Survival of the Smallest: A Study of Microenterprises in Haryana, India

  - Millennial Asia

Small business is vital for the health of an economy. Therefore, research into the factors governing the success of the small business is important. However, there is paucity of research in this area. Specifically, there are insufficient studies of the factors contributing to the sustainability of microbusinesses among the poor in emerging economies. While lamentable, this situation is inherently logical: microbusinesses are in the informal sector and written records are, therefore, unavailable. There is no simple proxy. Necessity entrepreneurs are not Schumpeterian innovators. The factors that govern the success of survival-focused entrepreneurs are not clear. Crucially, we do not know why some survival entrepreneurs survive and others do not. The primary objective of this study is to derive the factors helpful for the survival of enterprises in context of a developing economy.

Indeed, the research on survival entrepreneurs in developed countries may not be applicable to emerging country survival entrepreneurs. It has been observed that business survival depends on institutional environmental variables, for example, political stability, whereas business success will increase with task environmental variables, for example, skilled employees. What is true in one institutional environment may not be true in another. For example, micro-investors may be able to invest in microenterprise in France because there are microenterprises that are incorporated and can receive share capital, but survival firms in the informal sector in developing countries are not incorporated and little is known about them. Therefore, our primary survey of 222 micro-entrepreneurs in Haryana, India, adds to the few studies that delve into the success factors of microbusinesses in context of a developing economy.

The terms microenterprise and microbusiness have been used interchangeably and infer the same meaning. The activities of microbusiness enterprises, that is, micro, small and medium enterprises (MSMEs), in India fall within the purview of the MSMED Act of 2006. The basis of classification is initial investment in plant and machinery, with an initial investment ceiling of US$20,000 and US$50,000 for services and manufacturing enterprise, respectively. MSME share of GDP, manufacturing output and exports have been reported as 8 per cent, 45 per cent and 40 per cent, respectively, for the year 2015–2016 (Ministry of Micro, Small and Medium Enterprises [MSME], 2016). The Economic Survey (2018) makes a distinction between formal and informal sectors broadly on five parameters. The first and foremost basis of this difference is the existence of formal contract between employer and employee. The second parameter of difference is nature of work, that is, regular worker vs. casual worker or salaried worker vs. self-employed or casual. The third parameter of difference is registration of the firm with any branch of the government, wherein the employee/worker has been working. The fourth parameter is the record of tax payment by the firm and the last one is the provision of social security to the employee/worker. Within this, the informal sector exists, which encompasses a business segment where all monetary transactions are not disclosed to the government to undertake tax liabilities/benefit and to avoid labour law implementation despite operating the business with legal goods/services. Thus, the informal enterprises sector in India consists of all unincorporated private enterprises engaged in production of goods and services which are owned by individuals or households on a proprietary or partnership basis with the engagement of fewer than ten workers. The business-related activities of these enterprises are not regulated under any legal provision and have been in operation without maintaining any regular accounts.


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