How different are necessity and opportunity firms? Evidence from a quantile analysis of the Colombian microenterprise sector

This paper explores the relationship between start-up motivation and business performance, by looking into the extent to which start-up motivation (necessity vs. opportunity) influences several business performance indicators. Using the Colombian Small and Microenterprise sector public dataset, we analyse the factors associated with microenterprise performance using a quantile regression approach to model the distribution of different measures of business performance. Among the findings, we present evidence of statistically significant differences among quantiles confirming the heterogeneity of start-up motivation and other firm characteristics of the firms operating in the sector. The results show that start-up motivation is a factor that explains the difference in the distribution of the business performance indicators under study. This findings contributes to the debate around the connection between entrepreneurship and growth in the context of developing economies. Even though firms motivated by necessity show a lower level of profit, in particular for the firms that perform relatively poorly, this is not necessarily associated with null or diminishing growth rates. Necessity is not necessarily a deterrent for growth. It needs to be understood as a means to support families that otherwise would have no income-generating opportunities.

Keywords: Firm performance, entrepreneurship, public policy, new firms, enterprise policy

JEL Classification: L25, L26, J48, M13, L53