Survival of micro-enterprises: Does public seed financing work?

Abstract

We estimated a hazard function for the duration of micro-enterprises after they had been subject to a public seed financing programme in southern Chile. The programme aims to encourage innovative new firms and uses sponsors to support and follow-up on the benefiting firms. Using an administrative database, specially recovered for this purpose, we were able to follow a sample of 76 firms throughout a period of 9 years. This article offers new evidence about how a firm promotion subsidy programme works in a medium developed country. The results indicate that the amount of funds granted increases survival time. In contrast, the type of support organization does not seem to affect the duration of the micro-enterprises, while the sponsors' individual characteristics do seem to have an impact on survival. Thus, the public institution should periodically assess the sponsors' performance as part of the programme evaluation.

Keywords:

• firm survival
• micro-enterprises
• seed financing
• hazard model

JEL Classification:

• H25
• L25