Question

Researchers have found that most of the small firm effect occurs

Option a) Due to external market conditions
Option b) As a result of internal management practices
Option c) During periods of economic downturns
Option d) Within the first five years of establishment

Answer 1

Most of the small firm effect occurs because of poor management, unproductive work, unexpected market shifts, and intense competition.

Step-by-step explanation:

Researchers have found that the majority of the small firm effect occurs due to a multiplicity of factors. In the context of a market-oriented economic system, sometimes business failures are a necessary outcome. Firms may exit the market for various reasons, including poor management, unproductive workers, sudden changes in demand and supply conditions, or intense competition, both domestic and foreign. Such exits often occur within the first few years of establishment, when firms are particularly vulnerable and still trying to navigate the market. The U.S. Small Business Administration's data shows that in the years 2009-2010, a significant proportion of business exits involved small firms with fewer than 20 employees, which indicates that the size of the firm plays a role in its sustainability and resilience to market changes.