The success factors for SMEs: Empirical evidence

Abstract

This paper empirically analyzes the success factors for SMEs. Particularly, the paper intends to analyze if firm age, human resource costs, debt, venture capital funding, investment in innovation and productivity are success factors for SMEs. The effects were tested using static and dynamic panel data, on a data set of 200 Portuguese SMEs. The use of dynamic panel data is important in order to control for: endogeneity; time-invariant characteristics; possible collinearity between independent variables; effects from possible omission of independent variables; elimination of non-observable individual effects; and, the correct estimation of the relationship between the dependent variable in the previous and current periods. Our results reveal a positive impact on success of: human resource costs; investments in innovation; productivity; and, venture capital funding. We also confirm the negative impact of firm age and debt. Also, the results show evidence of persistence in success for the case of one of the success proxies used.