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AIM OF THE STUDY

First, the aim of this study is to identify and to describe financial bootstrapping measures used by Swedish small business managers in order to meet the need for resources in their businesses. On the basis of this description the second aim is to identify clusters of small businesses and small business managers, differing from each other in the use of financial bootstrapping measures.

After this presentation concerning the fundamental point of departure and the aim of the study we turn to a discussion about the method used. The empirical results will then be presented in three sections. First, we describe the relative use of different financial bootstrapping measures in Swedish small businesses. Second, we present the results from a factor analysis resulting in six groups of bootstrapping measures. Third, on the basis of the six factors found we identify clusters of bootstrapping users. The paper is completed by a discussion regarding the
implications of the study.

METHOD

In this section the data gathering process, variables used in the study and the sample will be described.

Data gathering process

This study is the first empirical study in Sweden focusing on small business managers´ use of financial bootstrapping measures. Due to the lack of knowledge the research process was initiated with a number of unstructured interviews with accountants, small business managers, bank officials, researchers, officials at the Regional Development Fund and consultants. This as a way to generate an empirical frame of reference.

On the basis of the exploratory interviews and a literature study, 32 bootstrapping measures were identified. In order to examine the relative use of these measures among Swedish small businesses, a questionnaire was constructed. The questionnaire was mailed to the manager (CEO) in 900 Swedish small businesses (fewer than 100 employees), out of which 500 had 0 - 9 employees, 200 10 - 19 employees, 100 20 - 49 employees and finally 100 50 - 99 employees. The latter groups are overrepresented in the sample, in relation to the whole population of Swedish small businesses, in order to reach a fair number of businesses of all sizes. Businesses active in the financial and/or public sector were not included in the sample.

Thirty-one businesses claimed that they were not independent businesses, belonging to a group of businesses, and three questionnaires were returned by the postal services due to unknown addressee (it was assumed that these three businesses had gone out of business). These 34 businesses were excluded from the sample, implying an effective sample of 866 businesses. Out of these 544 businesses were not heard from, 31 businesses were found to be inactive and 29 businesses returned incomplete questionnaires. Accordingly, 262 usable questionnaires were returned (implying a total response rate of 30 per cent). A more detailed drop-out analysis is presented in Table 1.

TABLE 1
Drop-out analysis

Group Sample Excluded Effective Number of Response rate
      sample answers (in per cent)
0 - 9 500 5 495 151 31
           
19-Oct 200 4 196 63 32
           
20 - 49 100 8 92 26 28
           
50 - 99 100 17 83 22 27
           
Total 900 34 866 262 30

The analysis made in the study is based on descriptive statistics, factor analysis, cluster analysis and ANOVA-tests.

Variables used in the study

The operationalization of the independent variables, referring to the characteristics of the business respectively the manager, is shown in Appendix 1. Furthermore, the operationalization of the bootstrapping measures, dependent variables, is shown in Appendix 2. As can be seen, 21 of the 32 measures examined are measured using a five-point scale, while the other 11 are measured on a dichotomous scale. The use of dichotomous scaled variables, besides the five-point scale, is explained by the fact that it was not considered relevant to use the five-point scale in these cases. This mixture of scales has been considered in the analysis made (see further comments in relation to the results from the factor analysis).

Description of the sample

The age of the businesses examined in this study is in median 10 years, the youngest not yet 1 year and the oldest 106 years. The number of employees per business is in median 5, and the median turnover 5.3 million SEK (US$ 730.000). The technology intensity among the businesses does not seem to be very high, which is indicated by the fact that the median business only used 1 per cent of the turnover 1995 for R&D activities.

In terms of stage of development the businesses can be regarded as being rather mature, implying a stable turnover and market (valid for 60 per cent of the businesses). Some businesses (21 per cent) are in an expansion stage, characterized by a high growth in turnover and increasing investments. Fifteen per cent of the businesses are in the introduction stage, while only a few businesses (4 per cent) are considered to be in the decline stage. The growth rate among the businesses, measured as the increase in turnover between 1994 and 1996, is in median 18 per cent, and the profit margin per business in 1995 is in median 7 per cent.

The businesses in the study represent different lines of business. A large number of businesses operate within consulting/other services (21 per cent) or the manufacturing industry (19 per cent). Some 13 per cent are active in trade, 12 per cent in building & construction and 11 per cent in the agricultural sector. Also with respect to geographical location the businesses are well spread. Forty-three per cent of the businesses are active in communities with less than 25,000 inhabitants, 20 per cent in communities with between 25,000 and 75,000 inhabitants and 37 per cent in cities with more than 75,000 inhabitants. Most of the businesses are limited companies (70 per cent) or private businesses (23 per cent). Accordingly, only some 7 per cent are partnerships.

A majority (72 per cent) of the businesses have an overdraft facility granted by the bank. On the other hand, 60 per cent of the businesses do not have any long-term loans in the bank. In spite of this, the vast majority of the managers claim that they do not need any additional capital in order to finance the business´ operations. The results show that 34 per cent of the small business managers included in this study are in need of further capital. Furthermore, the managers were asked about how they experience their businesses´ chances of obtaining capital from the banks respectively new owners. A majority of the managers (66 per cent) consider the chances of obtaining finance from the banks as great or very great, whereas most managers (48 per cent) argue that their businesses´ chances of obtaining capital from a new owner are almost non-existent.

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