THE RELATIONSHIP OF ENTREPRENEURSHIP AND SMALL AND MEDIUM-SIZED ENTERPRISES (SMES) WITH COMPLEMENTARY CURRENCIES

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Publication

This paper investigates the relationship of entrepreneurship and Small and Medium-sized Enterprises (SMEs) with complementary currencies (CCs). CCs exist besides the national currency, mostly locally, and aim to enhance the business network, increase turnover and transactions and strengthen the local community. Due to this impact that a change in CCs could potentially have on the success or failure of businesses, a time-series analysis for the years 1989 until 2014 in Germany is performed, finding that a larger amount of complementary currencies might reduce business bankruptcies. The second part of the paper looks whether countries with a higher activity of SMEs and entrepreneurs are also more likely to implement such currency systems since both SMEs and entrepreneurs are supposed to benefit from the establishment of CCs. In a cross-section analysis of 42 countries, no significant impact of the SME and entrepreneurial activity on the amount of CCs within a country was found. This paper was limited to a relatively small size of observations. The findings of this paper imply that there might be a positive impact of CCs with regard to reducing business failures. However, countries with a larger SME and entrepreneurship activity do not seem to engage in more CCs. This raises the question whether the benefits of CCs are clear to businesses it aims to promote.