The Location of Markets, Perceived Entrepreneurial Risk, and Start-Up Capital of Micro Rural Firms

The impact of the perceived entrepreneurial risk on the size of debt when liquidity constraints exist for new small- to medium-size enterprises in rural areas in southern Europe is the first topic examined.The second is the effect of the location of sales for these new ventures on the perceived entrepreneurial risk and in turn the impact on the equity of start-up capital. To examine these relationships, the simultaneous tobit model is utilized. Data used in the analysis, which provides a sample size of 203 firms, are from a survey done in the winter 1999 as part of a European Union research project funded by the FAIR6 program.The variables used include funds, firm size, sector, experience, education, sales in local area, marital status, parents' occupation, age, and where the entrepreneur has lived. Results show that entrepreneurs are likely to sell locally and form local partnerships that help reduce the perceived entrepreneurial risk and ensure that a large portion of the production will be placed into the local market. Further, the analysis confirmed that when the perceived entrepreneurial risk is low, the amount of external funds sought by entrepreneurs is low. Factors influencing this perceived entrepreneurial risk include the size and sector of the economic activity in combination with the experience of the entrepreneur and the location of the firm's sales.The creation and further expansion of rural development policies that aid businesses in non-financial ways will greatly aid those entrepreneurs in rural areas. (SRD)