Small firm behaviour in Sri Lanka

This paper investigates the behaviour of small firms in Sri Lanka using a c ountrywide cross-sectional survey. The 73 responding firms provide informat ion on whether certain variables: the firm's utilisation of assets; labour; technology; family savings; and access to bank financing, vary with four f irm-specific factors: industry; family ownership; size; and whether the fir m's manager was also an owner of the firm. Sampled small firms are mostly f amily owned and owner managed although a significant number of family owned firms are managed by non-family managers. Most firm's under-utilise assets , use existing rather than the latest technology, and are reliant upon fami ly savings. Statistical analysis provides evidence of significant cross-sec tional variation in small firm practice. The results are explained in terms of the cost of acquiring new technology, asymmetries and opacity in financ ial information, and the non-value maximising behaviour of firm owners who are also firm managers.