Small and medium-sized enterprises (SMEs) importance and significant contributions to countries’ gross domestic product (GDP), employment, and value creation are widely acknowledged. However, few studies in SME research ...
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Small and medium-sized enterprises (SMEs) importance and significant contributions to countries’ gross domestic product (GDP), employment, and value creation are widely acknowledged. However, few studies in SME research center on microstructures alone, despite being the most prominent business class in any country and being, by far, the best representation of SMEs (P. Cook 2001; Jaouen and Torrès 2008; J.S. Ramalho and da Silva 2009; St-Pierre, Julien, and Morin 2010; St-Pierre 2018). Furthermore, most SME academic studies concern higher-income countries, particularly the United States, the United Kingdom, the European Union, and a few others (see P. Cook 2001; Elyasiani and Goldberg 2004).The literature shows that the classic finance theory is unsuited to the complexity and realities of SMEs, and they need their financial theory (Pettit and Singer 1985; P. Hutchinson 1999; Abdulsaleh and Worthington 2013). Moreover, most research in the nascent field of entrepreneurial finance is performed under positivist views of science and quantitative methodologies (St-Pierre and Fadil 2011; 2016; St-Pierre 2018).This thesis aims to contribute to filling these knowledge gaps guided by a constructivist research paradigm and performing an exploratory naturalistic inquiry of ten (10) microenterprises in the Dominican Republic. The objective is to identify the key elements so that microenterprises can access finance, one of their main development obstacles. It uses a novel conceptual framework with a particular Latin American interest and mobilizes theories that have never been used before in the context studied: Norton’s theory of managerial choice (1991) and the law of proximity by Moles and Rohmer (1978). Furthermore, seven (7) proximities are studied, which are an adaptation of the original proposition made by Torrès (2011). These are hierarchical, spacial, patrimonial, information systems, relational, temporal, and economic proximity.The discussion and results allow us to make the following four main conclusions:First, owner-managers play a central role in the microenterprises’ management and financing decisions.Second, microenterprise financing sources are limited. They mainly rely on self-financing from the owner-manager set of resources or the business cash generation capacity, proximity capital, and commercial banks’ debt financing. Therefore, owner-managers are the creators of their financing opportunities, where they prioritize strategies to generate internal sources of funds first and continue, only if necessary, with the external ones. Furthermore, owner-manager financing sources and access strategies differ depending on the enterprise’s objective. Evidence shows that owner-managers savings and proximity relationships are essential for creating the business. Building and keeping a good trajectory, being proactive, and having strict cash flow management control are critical when operating the business. Last, controlling liquidity, setting clear performance goals, and proximity capital are crucial for growth.Third, noteworthy findings indicate that the mixture of proximities studied is vital to micro-business financing access. However, at the same time, owner-managers proximity preferences influence their financing decisions limiting their funding access and enterprise development and productivity. We call this the proximity vicious cycle of microfinancing. Overall, only hierarchical and relational proximity can do both: (1) unlock financing access and (2) be preferred highly by owner-managers when making financing decisions.Last, additional elements worth considering to obtain funds are the business profitability, pitch, plan, team, formality, products, and services.
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