Human capital and growth in Romanian small firms

Abstract

PurposeThe objective of this paper is to examine the impact that certain human capital variables have over employment growth of small firms in Romania.Design/methodology/approachThe human capital components considered in this paper are education, previous work experience, employment motivations, the presence of entrepreneurial teams, and the presence of family members in the firm. To attain the objective of the paper we carry out a regression analysis using a rich data set of 635 Romanian firms for the year 2006.FindingsConsistent with different employment growth measures, the empirical findings indicate that human capital matters for explaining small firms' employment growth. Previous work experience, the presence of entrepreneurial teams and the proportion of family members working in the business appear as determinant components. In addition, the results indicate that an active involvement of the entrepreneur in managerial tasks increases the intensity with which the entrepreneur makes use of his/her human capital, and this leads to higher employment growth rates.Research limitations/implicationsThe main limitation of the paper lies in the absence of a longitudinal analysis that could have given a greater perspective to the study. In order to enrich the analysis, future research should attempt to further explore the impact of human capital components on small firms' growth in other transition economies.Originality/valueThe paper increases the literature dealing with the determinants of small firms' growth in transition economies. The results of the paper also have important implications for academics and support institutions in Romania, as they suggest that, in the Romanian context, small firms may obtain significant benefits from support policies more oriented towards the formation of human capital.