Microenterprise performance amidst environmental turbulence and resource scarcity: an integrated capital approach

Abstract

PurposeMicroenterprises in emerging economies are known to operate in turbulent and resource-scarce environments. We test our hypothesis that a more comprehensive “Integrated Capital-Based Model” (ICBM) is needed when explaining the performance of microenterprises in such an environment. The model combines traditionally researched financial, human and social capital with more recently emphasized psychological and cognitive capital, providing greater explanatory power than models using only the traditional types of capital.Design/methodology/approachWe use a pooled linear regression to analyze an existing survey of more than 900 independent business owners who were interviewed seven times between 2008 and 2012 in the Accra and Tema marketplaces in Ghana. We measure the performance of microenterprises using three dependent variables (revenue, profits, and productivity). We contrast the explanatory power of ICBM models against the more traditional models.FindingsThe ICBM has significantly higher levels of explanatory power over the traditional models in examining the performance of these microenterprises. These results highlight the importance of psychological and cognitive capital in emerging economies.Research limitations/implicationsWe advocate for a more comprehensive view of capital as shown in our ICBM. However, the data were gathered only in an urban setting, which limits the generalizability to rural parts of emerging economies.Practical implicationsThese findings suggest the utility of government and appropriate agencies finding ways to enhance the level of psychological and cognitive capital of microenterprise owners.Originality/valueThis paper's originality stems from hypothesizing and empirically confirming the higher predictive efficacy of ICBM against more traditionally researched capital sources.