Prague Economic Papers 2016, 25(1):85-98 | DOI: 10.18267/j.pep.538

The Factors of Growth of Small Family Businesses - A Robust Estimation of the Behavioural Consistency in Panel Data Models

Vladimír Benáček1, Eva Michalíková2
1 Charles University in Prague, FSV-Institute of Economic Studies, Prague (benacekv@fsv.cuni.cz).
2 Faculty of Business and Management, Brno University of Technology, Brno (michalikova@volny.cz).

The paper quantifies the role of factors associated with the growth (or decline) of micro and small businesses in European economies. The growth is related to the levels of employment and value added in enterprises, as well as, ten institutional variables. We test the data for consistency of behavioural patterns in various countries and gradually remove outlying observations that can lead to erroneous conclusions when using the classic estimators; this is a quite unique approach in panel data analysis. In the first part of this paper we outline a highly robust method of estimation based on fixed effects and least trimmed squares (LTS). In its second part we apply this method on the panel data of 28 countries in 2002-2008 testing for the hypothesis that micro and small businesses in Europe use different strategies for their growth. We run a series of econometric tests where we regress employment and total net production in micro and small businesses on three economic factors: gross capital returns, labour cost gaps in small relative to large enterprises and GDP per capita. In addition, we test the role of 10 institutional factors in the growth of family businesses.

Keywords: robust estimator, LTS, fixed effects, family business
JEL classification: C01, C23, C51, C82, F21, F40

Published: January 1, 2016  Show citation

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Benáček, V., & Michalíková, E. (2016). The Factors of Growth of Small Family Businesses - A Robust Estimation of the Behavioural Consistency in Panel Data Models. Prague Economic Papers, 25(1), 85-98. doi: 10.18267/j.pep.538
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