Economic and Financial Impacts on MSME Survival in Colombia (2016–2023): Accounting for Unobserved Heterogeneity
Keywords:
small and medium-sized enterprises, business survival, survival analysis, econometric models, economic statistics, microeconomics, business management, financial management, COVID-19, economic crisis, Colombia, economic developmentMain Article Content
Introduction
The survival of micro, small and medium-sized enterprises (MSMEs) is a central indicator of economic and social well-being, given its impact on employment, productivity, and business dynamics, particularly in emerging economies such as Colombia.
Objective
This study aims to determine the economic and financial variables that impact the survival of Colombian MSMEs between 2016 and 2023, with explicit treatment of unobserved heterogeneity and identification of the structural change induced by the COVID-19 pandemic.
Methodology
A discrete-time proportional hazards model with gamma-distributed unobserved heterogeneity was estimated, complemented by the non-parametric Kaplan-Meier estimator, on an unbalanced firm-year panel of 161,085 observations corresponding to 29,737 unique firms. Two multiplicative interactions between firm-level financial covariates and the 2020 indicator were incorporated to capture the structural change induced by the pandemic.
Results
The aggregate six-year survival rate reaches 73.7%, with the highest sectoral rates in real estate and agriculture (around 81%) and the lowest in transportation and human health (below 60%). Profitability and firm liquidity reduce the hazard of exit, while short-term liabilities and firm indebtedness raise it. During 2020, the effect of firm indebtedness on the hazard was approximately three times stronger than in the rest of the period, while liquidity gained relative importance as a protective mechanism.
Conclusions
Sectoral and territorial conditions emerge as substantive determinants of survival, and the design of financial support during macroeconomic shocks should account for the pre-shock leverage position of beneficiaries.
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