Success and resilience: Three essays analyzing small business behavior using multivariate estimation techniques

The following dissertation is comprised of three essays that focus on different aspects of family-business organization and behavior. All three essay use variations of multivariate estimation to account for binary endogenous variables. Essay 1: Family Business Responses to Household and Business Cash-flow Problems. Family businesses can experience cash flow problems in the household and in the business. This essay examines the effect of cash flow problems on resource transfers from the business to the household and finds that the family business responds to business cash flow problems by transferring fewer resources to the household, but household cash flow problems do not affect the amount of resources transferred from the business to the household. Additionally, an analysis of the competition for resources between the business and the household shows that business and household cash flow problems significantly increase tension levels. The analysis uses a bivariate ordered probit to show that resource tension and resource allocation are not endogenous. Essay 2: An Analysis of the Endogenous Relationship between Family-Business Structure, Synergistic Relationships, and Profit. We implement a multivariate recursive probit to analyze the effect interpersonal interaction between spouses has on the profitability of family businesses. To support this endeavor, we develop a theoretical model that accounts for the couples\u27 marginal productivities as well as the joint product of their interaction. The empirical analysis focuses on derived hypotheses regarding converging productivities and the decision to work jointly with a spouse. The results suggest that spouses self-select into a copreneurial business structure depending on how much experience they have and the level of satisfaction they feel in their interpersonal relationships. Additionally, the results show that copreneurial businesses that have high satisfaction are more likely to have higher profit than if they were specialized. Essay 3: Informal and Formal Financial Resources and Small Business Resilience to Disasters. This essay examines the impact of Hurricane Katrina on small business success and adaptation. Businesses with revenue levels that are higher than pre- Katrina levels are considered successful, in accordance with the Small Business Disaster Resilience Framework (Marshall and Schrank, 2014). Adaptation is characterized as changes to business infrastructure. A multivariate probit with sample selection allows the empirical analysis to account for the simultaneity of changes in revenue and post Hurricane Katrina adaptation as well as sample selection bias introduced through business demise. The results suggest the importance of pre-disaster mitigation and adaptation activities as well as the effectiveness of formal financial resources in supporting adaptation. The results show informal financial resources are largely ineffective