Effects of a state subsidy programme in the small business sector: The case of the emerging market

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Timothy Olaniyi Aluko ORCID logo, Nicolaas Booyse

https://doi.org/10.22495/jgrv11i1siart5

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Abstract

This paper examines the effects of the state subsidy programme on the beneficiary’s firm operating status in the small business sector. The state subsidy is a matching grant-funded programme to black small businesses in South Africa to improve their competitiveness within the mainstream economy. A cross-sectional time-series secondary dataset of 945 beneficiary firms from 2012 to 2016 was utilised in the study. Data were analysed using a descriptive, multiple comparison Scheffé test and binary logistic regression technique estimated at 95% confidence intervals level of significance. The findings revealed that the state subsidy programme is a pivotal contributor to the black firm’s operating status; firms in the services and construction sectors show significant improvement in their operating status and had about twice the odds of being in operation compared to firms in the manufacturing and agricultural sectors. This study will assist state programme administrators and policymakers to realise the importance of the services sector, which emerged as a major driver of innovation in the growth of local economies (Kazekami, 2017). Neglecting the sector might be counterproductive in case of a similar programme in the future. This study is limited by scope as only one state subsidy programme in South Africa was studied which may not be enough to make an inference.

Keywords: State Subsidy, Operating Status, Performance, Small Business, Services Sector

Authors’ individual contribution: Conceptualization — T.O.A.; Methodology — T.O.A.; Formal Analysis — T.O.A.; Investigation — T.O.A.; Writing — Review & Editing — T.O.A.; Supervision — N.B.; Funding Acquisition — N.B.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G3, O2, H42, J18

Received: 18.09.2021
Accepted: 15.02.2022
Published online: 18.02.2022

How to cite this paper: Aluko, T. O., & Booyse, N. (2022). Effects of a state subsidy programme in the small business sector: The case of the emerging market [Special issue]. Journal of Governance & Regulation, 11(1), 244–251. https://doi.org/10.22495/jgrv11i1siart5