A long-term mortality analysis of subsidized firms in rural areas: an empirical study in the Portuguese Alentejo region

Abstract

Studies have demonstrated that public policies to support private firms' investment have the ability to promote entrepreneurship, but the sustainability of subsidized firms has not often been analysed. This paper aims to examine this dimension specifically through evaluating the mortality of subsidized firms in the long-term. The analysis focuses on a case study of the LEADER+ Programme in the Alentejo region of Portugal. With this purpose, the paper examines the activity status (active or not active) of 154 private, rural, for-profit firms in Alentejo that had received a subsidy to support investment between 2002 and 2008 under the LEADER+ Programme. The methodology is based on binary choice models in order to study the probability of these firms still being active.The explanatory variables used are the following: (1) the characteristics of entrepreneurs and managers' strategic decisions, (2) firm profile and characteristics, (3) regional economic environment. Data assessment showed that the cumulative mortality rate of firms on 31st December 2013 is over 20 %.Interpretation of the regression model revealed that the probability of firms' survival increases with higher investment, firm age and regional business concentration, whereas the number of applications made by firms has a negative impact on their survival. So it seems that for subsidized firms the amount of investment is as important as its frequency.

Principal Component Analysis of the LEADER Approach (2007–2013) in South Western Europe (Extremadura and Alentejo)

“…In the case of Alentejo, one of the study regions of this paper, there are not many studies about the impact of LEADER Approach, but on Portugal's rural development policy in general. For this reason, the works of Santos et al [29] and Neto et al [30] are significant, in which they analyzed the subsided firm's survival and the impact of local networks of public policies such as LEADER for entrepreneurships and innovation.…”

LEADER 2007–2013: An innovation dependent on local and national institutional arrangements? Some European illustrations

“…In the “best performing” LAGs, these new modes of shared decision‐making and self‐regulation between actors will tend to be more fine‐tuned over time by institutionalizing a way of working together, with the appearance of new standards of behaviour and co‐operation. These new standards tend to affect the sustainability of funded projects (Santos, Neto, & Serrano, ).…”

Design and implementation of the Local Development Strategy: a case study of Polish and Italian Local Action Groups in 2007-2013

“…Because Leader adopts a place-based approach, and LAGs prepare for the programme's implementation based on an analysis of local needs and with special regard to the specificity of territory in which they operate, it can be assumed that the policy tasks and measures planned by the LAGs will be well suited to the needs of the local community. Centred on a case study in the Leader Programme in the Alentejo region of Portugal, Santos et al (2016) examined the longterm survival rate of firms subsidised by public policy. Using binary choice models, they showed that the cumulative mortality rate of subsidised local firms in this region was over 20 per cent.…”