a e o med by he sel -employed.
The e o e, in he es o his s udy we shall use mic o and small businesses as a p oxy
ca ego y o amily businesses. We will hus dis inguish be ween wo ypes o amily
businesses (deno ed FB): hose anging in size om sel -employed indi iduals o
en e p ises wi h 10 employees (i.e. MB) and en e p ises wi h 10 o 50 employees
(i.e. SB). I is necessa y o no e ha we will wo k wi hin he non- inancial p i a e sec o
only, hus we will analyse an incomple e pa o he na ional economies o Eu ope.
The wo ld economic c isis slashed he EU expo s o goods and se ices om
p e ious annual g ow h a es close o 6% o a me e 1.6% in 2008 and a decline o 14%
in 2009 (Eu os a , 2010). This se e ely damaged he us in he g ow h leade ship o la ge
businesses. Go e nmen de ici spending compensa ed pa ially o he missing expo s,

90 Volume 25 | Numbe 01 | 2016PRAGUE ECONOMIC PAPERS
bu he e was no o he segmen o economy capable o illing he looming gap in bo h
agg ega e demand and e iciency. Wi h he excep ion o Poland, he p i a e sec o was
no able o ac as an agen o sus ained g ow h. Ne e heless, SME ha e sa ed many
Eu opean economies om d as ic alls in employmen .
The expec ed mild economic eco e y o he GDP g ow h o 1.6% in he EU-27 in 2011,
d i en mainly by expo s, will equi e ha a complemen a y esou ce is s a ed up o subs i u e
o he ading and ine icien go e nmen de ici spending. We p edic such a esou ce o exis
due o he e i al o au hen ic en ep eneu ship ha used o be ep esen ed by FB. Tha e i al
should ac ually be aced back o 1948–1965, when in e nally d i en de elopmen in FB was
s ill dominan and had no ye been c owded ou by globalized businesses.
3.2 Fac o s a ou able o ad e se o amily business de elopmen
We will y o es a hypo hesis ha he de elopmen o SB could ha e deepe mic oeco-
nomic ounda ions. We aced hem o wage and p o i s uc u es, and o he compe i ion
wi h la ge en e p ises which p essed “ inge compe i o s” o espond wi h s a egies idio-
sync a ic o smallness ha allowed hem o wi hs and he compe i i e ace.
The ollowing heo e ical assump ions will be used as guidelines o hypo heses in
ou empi ical es s:
a) The objec i e unc ion o en ep eneu s is p o i maximiza ion. The maximiza ion
o g oss capi al e u ns pe alue added (KR/VA), whe e capi al K is de ined by educing
o al labou compensa ion (W) om he ne income o en e p ises (VA)3, is s ill a plausible
c i e ion because i ep esen s a social e iciency o capi al alloca ed among businesses o
a ious scales. We could se up a hypo hesis ha coun ies wi h highe KR/VA in any g oup
o FB could also see he s onge de elopmen o FB. I he space o K=VA-W inc eases
(e.g. as a esul o inno a ion o lowe ansac ion cos s), i will induce he en ep eneu s
o expand hei employmen in o de o bols e he sales and ne ou pu . This will esul in
an inc ease o labou income W and a aise in he wage a es pe labou W/L. Ne e heless,
a e y high KR/VA may also imply a sho age o capi al (unde capi aliza ion and/o oo
expensi e capi al). Because o his high capi al e u ns could ac as an impedimen o FB
g ow h, i.e. KR/VA could be nega i ely ela ed o g ow h in employmen .
b) FB de elopmen is no au onomous in isola ion wi hin hei own SME ca ego ies
because an FB’s ela i e pe o mance is-a- is la ge businesses (LB) ma e s signi ican ly.
Small FB compe e wi h LB o limi ed na ionally a ailable economic esou ces. We will
es whe he (lowe ) wages pe wo ke in FB ela ed o (highe ) wages pe wo ke in
LB a e associa ed wi h highe g ow h in FB. Thus, we can aise a hypo hesis o empi ical
es ing o FB de elopmen assuming ha LFB is a nega i e unc ion o ela i e wage a es
(WFB/LFB)/(WLB/LLB). I is an ou come o an assump ion ha LB and FB di e in hei mic o-
echnologies, which a e d i en by di e en ela i e ac o p ices, i.e. di e en a ios o
wage a es pe capi al en al a es. Thus he isoquan s in FB end o be capi al-sa ing; while
in LB hey a e labou -sa ing, which in he end makes he o me ne job c ea o s.
c) Ano he hypo hesis abou he de e mining ac o s o g ow h in FB ha we will es
conce ns he deg ee o gene al economic de elopmen ep esen ed by GDP pe capi a.
We canno hen e i y whe he ising p ospe i y is a ac o ha enhances o es ains
he de elopmen o FB.
3 Ne income (i.e. he alue added) o en e p ises is de i ned as di e ence be ween sales S and ma e ial
inpu s M.
91
Volume 25 | Numbe 01 | 2016 PRAGUE ECONOMIC PAPERS
d) Con empo a y economic hinking s esses he impo ance o ins i u ions, as
adminis a i e bodies ha de ine he “ ules o he game” o incen i es whose pu pose
is o educe unce ain ies and ansac ion cos s in business in e ac ion (S igli z, 1998).
Na ional ins i u ions a e impo an ac o s ha may ha e bo h posi i e and nega i e
impac s on businesses o di e en sizes.
Thus, h ee economic indica o s ela ed o he in e nal a es o g oss capi al e u ns
(KRFB/VAFB), ela i e wages a es (WFB/LFB)/(WLB/LLB), and GDP pe capi a, plus en
ins i u ional indica o s ha e been selec ed as causal ac o s ela ed o he g ow h o FB,
i.e. he MB and SB.
4. Es ima ion o Reg ession Models
4.1 The e iew o a iables and models o empi ical es ing
In his chap e we will empi ically es he ex en o which he g ow h in FB in 28 Eu o-
pean coun ies was in luenced du ing 2002–2008 by he h ee economic ac o s desc ibed
abo e and by he isks o bene i s associa ed wi h en coun y-speci ic and ime-speci ic
socio-poli ical ins i u ions. Small Business Ac Fac shee s (Eu os a and DG En e p ises
and Indus y); GDP s a is ics o he Wo ld Bank; and Da abase on he Economic F ee-
doms (The He i age Founda ion) we e used as he sou ces o he da a. The obus e sion
o he ixed e ec panel da a model will be used o he es ima ion o coe icien s.
Dependen a iables
LFB
i : Employmen in FB (i.e. MB o SB) quan i ied by he numbe o wo ke s in coun y
i and yea .
VAFB
i : The alue o ne ou pu (i.e. he alue added) in MB o SB in coun y i and yea .
Economic explana o y a iables
KRFB
i /VAFB
i : G oss capi al e u ns in analysed businesses pe alue added
LCFB
i /LCLB
i : Rela i e a es o ull labou cos s (LC=W/L), i.e. o al labou compensa ion
pe wo ke in FB di ided by simila compensa ion in LB
GDPi /PCi : GDP pe capi a in pu chasing powe pa i y.
Ins i u ional explana o y a iables
Reguli : Business eedom ( egula ion) index
T adei : T ade eedom ( ade ba ie s) index
Mone i : Mone a y eedom (in la ion and p ice con ol) index
Go e ni : F eedom om go e nmen (public spending) index
Fiscali : Fiscal eedom ( axa ion) index
P opRi : P ope y igh s index
In es i : In es men eedom (capi al con ols) index
Financi : Financial eedom (p i a e banking secu i y) index
Co up i : F eedom om co up ion (pe cep ion) index
Labou i : Labou eedom index
92 Volume 25 | Numbe 01 | 2016PRAGUE ECONOMIC PAPERS
N.B.: Ins i u ional a iables a e he p oxies o economic “ eedoms” anging in hei
alues <0, 100>. The highe is he pe cen age index, he mo e libe al and p o-ma ke he
local ins i u ional a angemen .
The selec ion o 28 coun ies o Eu ope is highly ep esen a i e, co e ing nea ly all
o he EU and po en ial accession coun ies (see Table 1).
Table 1 | Lis o Coun ies Included in he Analysis
ALL Ad anced Eu ope (14) + Eme ging Eu ope (14)
Ad anced Eu ope (14) Aus ia, Denma k, Finland, F ance, Ge many, G eece, I eland,
I aly, he Ne he lands, No way, Po ugal, Spain, Sweden, he Uni ed Kingdom
Eme ging Eu ope (14) Albania, Bulga ia, C oa ia, Cyp us, he Czech Republic, Es onia, Hunga y,
La ia, Li huania, Mal a, Poland, Romania, Slo akia, Slo enia
Sou ce: Own classi ica ion
The i s wo explana o y a iables a e ele an o decision-making in en e p ises.
G oss capi al e u ns a e closely ela ed o p o i s and p o i s o m he basis o in es men s
in o physical capi al and R&D. High p o i s also mo i a e FB owne s o inc ease he scope
o hei p oduc ion and ake ad an age o gains due o economies o scale, which should
imply g ow h. The easons o ha ing a high sha e o g oss capi al e u ns on he alue added
can be: a) Inc easing labou p oduc i i y wi hou compensa ing wo ke s a a p opo ionally
highe wage a e would imply high p o i s; b) Dec easing he ma ginal p oduc o labou
by o e s a ing ha is e lec ed in disp opo ionally lowe a e age wages in he en e p ise
would imply a high cos o capi al ha bu dens he i m; c) Hi ing and paying labou
ou side o icial con ac s, which slashes o al labou cos s. Fo di e en easons ha d i e
KR/VA upwa d, we canno be su e whe he his a iable is ela ed o FB g ow h nega i ely
o posi i ely. The second a iable LCFB/LCLB es s he ele ance o low ( epo ed) wages
and o he gap in FB wage a es ailing behind LB. We can expec o obse e a wide ange
o c oss-coun y di e ences in his ela ionship. Wha ma e s is whe he a highe labou
cos gap in FB is a d i ing ac o o a es ain upon FB g ow h. Once again we canno
be su e a p io i abou he na u e o i s sign. The hi d a iable poin s o a gene al end
o de elopmen . Ou only mac oeconomic indica o is subs an ia ed on he heo e ical
g ounds ha we e elabo a ed by Lucas (1978), and ollowed by Acs e al. (1994) and
To ini (2005). We should expec i s sign o be posi i e.
The cen al idea behind he choice o ins i u ional a iables is ha ins i u ions a e
man-concei ed ac o s ha ha e a wo-p onged impac on businesses: as public goods o
as public bads. The depa u e om la gely mac oeconomic o mic oeconomic explana o y
a iables ep esen ing incen i es o policy ins umen s, has ecen ly become a s anda d
ool o econome ic analysis (Blau 1987; Robson, W en 1999; Da is, Hen ekson 1999).
All ou ins i u ional a iables a e based on hei pe cei ed quali ies ha allow ma ke and
en ep eneu ial eedom, once he coe icien is posi i e. E en hough we can assume ha
mo e libe al economies g ow as e , some s udies o SME ha e e ealed ha e y small
businesses a e no posi i ely ela ed o all indica o s o a ee ma ke economy (To ini, 2005).
The es consis o ou models ela ed o mic o and small en e p ises, whose
spe-ci ica ions a e as ollows:
93
Volume 25 | Numbe 01 | 2016 PRAGUE ECONOMIC PAPERS
Lmic o
i = α1 KR/VAmic o
i + α 2 LCmic o
i /LCla ge
i + α 3 GDPi /PCi + α x INSTIT a
i x+εi
Lsmall
i = β1 KR/VAsmall
i + β 2 LCsmall
i /LCla ge
i + β 3 GDPi /PCi + β x INSTIT a
i x+εi
VAmic o
i = γ1 KR/VAmic o
i + γ 2 LCmic o
i /LCla ge
i +γ 3 GDPi /PCi + γ x INSTIT a
i x+εi
VAsmall
i = δ1 KR/VAsmall
i + δ 2 LCsmall
i /LCla ge
i + δ 3 GDPi /PCi + δ x INSTIT a
i x+εi
whe e i = 1, …, 28 a e coun ies, = 2002, …, 2008 a e he obse ed yea s,
x = {4, 5, …, 13} indica es he espec i e numbe o ins i u ional a iable 4 h ough 13.
4.2 Commen s on he econome ic esul s
In Tables 2 and 3 we epo he esul s o ou eg essions as speci ied abo e4. In each
eg ession, we included h ee economic explana o y a iables, as well as, some ele an
ins i u ional explana o y a iables. The non-signi ican ins i u ional a iables we e
d opped om he model. In he i s column o each eg ession, we epo esul s o
classic ixed e ec s model. In he ollowing columns, we epo he esul s o LTS
eg ession, applied on he da a cen e ed by median, wi h ega d o a di e en choice o h.
Table 2 | Robus Fixed E ec s Reg essions - Models 1 and 2
Model 1 2
Dependen
Va iables Lmic o
i Lsmall
i
h% - 95% 85% 75% - 95% 85% 75%
Economic
KR/VAmic o
i
-0.080*
(0.043)
-0.329***
(0.053)
-0.210***
(0.047)
0.009
(0.017)
KR/VAsmall
i
-0.164***
(0.021)
-0.157***
(0.015)
-0.166***
(0.010)
-0.005
(0.051)
LCmic o/la ge
i
-0.346***
(0.062)
-0.398***
(0.051)
-0.318***
(0.039)
-0.157***
(0.025)
LCsmall/la ge
i
-0.330***
(0.091)
-0.167**
(0.074)
-0.016***
(0.054)
0.016
(0.049)
GDP/PCi
0.509***
(0.039)
0.419***
(0.029)
0.405***
(0.021)
0.377***
(0.018)
0.541***
(0.035)
0.496***
(0.026)
0.407***
(0.003)
0.423***
(0.017)
Ins i u ional
MONET 0.003**
(0.001)
0.0003
(0.001)
-0.001*
(0.001)
-0.003***
(0.001)
FINANC 0.001**
(0.001)
0.002***
(0.001)
0.0006**
(0.0003)
0.0004**
(0.002)
0.001**
(0.001)
0.001**
(0.0004)
0.001**
(0.0003)
0.001
(0.001)
LABOUR -0.001
(0.001)
-0.001
(0.001)
-0.002**
(0.001)
-0.001***
(0.0004)
Numbe o obs. 196 187 167 147 196 187 167 147
Adj. R2 0.525 0.603 0.700 0.772 0.634 0.748 0.751 0.837
No es: The alue o h% deno es how many obse a ions we e included in o da a se . * signi ican a 10%; ** sig-
ni ican a 5%; *** signi ican a 1%. S anda d e o s a e in b acke s. Fixed e ec s a e no epo ed. Va iance in-
la ion ac o does no sugges any p oblems wi h collinea i y in eg essions. Dependen a iables and GDP pe
capi a a e in loga i hms. B eusch – Pagan / Cook Weisbe g does no ejec he hypo hesis o homoscedas ici y.
Sou ce: Own calcula ion (S a a, Ma lab)
4 All es ima es we e ob ained by S a a and Ma lab