Tue | Mar 26, 2019

Still-born, dying businesses worry researchers

Published:Wednesday | June 25, 2014 | 12:00 AM

Avia Collinder, Business Reporter

Researchers who conducted a survey for the Global Entrepreneurship Monitor 2013, found that among the primary causes for the discontinuation of businesses in Jamaica was inadequate financing.

At the same time, they suggested that more should be done to find out the reasons for the decline of established businesses, new businesses and the nascent entrepreneurial activity on the island.

The report, released yesterday, revealed that the ownership rate of established businesses more than 3.5 years old fell from 16.3 per cent in 2009 to 6.3 per cent in 2013. For new businesses up to 3.5 years old, the ownership rate declined from 10.6 per cent in 2009 to six per cent in 2013.

The Monitor said that nascent businesses - whereby individuals set up operations without paying salaries - exhibited a similarly decreasing trend, moving from a high of 13 per cent in 2009 to eight per cent in 2013, the lowest level since 2005, with the exception of 2010 when it declined to 5.5 per cent. Overall, the results for 2013 show that 76 per cent of discontinued businesses in Jamaica ceased operations altogether, the researchers stated.

The Global Entrepreneurship Monitor, started in 1997 by the London Business School and Babson College of the United Kingdom, is a comparative study of entrepreneurship. In Jamaica, the 2013 research was led by a team from the University of Technology.

The report said that Jamaica's discontinuation rate of 7.4 per cent for 2012 is among the highest in all 28 efficiency-driven eco-nomies, among which the island is categorised. An efficiency-driven economy is defined as one that has a gross domestic product per capita of between US$3,000 and US$8,999, and mineral exports as a fraction of total exports is less than 70 per cent.

INFORMATIVE ANALYSIS

The level of discontinuation "is not a favourable sign and an analysis of the reasons for business discontinuities should be very informative," the researchers state.

Data for the study is culled from two sources, an adult population survey which tracks the entrepreneurial attitudes, activity and aspirations of individuals, and a national expert survey.

The export survey monitors entrepreneurial framework conditions comprising nine aspects of a country's socio-economic contextual circumstances that are believed to have a significant impact on national entrepreneurship. Each participating economy conducts an adult population survey of a random representative sample of at least 2,000 adults aged 18 and over. Participating Caribbean countries in 2013 were Jamaica, Suriname and Trinidad and Tobago.

The Global Entrepreneurship Monitor business discontinuation rate measures the proportion of the working age population that discontinued businesses over the 12 months prior to the survey period through selling, shutting down or otherwise severing an owner/management entrepreneurship relationship with the business.

It said that the most cited reasons by Jamaicans for discontinuing businesses are that "business was not profitable", 34.6 per cent; "personal reasons", 26.5 per cent, and "problems getting finance", 13.6 per cent.

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