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The Influence of Institutions on Variation in Innovativeness of Small Businesses and Occupational Structure: A Case Study in Sri Lanka

Author:

W. A. Upananda

Wayamba University of Sri Lanka, LK
About W. A.
Department of Banking and Finance
Faculty of Business Studies and Finance
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Abstract

Growth of the Sri Lankan economy in the last three decades, according to published data, is uneven or spurious. Even though internal and external shocks have been cited as reasons for this uneven pattern, it is unlikely to explain huge continuous variation in economic growth in recent years. Also such variation may not supported by the statistics in occupational structure of the country. But in other countries such as India and European countries economic growth has strong relationship with the occupational structure. Economic growth of those countries is characterized by sequential transformation: agriculture dominated economies to industrial economies and then to services economies. Recent research in Europe suggests that economic growth is directly related to innovativeness of small businesses which claims larger share of employment and theorizes that relationship between economic development and entrepreneurship takes U-shape. Entrepreneurship of an economy is represented by the population engaged in productive self-employment. Researchers who support this argument argue that entrepreneurs move along a spectrum of innovativeness. At the lower end of this spectrum lies self-employment for earn a living while the other extreme is occupied by the innovative small businesses. These innovative businesses are operated by individuals who believe that they could earn better income from business than their wage employments. This paper argues that institutional environment could be the major factor which determines the position of small business on the innovativeness spectrum. The basis of this argument is the uncertainty of outcome engaging in small businesses due to uncertain institutional environment. Institutional environment, according to scholars, consisted of political and regulatory, economic and social cultural and technological institutions. Selecting 13 cases after screening 98 cases in different provinces across the country this study found that entrepreneurs who sought small businesses as an earn-a-living stay at the lower end of innovativeness spectrum while other end is occupied by individuals who believe his capability of earning more than a wage employment. In-depth studies of these 13 cases reveal that adopt survival strategies than growth strategies.


Wayamba Journal of Management 2013 4(1): 26-41
How to Cite: Upananda, W.A., (2016). The Influence of Institutions on Variation in Innovativeness of Small Businesses and Occupational Structure: A Case Study in Sri Lanka. Wayamba Journal of Management. 4(1), pp.26–41. DOI: http://doi.org/10.4038/wjm.v4i1.7455
Published on 21 Jan 2016.
Peer Reviewed

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