Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience)
Досліджено вплив соціального капітілу на фінансування та прибутковість підприємств малого бізнесу. Дані для дослідження було зібрано в 2005—2006 рр. в Ізраїлі методом анкетування. Вибірка респондентів побудована на основі комбінації методів Convenient Sample и Snowball Sample і містить відповіді 496...
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irk-123456789-239472013-02-13T03:29:52Z Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) Kushnirovich, N.A. Міжнародна та регіональна економіка Досліджено вплив соціального капітілу на фінансування та прибутковість підприємств малого бізнесу. Дані для дослідження було зібрано в 2005—2006 рр. в Ізраїлі методом анкетування. Вибірка респондентів побудована на основі комбінації методів Convenient Sample и Snowball Sample і містить відповіді 496 власників підприємств малого бізнесу. Ключові слова: соціальний капітал, фінансування, прибутковість, підприємства малого бізнесу. Исследовано влияние социального капитала на финансирование и прибыльность предприятий малого бизнеса. Данные для исследования были собраны в 2005 - 2006 гг. в Израиле методом анкетирования. Выборка респондентов построена на основе комбинации методов Convenient Sample и Snowball Sample и содержит ответы 496 владельцев предприятий малого бизнеса. Ключевые слова: социальный капитал, финансирование, прибыльность, предприятия малого бизнеса. This study investigates how social capital affects the financial funding and profitability of small businesses. Data were collected in Israel in 2005—2006. Combining convenient and snowball samples, 496 entrepreneurs who have operating businesses were surveyed via a questionnaire. Key words: social capital, financial funding, profitability, small businesses. 2010 Article Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) / N.A. Kushnirovich // Економічний вісник Донбасу. — 2010. — № 2. — С. 80-83. — Бібліогр.: 22 назв. — англ. 1817-3772 http://dspace.nbuv.gov.ua/handle/123456789/23947 7.014.5 en Економічний вісник Донбасу Інститут економіки промисловості НАН України |
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Міжнародна та регіональна економіка Міжнародна та регіональна економіка |
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Міжнародна та регіональна економіка Міжнародна та регіональна економіка Kushnirovich, N.A. Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) Економічний вісник Донбасу |
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Досліджено вплив соціального капітілу на фінансування та прибутковість підприємств малого бізнесу. Дані для дослідження було зібрано в 2005—2006 рр. в Ізраїлі методом анкетування. Вибірка респондентів побудована на основі комбінації методів Convenient Sample и Snowball Sample і містить відповіді 496 власників підприємств малого бізнесу. Ключові слова: соціальний капітал, фінансування, прибутковість, підприємства малого бізнесу. |
| format |
Article |
| author |
Kushnirovich, N.A. |
| author_facet |
Kushnirovich, N.A. |
| author_sort |
Kushnirovich, N.A. |
| title |
Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) |
| title_short |
Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) |
| title_full |
Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) |
| title_fullStr |
Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) |
| title_full_unstemmed |
Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) |
| title_sort |
social capital and its influence on the financing and profitability of smallscale enterprises (israel experience) |
| publisher |
Інститут економіки промисловості НАН України |
| publishDate |
2010 |
| topic_facet |
Міжнародна та регіональна економіка |
| url |
http://dspace.nbuv.gov.ua/handle/123456789/23947 |
| citation_txt |
Social capital and its influence on the financing and profitability of smallscale enterprises (Israel experience) / N.A. Kushnirovich // Економічний вісник Донбасу. — 2010. — № 2. — С. 80-83. — Бібліогр.: 22 назв. — англ. |
| series |
Економічний вісник Донбасу |
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2025-07-03T03:25:54Z |
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| fulltext |
80
Економічний вісник Донбасу № 2 (20), 2010
Introduction. Understanding the impact of social
capital on the entrepreneur-ship process is an area of
considerable interest among scientists. A broad range of
studies are devoted to this problem (Adler and Kwon,
2002; Coleman 1988; Fukuyama, 1995; Griffith and
Harvey, 2004; Kostova and Roth, 2003; Leana and Van
Buren, 1999; Paldam and Svendsen, 2000). The social
capital of a firm can be regarded as a resource that
reflects the character of the firm’s social relations and
influences business capital and businesses performance
(Hunt, 2000; Kostova and Roth, 2003). The tighter the
links to communities are, the stronger the effect of the
social capital (Honig 1997; Walker et al. 1997).
The purpose of this study is to investigate how social
capital affects the financial funding and profitability of
small businesses.
Theoretical framework. Social capital is defined in
the literature as an asset that is engendered via social
relations and can be employed to facilitate action and enlarge
one’s profit (Griffith and Harvey, 2004). Social capital
enables individuals and firms to cooperate with one another
to achieve objectives (Coleman, 1988). Thus, a firm’s social
capital can be explained in terms of business cooperation.
Griffith and Harvey (2004) defined two groups of
social capital: capital at the individual and firm levels.
Social capital at the individual level is presented as the
social capital of the firm’s manager. Firm level social
capital represents relationships in the business network
that include customers, business partners and
governmental agencies. Business networks are a set of
interconnected organizations or a set of connected
relationships (Peng and Luo, 2000). Birley (1985) used a
loose classification of entrepreneurial networks that
comprises banks, accountants, local governments,
business contacts, family and personal friends. Developing
business networks provide a base of positive word-of-
mouth resulting in enhanced business profitability
(Reichheld and Teal, 1996).
Entrepreneurs require resources such as
information, capital, skills, and labor to start business
activities. They can complement their resources by
accessing their contacts. Business social networks,
however, do not constitute the resources themselves but
rather represent the ability of the entrepreneurs to mobilize
these resources on demand (Portes, 1995). The classic
resources in economic theory are capital and labor. Capital
accessibility is the entrepreneur’s perceptions concerned
with networking to gain capital funds (Adam, 2003).
More resources help to achieve higher performance
(Tesfom, 2006). Perreault et al. (2003) pointed to the
existence of a link between business performance and
social capital in specific forms. According to Griffith and
Harvey (2004), utilizing the firm’s social capital can
provide performance gains. This allows businesses to
not only be more profitable in the short run, but also in
the long run (O’Brien and Jones, 1995). One’s social
network is viewed as a crucial factor for business
success (Pearce, 2005; Redding, 1991).
On the other hand, reliance on social support
networks in a restricted community can be associated
with lower profits and higher failure rates (Bates, 1994).
Studies conducted in Israel on immigrant entrepreneurs
found that they rely only to a minor extent upon business
networking, but the social capital immigrants acquire
through business ownership improves the odds that their
businesses will survive (Lerner and Khavul, 2003).
In this study a firm’s social capital is regarded as
business networks that include private businesses,
governmental agencies, business associations and self-
employed entrepreneurs. Correspondingly, I delineated
four groups of business cooperation: cooperation with
private businesses from the same sector, cooperation with
private businesses from other sectors, cooperation with
governmental institutes, and cooperation with others
(business associations, donors, business advisors and self-
employed entrepreneurs etc.). The study focuses on the
impact of social capital in terms of business cooperation
on financing small businesses’ business growth.
Method. Data collection — data for the study were
collected in Israel in 2005—2006. The target research
population consisted of entrepreneurs who owned
operating businesses at the time of the survey. Based on
a combination of convenience and snowball samples, 496
business owners from all regions of Israel and all business
spheres were surveyed. All the businesses under
investigation were small businesses according to the
definition of the Israel Small and Medium Enterprises
Authority (2006).
УДК 37.014.5
N. A. Kushnirovich,
Ph.D, The Ruppin Academic center,
Israel
SOCIAL CAPITAL AND ITS INFLUENCE ON THE FINANCING
AND PROFITABILITY OF SMALL-SCALE ENTERPRISES
(ISRAEL EXPERIENCE)
N. A. Kushnirovich
81
Економічний вісник Донбасу № 2 (20), 2010
Measures. Dependent variables are scope of
investment, share of debt in business capital and
businesses profitability. Scope of start-up capital was
categorized on a scale of 1 to 4: “1” = up to 5,000 NIS;
“2” = 5,001—25,000 NIS; “3” = 25,001—100,000 NIS;
“4” = more than 100,001 NIS, with $1 = 4,0 NIS. Share
of debt in business capital is continuous variables
measured in percentage. Businesses profitabi-lity was
categorized on a scale of 1 to 3: “1” = income does not
cover expenses; “2” = income covers expenses; “3” =
income exceeds expenses.
Independent variables are dichotomy variables (“0”
= does cooperate, “1” = does not cooperate): cooperation
with private business from the same sector, cooperation
with private business from other sectors, cooperation
with governmental institutes, cooperation with others
(cooperation with business associations, business
advisors, self-employed entrepreneurs etc.); and a dummy
variable for business type (trade, professional services
whereas personal services is a reference category).
Sample characteristics. The study revealed significant
differences in characteristics between entrepreneurs who
cooperate and those who do not (table 1).
Entrepreneurs who do cooperate are younger, more
educated, have more entrepreneurial and managerial
experience. Men are more likely to cooperate than women.
Entrepreneurs who are engaged in professional services
and production are more likely to cooperate than
entrepreneurs engaged in trade and personal services.
The study did not find differences between the businesses
as to business type and duration of business activity and
number of employed workers.
Results. In order to investigate how social capital
affects the financial funding and profitability of small
businesses, I conducted a regression analysis. The
dependent variables were the scope of investment, share
of debt in business capital and profitability of business.
The range of independent variables covers
cooperation of businesses with other businesses and
organizations and business type. Because only 6,6—10,8%
of entrepreneurs engaged in production, I examined only
three types of businesses: trade, professional services and
personal services, with the last as a reference category.
Table 2 presents the results of the regression model.
The analysis indicates that cooperation significantly
influences the funds of businesses (all the regressions
are significant at the level 0,05). 37,3% of the variance
of the scope of investment, 34,5% of the share of debt
in business capital and 45,8% of the profitability are
explained by the business cooperation.
Table 1
Characteristics of entrepreneurs and their businesses
Characteristics Cooperate Do not
cooperate
Test Sig.
Characteristics of entrepreneurs
Gender: 100% 100% χ2 = 8,832 0,003
1. Male 70,2 57,0
2. Female 29,8 43,0
Age 38,6 40,5 t = -1,953 0,050
Education: 100% 100% χ2 = 10,755 0,013
1. Up to and including a matriculation
certificate
16,3 25,0
2. Vocational studies 25,9 31,8
3. Undergraduate degree 33,1 25,4
4. Graduate or doctoral degree 24,7 17,8
Former entrepreneurial experience 55,1% 41,2% χ2 = 8,996 0,003
Former managerial experience 57,4% 46,0% χ2 =6,170 0,013
Years of work experience before becoming
entrepreneur
12,7 15,1 t = -2,477 0,014
Characteristics of businesses
Type of business 100% 100% χ2 =20,507 0,000
Production 10,8 6,6
Trade 30,6 43,0
Personal services 36,2 41,2
Professional services 22,4 9,2
Duration of business activity, years 5,9 5,6 NS
Number of employed workers 4,5 3,5 NS
N. A. Kushnirovich
82
Економічний вісник Донбасу № 2 (20), 2010
The scope of investment in businesses that cooperate
with other businesses from the same sector is larger than
that of those that do not. Cooperation with private
businesses from other sectors and cooperation with
business associations, donors, self-employed business
advisors etc. significantly influence the share of debt in
business capital. Cooperation with governmental institutes
significantly increases the profitability of business.
The study found that business type also significantly
affects financial funds and business profitability:
businesses engaged in trade need more investments and
businesses engaged in professional services are more
profitable than others.
Conclusions. The study revealed that business
social capital in terms of business cooperation
significantly influences financial funding and profitability
of businesses. The scope of investment in businesses
that cooperate with other businesses from the same sector
is larger than that of those that do not. One possible
explanation is that large businesses with large-scale
investments need more cooperation, and therefore, their
managers are more likely to utilize businesses ties.
Factors influencing the share of debt in business
capital are cooperation with private businesses from
other sectors (such as suppliers, clients, financial and
credit organizations), and cooperation with business
associations, donors, business advisors, and self-
employed entrepreneurs. Close cooperation with all
these organizations broadens access to loans and trade
credit and, therefore, facilitates businesses’ mobilizing
of capital.
Nevertheless, only cooperation with governmental
institutes contributes to business profitability. This can
be explained by the fact that many governmental institutes
in Israel support entrepreneurs. Entrepreneurs can receive
all types of governmental support: training and advice,
financial support, and support for creating and maintaining
business ties. Designated loans on favorable terms and
other kinds of support are significant factors in a business’
profitability and viability.
In sum, the study revealed that social capital of
business in terms of cooperation with private businesses,
business associations, business advisors and self-
employed entrepreneurs facilitates mobilization of capital.
Nevertheless, only cooperation with governmental
institutes contributes to business profitability.
References
1. Adam J.D. Factors influencing migrant and local
entrepreneurial networking // Australasian Journal of
Business and Social Inquiry. — 2003. — No 1(3) // http:/
/www.scu.edu.au/ ajbsi/papers/vol1/adam.html.
2. Adler P.S. and Kwon S. W. Social Capital: Prospects
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Table 2
Regression results for financial funds and profitability of businesses
Scope of investment,
R2= 0,373**
(0,025)
Share of debt in business
capital,
R2=0,345*
(0,047)
Profitability of business,
R 2= 0,458***
(0,003) Independent variables
Beta t-statistics Beta t-statistics Beta t-statistics
Cooperation with private
businesses from the same sector
0,349
(0,058) 1,974* 0,283
(0,1528) 1,455 0,198
(0,228) 1,230
Cooperation with private
businesses from other sectors
0,119
(0,458) 0,752 0,485
(0,014) 2,648** 0,126
(0,395) 0,864
Cooperation with governmental
institutes
0,294
(0,125) 0,119 0,126
(0,549) 0,607 -0,518
(0,005) -3,048***
Cooperation with others
(business associations, business
advisors and self-employed
entrepreneurs etc.)
-0,092
(0,568) -0,577 -0,358
(0,053) -2,028* -0,163
(0,273) -1,116
Dummy 1 (trade) 0,416
(0,025) 2,369*** -0,088
(0,672) -0,428 0,007
(0,965) 0,045
Dummy 2 (professional
services)
-0,043
(0,815) -0,236 -0,117
(0,598) -0,534 0,331
(0,060) 1,951*
(Constant) 0,019 -0,931 2,007
Notes: *** Sig.<0,005; ** Sig.<0,05; * Sig. < 0,10.
N. A. Kushnirovich
83
Економічний вісник Донбасу № 2 (20), 2010
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Кушнірович Н. О. Соціальний капітал та його
вплив на фінансування та прибутковість
підприємств малого бізнесу (досвід Ізраїлю)
Досліджено вплив соціального капітілу на фінан-
сування та прибутковість підприємств малого бізнесу.
Дані для дослідження було зібрано в 2005—2006 рр.
в Ізраїлі методом анкетування. Вибірка респондентів
побудована на основі комбінації методів Convenient
Sample и Snowball Sample і містить відповіді 496 влас-
ників підприємств малого бізнесу.
Ключові слова: соціальний капітал, фінансуван-
ня, прибутковість, підприємства малого бізнесу.
Кушнирович Н. А. Социальный капитал и
его влияние на финансирование и прибыльность
предприятий малого бизнеса (опыт Израиля)
Исследовано влияние социального капитала на фи-
нансирование и прибыльность предприятий малого биз-
неса. Данные для исследования были собраны в 2005—
2006 гг. в Израиле методом анкетирования. Выборка рес-
пондентов построена на основе комбинации методов
Convenient Sample и Snowball Sample и содержит ответы
496 владельцев предприятий малого бизнеса.
Ключевые слова: социальный капитал, финанси-
рование, прибыльность, предприятия малого бизнеса.
Kushnirovich N. A. Social capital and its
influence on the financing and profitability of small-
scale enterprises (Israel experience)
This study investigates how social capital affects
the financial funding and profitability of small businesses.
Data were collected in Israel in 2005—2006. Combining
convenient and snowball samples, 496 entrepreneurs who
have operating businesses were surveyed via a
questionnaire.
Key words: social capital, financial funding,
profitability, small businesses.
Стаття надійшла до редакції 12.04.2010
Прийнято до друку 30.04.2010
N. A. Kushnirovich
|