Cluster of Financial Boostrappers

The scores of the six factors were used as an input to the cluster analysis undertaken in a third stage of the analysis (using Ward´s method). Different cluster solutions were elaborated upon, ranging in number from 2 to 6. The cluster solution chosen comprises six clusters of small businesses. The six clusters´ mean values on each factor are presented in Table 5.

TABLE 5
Cluster Analysis (Six Cluster Solution)

 Cluster 1 Cluster 2 Cluster 3 Cluster 4 Cluster 5 Cluster 6 Factor Factor 1 -0.14 0.32 -0.35 -0.29 -0.24 2.44 Factor 2 -0.37 -0.47 0.15 1.22 -0.42 0.19 Factor 3 -0.11 2.07 -0.25 -0.01 -0.42 -0.58 Factor 4 0.8 -0.68 0.02 -0.36 -0.38 -0.33 Factor 5 0.52 -0.37 0.2 0.25 -0.96 0.67 Factor 6 -0.28 0.08 2.7 -0.3 -0.26 -0.18 Cluster size 82 25 21 52 65 17

Note :
Presented measures represent each cluster´s mean value on each factor. The factor scores are standardized, implying a mean of 0 and a standard deviation of 1. P< 0.01 in all cases

From the table can be seen that managers active in businesses belonging to Cluster 1 use different delaying measures (factor 4) to a relatively high extent, and are therefore labelled delaying bootstrappers. This cluster consists of 82 businesses most of them active in trade and the hotel/restaurant sector facing financial problems. The businesses are relatively large, in median 9 employees. These businesses operate with a small profit margin, and the managers state a need for further capital. The financial problems are exacerbated by the fact that the managers experience great problems in obtaining finance from banks. Therefore, much effort is put into the financial matters of the business.

Businesses in Cluster 2 use measures for joint utilization (factor 3) to a relatively high extent. Accordingly, these businesses are named relationship oriented bootstrappers. This cluster comprises 25 businesses, most of them active in small-scale industry located in the rural area (with fewer than 25,000 inhabitants). The major part of these businesses are mature, in terms of stage of development, rather small (in median 1 employee) private businesses and/or partnerships (few limited companies) in the agricultural sector. Using relationships seems to be natural for these managers, more or less a way of running the business. The businesses operate with a rather small profit margin, but do not have any major need for additional capital. Further, the managers experience no problems in obtaining additional finance from banks if needed.

Cluster 3 comprises 21 businesses using subsidies from public organizations (factor 6) to a relatively great extent. These businesses are called the subsidy bootstrappers. Most of these businesses are rather large (in median 16 employees) manufacturing limited companies in the expansion stage, characterized by a high growth in turnover during 1994 to 1996. In other words, this cluster comprises growing manufacturing businesses with a potential for increased employment. However, the expansion, and the hereby generated need for capital, can not be fully met by using internally generated funds, as the profit margin is small. These businesses are today rather indebted, by the use of overdraft facility and long term loans at the bank. Finally, it is interesting to note that the managers in these "subsidy bootstrapping" businesses are relatively young and own a relatively small share of the businesses.