Financial literacy, role models, and micro-enterprise performance in the informal economy

Pontus Engström, Alexander McKelvie

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

This article analyses how financial literacy and role models contribute to explaining the performance of micro-enterprises in the informal economy. Grounded in human capital reasoning and social learning theory, we argue that financial literacy and personal knowledge of role models lead to improved firm performance. We test our hypotheses on a unique dataset of 739 micro-enterprises in Ecuador. We find that financial literacy is an important predictor of financial performance but not growth, and the use of role models predicts return on assets but not other performance metrics. Our results have implications for future work on micro-enterprises and the nature of the human and social capital of their founders.

Original languageEnglish (US)
Pages (from-to)855-875
Number of pages21
JournalInternational Small Business Journal:Researching Entrepreneurship.Researching Entrepreneurship
Volume35
Issue number7
DOIs
StatePublished - Nov 1 2017

    Fingerprint

Keywords

  • financial literacy
  • informal economy
  • micro-enterprise performance
  • role models

ASJC Scopus subject areas

  • Business and International Management

Cite this