Firm-level determinants of job creation by SMEs: Swedish empirical evidence

Abstract

Purpose – Using a resource-based approach, the purpose of this paper is to examine the effects of the firm-level determinants financial leverage and liquidity on job creation at small and medium-sized enterprises (SMEs) in six industry sectors in Sweden. Design/methodology/approach – The generalized method of moments system model was used to analyse an extensive panel data set of 26,721 Swedish SMEs over the 2008-2011 period. Findings – The empirical results indicate that job creation is positively related to SMEs’ financial leverage and liquidity, and to their size and age. SMEs’ financial leverage and size are the most important firm-level determinants of job creation. Although there are differences between industry sectors, the results confirm the general pattern of the effect of financial leverage and liquidity on job creation. Research limitations/implications – Due to the importance of job creation for economic growth, the relationship between SMEs’ capital structure and job creation should be of interest to researchers, practitioners, and policymakers. In investigating the importance of financial leverage and liquidity to labour demand dynamics, this study analyses the firm-level factors that influence job creation by SMEs. Originality/value – Since there is limited empirical research focusing on this relationship at firm level in the context of SME, the current research aims at investigating the determinants of job creation at the firm level empirically.