Culture,business environment and SMEs' profitability: Evidence from European Countries |
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| Institution: | 1. Department of Economics, Stony Brook University, Stony Brook, USA;2. The Interdisciplinary Center, Herzliya, Israel;3. School of Mathematical Sciences, Tel Aviv University, Israel;1. Technological Institute of Sonora (Mexico), Faculty of Economic and Administrative Sciences, Mexico;2. University of the Valle (Colombia), Faculty of Administration Sciences, Colombia;3. Université de Rennes 1 (France), Centre de Recherche en Economie et Management (CREM), France;1. Rutgers Business School – Newark and New Brunswick, 1 Washington Park, Rm 1095, Newark, 07102, NJ, USA;2. Kemmy Business School, University of Limerick, Limerick, Ireland;1. Department of Accounting, Feng Chia University, No.100, Wenhwa Road, Seatwen, Taichung 40724, Taiwan, ROC;2. Department of Accounting, National University of Singapore, 15 Kent Ridge Drive, Singapore 119245, Singapore |
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| Abstract: | This paper aims to examine whether and how, certain country-specific characteristics shape the profitability of SMEs. Using a large sample of around 40,000 firms operating in 25 EU countries over the period 2006–2014 we find that freedom from corruption, a better environment in terms of the conditions that could contribute to the ease of getting credit, and fewer government regulation related to the starting, operating, and closing a business, enhance profitability. The dimensions of national culture also play an important role. Our results show that individualism, masculinity, and long-term orientation have a positive impact on profitability, whereas power distance and uncertainty avoidance have the opposite effect. We also find that the magnitude of the impact of national culture on profitability depends on political stability and institutional quality. |
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| Keywords: | Profitability SMEs Culture Business environment L25 D73 |
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