After an overview of the role of family businesses in present economies, we work out theoretical vantage points for assessing the factors associated with the growth (or decline) of micro and small businesses in European economies. Based on data for 28 countries in 2002-2008 we run a series of econometric tests where we analyse the evolution of shares of businesses up to 50 employees on total employment and on total net production (value added). We regress these two relative indicators on the measure of gross capital returns in analysed businesses per their value added (as a proxy for profitability and investment) and on the relative gap between labour costs (wages) in small and large enterprises (as a proxy for cost advantages in order to gain competitiveness). In addition, we test the impact of GDP per capita on the growth of family businesses and the importance of a set of ten institutional variables that represent government policies relevant for the viability of small entrepreneurship.
Our tests conclude that ten out of 13 determining factors are found statistically significant for the development of family businesses. It is shown not only that the viability of micro businesses depends on different strategies in decision making than in small enterprises, but also that large differences exist between achieving the objectives of employment growth and output growth. The latter is most pronounced in the impacts of government policies. Thus, micro and small businesses apparently require different policies and managerial strategies for sustaining their role as job creators and drivers of GDP growth.
