URN:NBN:fi:tsv-oa7965 DOI: 10.11143/7965 On the importance of forest assets for micro-firm performance KATARINA HAUGEN AND URBAN LINDGREN Haugen, Katarina & Urban Lindgren (2013). On the importance of forest assets for micro-firm performance. Fennia 191: 2, pp. 122–142. ISSN 1798-5617. Business start-ups are on the increase, a development which is accompanied by hopes that these new firms will generate a potential for, e.g., local and regional development and a strengthening of local labour markets as well as the national economy. However, the long-term performance and viability of new firms are often rather poor. This research aims to analyse the importance of access to as- sets in the form of forest holdings for the performance of Swedish micro-firms. The analyses are based on official register data and fixed-effects panel regression modelling. A hypothesis is that a firm whose owner also possesses forest hold- ings is more viable thanks to the different resources (in the form of capital from logging or mortgaging, or non-pecuniary other values) the forest holdings may provide, and which possibly contribute to the firm’s economic stability and re- silience to economic fluctuations. From a general point of view, we find support for the hypothesis that forest assets positively and significantly influence firm performance in terms of earnings before interest and taxes (EBIT), but not in terms of value added. Access to forest assets is never detrimental to firm perfor- mance, although it does not have a significant positive effect in all sub-catego- ries of entrepreneurs based on different combinations of age, gender and firm type. Particularly, the economic performance of private firms run by older men benefits from resources stemming from their forest holdings. No significant ef- fects were found for female entrepreneurs or for limited companies. As regards regional variations, firms located outside the metropolitan regions – as com- pared to those at the top of the urban hierarchy – are likely to perform better, thus indicating that local development may benefit from resource transfers from the forest sector to micro-firms engaged in non-primary activities. Keywords: micro-firms, firm performance, entrepreneurship, local development, forest ownership, panel regression, Sweden Katarina Haugen & Urban Lindgren, Department of Geography and Economic History, Umeå University, SE-901 87 Umeå, Sweden. E-mails: katarina.haugen@ geography.umu.se, urban.lindgren@geography.umu.se Introduction Entrepreneurship and new business creation are on the increase. More than 60,000 new firms1 are started in Sweden each year, and the number of annual start-ups has increased since the mid- 1990s (Fig. 1). Entrepreneurship is frequently expected to strengthen local labour markets and provide employment as well as local and re- gional economic development (e.g. Brüderl et al. 1992; Storey 1994; Henderson 2002; van Praag 2003; Reijonen 2008; Holmes et al. 2010), not least in rural areas going through processes of economic, demographic and social change (Labrianidis 2006). Hopes are high that entre- preneurship may constitute a key component of livelihood strategies as well as broaden the scope of the rural economy and strengthen local and regional development (Alsos et al. 2003; Al- sos & Carter 2006; Wilson 2010). However, the flipside of entrepreneurship is that many small businesses fail to ‘survive’ in the longer term (Holmes et al. 2010; Grande et al. 2011; Brouder & Eriksson 2012). Although the degree of firm survival has increased compared to the late 1990s, nearly a third (32%) of the FENNIA 191: 2 (2013) 123On the importance of forest assets for micro-firm performance new firms started in Sweden in 2005 had dis- continued their activities after a few (3) years (Fig. 2). Moreover, for those firms which do sur- vive the critical first few years, their turnover is often insufficient to even provide a livelihood for the owner2 (Swedish Agency for Growth Analysis 2010). Thus, while ‘entry to markets is relatively easy...survival is not’ (Esteve-Pérez & Mañez-Castillejo 2008: 231), and accordingly there is a substantial body of research literature which attempts to identify factors which may in- fluence the performance and survival of firms, and to which the present paper aspires to con- tribute. This research is underpinned by the idea that a firm’s development, and by extension its sur- vival, may be beneficially affected if its owner is also the owner of forest property, because the forest holdings provide access to various re- sources that can potentially be used within the firm. The aim of this study is to explore the im- portance of forest assets for the economic per- formance of micro-firms throughout Sweden. The analyses are focused on micro-firms, de- fined as companies having up to ten employees. The following research questions are analysed: i) Does the value of the forest assets owned by micro-firm owners boost the performance of their firms?; and ii) How does the importance of forest assets for micro-firm development vary depending on the properties of the firm owners (e.g. sex and age) and of the firms and their con- text (e.g. firm type, line of business and geo- graphical characteristics)? Forest ownership may entail several potential benefits3. The first and presumably most essen- tial aspect is that it may provide economic val- ues in the form of income from logging or capi- tal from mortgaging which may be used to, e.g., finance investments in the firm. One of the eco- nomic objectives of small-scale forest owners is to attain liquidity reserves via their forest hold- Fig. 1. Total number of firm start-ups and number of firm start-ups per 1,000 inhabitants in Sweden 1995–2010. Source: Swedish Agency for Growth Analysis (2012). Fig. 2. Share of ‘surviving’ firms three years after start-up by year of start-up (1997–2008). Source: Swedish Agency for Growth Analysis (2013). 124 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren ings (Hugosson & Ingemarson 2003), and invest- ing in one’s micro-firm could be one possible way of putting such funds to use. Compared to, for instance, entrepreneurs who rely on private housing mortgages as a means to acquire neces- sary capital (Storey 1994; Shane 2003) to self- finance business ventures – which incidentally is the most common financial strategy of entre- preneurs (Shane 2003), presumably particularly in the case of the smallest firms, which rarely rely on external funding (Holmes et al. 2010) – forest owners have additional assets that may be used to this end. It is also possible that particu- larly young firms in the sensitive initial phase after market entry may benefit from the addition- al financial security forest ownership may gener- ate, potentially giving them a longer life expec- tancy rather than a short ‘mayfly’ existence. A more indirect possible benefit of forest owner- ship is that the income and thus economic secu- rity the owners derive from their forest may make them more willing and daring to pursue entrepreneurial ambitions. Second, forest holdings may provide other – at least partially non-pecuniary – values, as well as access to various types of resources which may support the activities of the firm. These as- sets may include, e.g., access to land for storing equipment; out-buildings which can be used or let; natural environments; hunting and fishing grounds; leaseholds; building plots; and various natural resources. It is also noteworthy that for- est values in a more general sense are multidi- mensional (Xu & Bengston 1997), encompassing both instrumental values (including economic and/or utilitarian types of values) and non-in- strumental values (e.g. aesthetic values, which may be important in, e.g., tourism business ven- tures). Therefore, even in cases in which the tim- ber production from private forest holdings may not necessarily generate a substantial income for the owners (Törnqvist 1995), it may never- theless be the case that forest ownership might provide them with other resources. An addition- al possibility is that forest ownership is associ- ated with aspects of human capital (e.g. knowl- edge; experience; access to information) and networks of contacts, which may also be valua- ble for non-forest-related entrepreneurial activi- ties. In sum, the hypothesis which serves as the point of departure in this research is that differ- ent types of assets stemming from forest hold- ings may provide forest-owning entrepreneurs with a certain financial stability and therefore resilience to economic fluctuations compared to entrepreneurs who cannot rely on these poten- tial additional resources, as well as other non- pecuniary assets of potential value in the run- ning of their firm. The current research contributes to the knowl- edge bases of rural development as well as en- trepreneurship in several ways. On a broad level it addresses the question of how a key rural re- source – the forest – can make a difference for local trade and industry and thereby form an in- tegrated part of feasible endogenous develop- ment paths in times of demographic and socio- economic change in rural areas. These issues are internationally relevant, and the results of the present study have the potential to inform de- bates and research on entrepreneurship and ru- ral development beyond the Swedish borders. More specifically, it is scrutinized whether, and in which situations and contexts, forest resourc- es can function as a constituent of firms’ re- source bases and boost firm performance. Also, the present paper emphasizes resource transfers from rural to non-rural sectors rather than trans- fers between related rural (sub-)sectors. This pro- vides novel perspectives on the entrepreneurial activities of forest owners as well as new insights into the importance of a rural resource for non- primary economic activities. Finally, the paper contributes to the rather scarce research on en- trepreneurship and firm performance using lon- gitudinal methodological approaches (Korunka et al. 2010). The outline of the remainder of the paper is as follows. The introductory section is followed by a review of previous research related to the potential for forest owners to use rural resourc- es in business ventures as a rural livelihood strategy; as well as research on the determi- nants of entrepreneurship, firm performance and firm survival. The literature review serves to contextualize the present empirical study with regard to rural development as well as to provide theoretical anchorage in the literature on entrepreneurship and firm development. Next, the empirical data and methods are de- scribed in detail, followed by a section where the results are presented. Finally, the findings are discussed with regard to previous research and potential implications, and conclusions are drawn. FENNIA 191: 2 (2013) 125On the importance of forest assets for micro-firm performance Forest owners, entrepreneurship and rural development Entrepreneurship in rural areas is frequently considered as a strategy emerging from the need to grapple with negative trends (Alsos & Carter 2006) of demographic and socioeconomic de- velopment. It may be a central constituent of adaptation strategies and policies aiming to- wards multifunctionality and pluriactivity as means for dealing with declining opportunities (Alsos et al. 2003; Alsos & Carter 2006; Wilson 2010) and for generating endogenous develop- ment based on non-primary economic activities and new forms of rural livelihoods, sometimes argued to reflect a ‘post-production’ transition (Mather 2001; Elands & Praestholm 2008). In line with the premises of these policies, entre- preneurship has been found to be mostly posi- tively associated with beneficial local develop- ment, as indicated by business tax revenues and the share of social welfare cases in rural com- munities (Baumgartner et al. 2013). In the case of forest owners, their decision to start a firm may be spurred by, e.g., a wish to make use of their resources – land, buildings, game, road in- frastructure etc. – and to contribute to their live- lihoods as a way to compensate for a drop in agricultural income and occupation (Lunnan et al. 2006) in the wake of discouraging demo- graphic and socioeconomic trends. Agricultural resources such as areal resources in the form of forest ownership may primarily be expected to be of importance for the perfor- mance of firms whose activities are of similar, i.e. rural, character (Grande et al. 2011); i.e., that farmers transfer resources between their different rural activities. A study of multiple business ownership among Norwegian farmers showed that resource transfers, including knowledge and organizational and physical re- sources, took place between farm businesses and other business ventures, and this was par- ticularly common when the business on the re- ceiving end was also related to farming. For those firms, transfers stemming from rural re- sources made a substantial difference for firm performance (Alsos & Carter 2006). It is perhaps less obvious whether values orig- inating in areal resources such as forest hold- ings would also be transferred and used to the benefit of firms in different lines of business, i.e. unrelated to the farm sector. When it comes to forest owners, the literature specifically focus- ing on self-employed or entrepreneur forest owners is rather scarce, and unsurprisingly mainly focuses on forest-related activities (e.g. Lindroos et al. 2005; Dhubháin et al. 2007). However, this group does not necessarily direct their entrepreneurship efforts towards activities of primary character. Another Norwegian study found that among forest owners who had start- ed firms, the most common business activities were either ‘commercialization of hunting and fishing’ (23%) or renting out accommodation (cabins), i.e., tourism (20%) (Lunnan et al. 2006: 686, cf. Eikeland & Lie 1999). Hence, forest owners’ business ventures may also in- clude a substantial share of other activities such as various service activities, and therefore it is of interest to explore the possibility that re- source transfers may also take place to other business ventures than primary production. Forest owners constitute a heterogeneous group and differ in important ways, as shown in numerous typologies (e.g. Wiersum et al. 2005; Ingemarson et al. 2006; Dhubháin et al. 2007). For instance, their objectives for forest ownership may have different rationales relat- ed to goals of production, consumption or rec- reational values (Dhubháin et al. 2007). Such differences in attitudes and approaches can also be expected to be present among the sub- group of forest owners who are also entrepre- neurs, and to potentially affect their chosen courses of action. Moreover, not all forest owners are rural dwellers, and the share of non-resident forest owners – i.e. people who live at a distance from their forest holdings, usually in cities – is increasing (Lindroos et al. 2005, cf. Ziegenspeck et al. 2004; Schraml 2006). The geographical relationship between forest owners and their property – whether they are resident or non-resident owners – tends to be associated with different strategies as regards the use of the forest (Nordlund & Westin 2011). For instance, non-resident own- ers more often generate outflows of forest rev- enue away from the local rural context (Karls- son 2007). This geographical perspective also implies that the importance of forest holdings, which constitute a rural resource location- wise, is not restricted to people who them- selves live in rural areas or to firms operating in these parts of the country. 126 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren Entrepreneurship and the performance and survival of micro-firms Given the focus of the present empirical study on the importance of areal resources for micro-firm development, a review of the literature on entre- preneurship and firm development is called for. In Sweden as well as more generally (Bartelsman et al. 2005; Cressy 2006; Reijonen & Komppula 2007), small firms dominate in terms of number of firms, although they are much less important in terms of employment numbers. In 2011, micro- firms represented 96% of the total number of Swedish firms, but only accounted for 15% of the total number of firm employees (Statistics Sweden 2012). Development and survival in small firms are often problematic. A general pattern in most markets is that many firms enter and many firms exit each year5, and most firms that enter or exit are small (Bartelsman et al. 2005). New firms often exit within the first few years following entry (Cefis & Marsili 2005; Cressy 2006). A cross-country comparison comprising ten OECD countries6 found that 20–40% of new firms failed within the first two years after entry as a result of market se- lection. After the first seven years, 40–50% were still in business (Bartelsman et al. 2005). While there is no consensus as regards the spe- cific factors associated with the success (or failure) of firms, due to the complexity of the issue (Simp- son et al. 2012), certain broad types of factors can nevertheless be outlined. These can be attributed to realms pertaining to the individual entrepre- neur, the firm structure, and the environmental/ contextual conditions (Brüderl 1992; Box 2008). The individual realm: characteristics of the entrepreneur The characteristics of the individual entrepreneur may be expected to be particularly important in small firms due to the ‘omnipresence of the entre- preneur’ in all business activities (Reijonen & Komppula 2007: 692, cf. Gray 2002). Their human capital includes both general and specific traits such as age, sex, education, previous work and/or entrepreneurial experience, ethnicity, family (busi- ness) background, and marital status (Brüderl et al. 1992; Alsos & Carter 2006; Ucbasaran et al. 2007; Fairlie & Robb 2009; Shaw et al. 2009; Swedish Agency for Growth Analysis 2010). Most entrepre- neurs tend to be relatively young adults or in early middle age (Storey 1994). Therefore, they have of- ten accumulated more financial and human capi- tal compared to a younger person (Farrell et al. 2003), but entrepreneurial motivation may also decline with increasing age (Lévesque & Minniti 2006). Sex has been found to interplay both with the propensity of becoming an entrepreneur (e.g. Berglann et al. 2011, who found a lower likeli- hood of entrepreneurship among women com- pared to men) and with business outcomes. The common observation that female-owned firms tend to ‘underperform’ in comparison to male- owned firms (e.g. Fairlie & Robb 2009; Swedish Agency for Growth Analysis 2010) may be at least partially explained, e.g., by different access to re- sources (Fairlie & Robb 2009; Shaw et al. 2009) or by comparisons being based on measures of suc- cess which disproportionally favour male-owned firms (Robb & Watson 2012). Having a spouse may be beneficial to business development by offering access to financial or other forms of support, labour input (Fairlie & Robb 2009) and risk sharing (Krasniqi 2009), thus suggesting that the immediate social (household) context of the entrepreneur matters (e.g. Jayawarna et al. 2011). Mixed findings have been reported concerning education. For instance, Berglann et al. (2011) found variation across educational lengths and types, although the relationship be- tween educational length and entrepreneurship was not linear. Fairlie and Robb (2009), on the other hand, found that business success increased with higher educational levels. However, the high- ly educated tend to have access to attractive la- bour market opportunities and may therefore be less prone to start their own business (Krasniqi 2009). Micro-firm survival has been found to be related to the entrepreneur’s experience of work in related lines of business and to having local expe- rience (Brouder & Eriksson 2012, cf. Fairlie & Robb 2009), whereas Alsos and Carter (2006) found previous entrepreneurial experience to be associated with assets as well as liabilities. Other relevant personal ‘traits, motivation and capacity’ (Box 2008: 379) include, e.g., the indi- vidual’s degree of entrepreneurial orientation in terms of ‘proactiveness, innovativeness, and risk taking’ (Wiklund & Shepherd 2005: 85, cf. e.g. Lévesque & Minniti 2006; Lunnan et al. 2006). En- trepreneurial attitudes, e.g. the ability to recognize potential business opportunities and readiness to take risks, have been found to be associated with FENNIA 191: 2 (2013) 127On the importance of forest assets for micro-firm performance the probability of becoming an entrepreneur (Lun- nan et al. 2006, cf. Zhao et al. 2010). Personality dimensions (conscientiousness, openness to expe- rience, emotional stability, and extraversion) posi- tively influence the intention and decision to be- come an entrepreneur as well as firm performance (Zhao et al. 2010). Entrepreneurs’ social skills can also influence firm performance, e.g., through ac- cess to information and resources (Baron & Tang 2009). The structural realm: characteristics of the firm A second group of factors refers to ‘structural’ characteristics of the firm, including age, size (current and/or initial) and line of business (Box 2008). Firm age and size are generally positive- ly associated with survival (Bartelsman et al. 2005; Esteve-Pérez & Mañez-Castillejo 2008, cf. Shane 2003), and there are risks associated with newness as well as being a small-size firm7 (Box 2008). In terms of employee num- bers or financial assets (Brüderl et al. 1992) small firms ‘exist close to the edge’ and are more vulnerable to sudden shocks compared to larger firms (e.g. Hannan et al. 1998: 283, cf. Storey 1994). ‘Adolescent’ and ‘senescent’ firms may also be exposed to higher risks com- pared to mature (but not too old) firms which have attained an established market position. The reasons larger firms tend to have better sur- vival prospects than their smaller equivalents include, e.g., a higher likelihood of substantial scale and diversity of business activities (which reduces the firm’s vulnerability to market changes) and a higher efficiency and ability to attract financial and human resources (Esteve- Pérez & Mañez-Castillejo 2008). Other factors which may be beneficial to firm performance and survival include innovativeness; post-entry growth rate; belonging to a high-technology line of business (Cefis & Marsili 2005, cf. Georgellis et al. 2000); targeting a specific market niche as opposed to adopting a more generalist strategy; forming strategic alliances with firms already on the market (Shane 2003); and the application of advertising and R&D (re- search and development) strategies in order to ‘develop firm specific assets’ (Esteve-Pérez & Mañez-Castillejo 2008: 244). Access to resources and its importance for firm development is a key issue in the present paper, as well as in the entrepreneurship litera- ture. According to the ‘resource-based perspec- tive’ (Alsos et al. 2003; Alsos & Carter 2006), firms may develop a competitive advantage through the possession of unique combinations of different resources (Esteve-Pérez & Mañez- Castillejo 2008; Chen et al. 2009; Grande et al. 2011), encompassing both tangible physical re- sources (e.g., natural resources and financial as- sets) and intangible human resources (e.g., com- petence and information networks) (Cefis & Mar- sili 2005; Grande et al. 2011). Access to finan- cial assets is crucial for both firm entry as well as performance and survival in the short and long term (Binks & Ennew 1996; Headd 2003; Musso & Schiavo 2008; Krasniqi 2009): ‘the more own capital is available, the more successful will the small business owner be’ (van Praag 2003: 6; cf. Wiklund & Shepherd 2005; Fairlie & Robb 2009) since it provides a protecting buffer and im- proves the prerequisites for survival, growth and profitability (Shane 2003). According to Korunka et al. (2010), access to financial capital at start- up is the most important determinant of long- term business survival. Firms of small entry size tend to have limited access to resources for cop- ing with initial challenges, and a shortage of re- sources is a common disadvantage faced by small firms more generally (Malecki 1993). Simi- larly, young firms are often exposed to risk due to a lack of resources and the absence of an es- tablished position (Box 2008). Moreover, access to private financial assets may enable entrepre- neurs to avoid relying on mortgages (Åstebro & Bernhardt 2003). Previous research has shown that becoming an entrepreneur was positively associated with family wealth (Berglann et al. 2011), and that firm survival and growth were positively related to the firm owner having re- ceived an inheritance (Holtz-Eakin et al. 1994). The environmental realm: characteristics of the broader context The contextual or environmental factors largely refer to aspects of the ‘economic, political and cultural context’ (Shane 2003: 145) such as macro-economic conditions and fluctuations, as well as other prerequisites stemming from the institutional framework. Environmental econom- 128 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren ic conditions at the time of firm founding have been found to continue to influence firm devel- opment through lasting cohort effects (Box 2008), which may produce enduring heightened or lowered levels of risk throughout the ‘lives’ of businesses started during a particular period (Box 2008; Holmes et al. 2010) as well as inter- act with the importance of firm age and size (Wagner 1994). Other contextual factors include changing market conditions due to, e.g., the en- try of new firms which alter the competitive structure (Esteve-Pérez & Mañez-Castillejo 2008). Geographical characteristics of the firm loca- tion may also be considered to be part of the contextual realm of factors. For instance, it may be the case that different types of places along an urban-rural continuum are favourable in dif- ferent phases of firm development processes, e.g., start-up, growth and long-term survival (Renski 2009), or in terms of different aspects of business development (Fairlie & Robb 2009). As regards rural locations more specifically the dis- advantages may include, e.g., constraints in terms of limited local demand, isolation from markets, or a lack of infrastructure and services (Renski 2009) or of skilled, specialized labour (Dinis 2006; Baumgartner et al. 2013). The ad- vantages may include lower costs (Renski 2009), for instance, and because firms in rural locations are more likely than urban firms to own their premises they often have better prerequisites with regard to financing (Keeble et al. 1992; Blackburn & Curran 1993). Rural areas may also have specific properties which have the poten- tial to serve as resources for small-scale entre- preneurs. Rural qualities such as ‘natural re- sources’, ’tradition and cultural heritage’ and ‘environment and amenity resources’ (Lane & Yoshinaga 1994) may be valuable in the market- ing of certain types of products or services, thus providing additional advantages for rural firms (Patterson & Anderson 2003), e.g., within tour- ism ventures (Lunnan et al. 2006; Daugstad 2008). In sum, this literature review has served to contextualize the present study in the fields of rural development research as well as entrepre- neurship and firm development research. Addi- tionally, it provides theoretical justifications which guide the design of the empirical study in terms of the selection of relevant variables. Empirical analyses Data The data used for the analyses were collected from various registers at Statistics Sweden. Individual- level register data make it possible to combine de- mographic and socioeconomic attributes as well as information about ownership of firms and forest properties. The ASTRID database, hosted by Umeå University, is a compilation of these registers and possesses longitudinal micro-level attributes link- ing forests and firms to individuals. The creation of the dataset started with a selec- tion of firms having between one and ten employ- ees. This category of firms closely resembles the definition of micro-firms by the European Com- mission (Storey 1994; European Commission 2005). We decided to exclude larger firms because the forest revenue to firm turnover ratio is likely to be very small among this group of forest and firm owners. Of Sweden’s 330,000 forest owners (Swedish Forest Agency 2012), the average size of forest property is approximately 35 hectares (Fed- eration of Swedish Farmers 2009), which implies that the average annual yield is just about equiva- lent to a household’s gross monthly income. Thus, for micro-firms, forestry income may make a dif- ference in their operations as a means for invest- ments and other types of resource transfer. We are particularly interested in the ways eco- nomic exchange between forestry and micro-firms takes place from a general point of view. It is known from previous research that there are close connections between firms sprung from diversifi- cation strategies at the farm and traditional forest- ry, although the different economic activities run as separate businesses (e.g. Eikeland & Lie 1999). This category of forestry and micro-firm interac- tion may certainly be of interest, but it is likely bi- ased towards rural-based firms producing products and services close to core activities of farming. Statistics from our dataset confirm that this is a common symbiosis. As mentioned, it may not come as a surprise that farmers use forest revenues for their broader economic activities, but is it the case that forest assets contributes to micro-firm performance more generally? In order to shed some light on this issue we choose to focus on micro-firms outside the primary sector, deselecting firms registered as involved in forestry, agriculture and fishing activities. FENNIA 191: 2 (2013) 129On the importance of forest assets for micro-firm performance Another relevant distinction between micro- firms is related to the owners’ choice of type of company; they may choose different administra- tive setups for their business organizations. Two dominating types are the private firm and the lim- ited company. In the private firm the owner is per- sonally responsible for potential debts accumulat- ed in the business, and the surplus and deficit of the business activity have to be accounted for in the owner’s personal income-tax return. Firm money can be used for private needs, as long as the transactions are accounted for in the books as private loans. Conversely, in the limited company, the owner has no personal responsibility for com- mitments made by the company. At worst, the owner may lose the share capital (least possible amount 50,000 SEK), but personal assets like the family house, bank balance, market portfolio etc. are protected in cases of bankruptcy. Moreover, this implies that the owner has to make a clear distinction between assets belonging to the com- pany and his/her private finances as it is illegal to use company money for private needs. Based on this discussion, the importance of forest holdings for micro-firm performance may be connected to the registration of the micro-firm: whether it is reg- istered as a private firm or a limited company. From this point of departure, we sampled micro- firms having one to ten employees in 2003 (ap- proximately 153,000 companies). The database includes links between firms and people, which makes it possible to identify who works in which firm. In the next step, characteristics of the em- ployees were collected. Based on this information, firm ownership was established and a number of necessary attributes of the owner were collected for further data extraction. The identification of ownership was not successful in all cases, causing the sample of firms to be reduced to 71,000. An- other prerequisite for inclusion in the sample was that the firm be observable in the dataset during the years after the data extraction base year of 2003; some firms may vanish from the dataset be- cause of acquisitions, mergers and spin-offs. In or- der to take into account such organizational changes we used Statistics Sweden’s ‘FAD’ (firm and workplace dynamics) register, which made it possible to keep track of firm identity over time (i.e., the organizational identity number in the da- tabase refers to the same firm from one year to an- other). After firms with an unclear ‘pedigree’ were removed, 29,800 firms remained in the sample. The panel covers the years 2003 to 2008. Some of the firms ceased to exist during this period, which means that we have an unbalanced panel. After having identified the micro-firms and firm owners, we continued to link additional informa- tion from the database to the firms and individuals. In regard to firms, there are data on value added and earnings, and for the firm owners there are various demographic and socioeconomic data. In addition, information about forest properties owned by individuals is also available. This part of the dataset contains variables such as number of hectares of forest land, arable land, marshland etc., and assessed value of these different catego- ries of land. Among these variables, forest land is likely to be the most important factor for determin- ing pecuniary assets because logging generates cash flow that can potentially be used in other economic activities. This is why we use assessed forest value as a key research variable in the analy- ses. All in all, the generated panel dataset contains information on firms and their performance indi- cators together with variables describing firm own- ers’ demographic, socioeconomic and forest prop- erty-related characteristics. Many of these varia- bles correspond closely to those mentioned in the firm development literature. Econometric model For the analysis of the effects of the value of forest assets on micro-firm performance, we have esti- mated a number of fixed-effects models that ac- count for endogeneity driven by unobserved het- erogeneity and self-selection (Eq. 1). The reason for using fixed-effects panel regressions is that we want to use the estimation results for causal inter- pretation of the relationship between forest hold- ings and firm performance. When estimation tech- niques that operate on cross-sectional data (e.g. OLS) are applied, the obtained results might be biased as a consequence of self-selection. For ex- ample, positive estimates of the value of forest as- sets on performance generated by the OLS model could be the result of a self-selection of successful firm owners with accumulated capital buying for- est land as an investment or for taxation reasons. Thus, it would not be possible to interpret the esti- mation results of the OLS as a causal effect where- by forest assets boost micro-firm performance. However, the fixed-effects model does not solve all problems related to cause-and-effect interpreta- tion. As long as the individual-specific error (v i ) 130 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren does not change over time, implying that unob- served characteristics stay the same (e.g. ability, values, routines etc.), the model is not biased by endogeneity. Moreover, the fixed-effects model also rests on the assumption that there is no cor- relation between x it and . If this is not the case, the fixed-effects model will be biased and other modelling approaches could be considered (e.g. structural equation modelling). However, it can be assumed that most non-observable characteristics of the individual do not change over time, or if they do, that the processes of change are operating at a slow pace (Stern et al. 1999). [Eq. 1] In the fixed-effects model x it is a matrix of co- variates, is a vector of estimates, v i is the indi- vidual-specific error, and is the idiosyncratic error that varies over time and across individuals.8 Dependent and independent variables Two different groups of models were estimated with two different dependent variables. The per- formance of micro-firms can be measured in many different ways. One straightforward meas- ure of economic output is value added (Rigby & Essletzbichler 2002), which is a function of la- bour costs, earnings before interest and taxes (EBIT) and depreciation. Value added is the firm’s contribution to the gross domestic product (GDP), and can be viewed as a general input to the national economy and employment. The sec- ond dependent variable of performance used in this study, EBIT, is more focused on the firm’s ability to make profits and generate earning power. Large and increasing EBIT is a strong in- dication of profitable and successful companies. Both value added and EBIT are available for all firms in the dataset, which makes it possible to assess the importance of the value of forest as- sets on micro-firm performance throughout the entire country. The principal independent variable is an indi- cator of forest value. By using the tax value of productive forest land, which is correlated with the amount of m3 standing volume, we get an assessment of available assets that the forest owner has at his/her disposal.9 It should be kept in mind that m3 standing volume says nothing about the age distribution of the stands of the property, which means that felling must presum- ably be carried out over a longer period of time, making it virtually impossible to withdraw all as- sets instantly. This indicator is nevertheless a bet- ter proxy for available assets than factors like number of hectares or other types of land use associated with the property. Aside from the forest assets, a set of additional independent variables is also included in the analyses. These were chosen in order to, based on the information available in the register data, represent to the highest degree possible the three domains of factors previously found to be of im- portance for firm performance: individual, struc- tural and environmental, as discussed in the lit- erature review. Concerning the characteristics of the individu- al entrepreneur, a number of indicators are in- cluded in the analyses: age, sex, country of birth, marital status, family composition, level of edu- cation, main occupation, income and entrepre- neurial experience. Aside from being standard demographical variables, age and sex have also been found in previous studies to interplay with entrepreneurial/firm performance, and may thus be expected to be of importance in themselves or in interaction with other variables. The entre- preneur’s level of education is used as an indica- tor of the human capital of the firm owner. Level of education is categorized as low (compulsory school), mid (secondary school) or high (ter- tiary). Main occupation and country of birth are both background variables represented by dum- my variables (work/other and Sweden/other, re- spectively). Marital status (dummy variable for married/other) and household composition, in terms of the number of children aged 18 or older in the household, are included as indicators of the family situation and the close social context of the entrepreneur, and of their possibilities to rely on close relations for, e.g., helping out with firm activities or providing support in other ways. Entrepreneurial experience is indicated by the sum of business income from 1990 and onwards. It should also be noted that certain hard-to- measure qualities pertaining to the individual entrepreneur which have been frequently stud- ied in previous research, for instance entrepre- neurial orientation and other personality traits, are also implicitly included in the analyses since the chosen method of analysis takes into ac- count such (otherwise omitted) variables, as mentioned earlier.   yit  1 xit  vi it FENNIA 191: 2 (2013) 131On the importance of forest assets for micro-firm performance The structural characteristics of the firm are primarily represented by the line of business in which it is active, according to an official clas- sification. Forest-related lines of business are ex- cluded as a consequence of the above-men- tioned sampling criteria. The level of access to financial resources is indicated by the firm own- er’s income as well as that of the owner’s partner, which according to previous research may also benefit business development. Type of firm (pri- vate firm or limited company) is also included as a variable. Chief among the indicators of the environ- ment or context in which the firms operate is a classification by the Swedish Association of Lo- cal Authorities and Regions (SALAR 2010) of the Swedish municipalities into different types based on, e.g., economic and demographic conditions. Previous studies have suggested that different geographical environments may interplay with firm development. Another contextual issue, the possible existence of cohort- or generation-relat- ed issues pertaining to the firm (e.g. the general economic conditions at the time of firm entry), is accounted for through the method in itself and the inclusion of a time variable (year). Finally, a quota for the extent to which forest estates are located at the owner’s residential location or elsewhere is included to account for the possible importance of the location of forest property vis- à-vis residential location. Descriptive statistics For most variables, meta means are used to sum- marize the results over the entire study period. These are mean values calculated as indices of the mean values of the different indicators for each respective year in the time series 2000– 2008. The distinction between forest-owning and non-forest-owning firm owners is based on a definition of forest owners as persons who own forest land with an assessed value of >0. Hence, a dummy variable is used for descriptive purpos- es, as opposed to the continuous variable which is used in the subsequent analyses. Unless stated otherwise, the results reported below are statisti- cally significant at least at the p<0.05 level (Chi- square and ANOVA tests) for all years in the panel.10 Forest owners constitute a relatively small mi- nority (meta mean 7.6%) of the sample. The meta mean for the average assessed value of the forest holdings is 876,000 SEK (roughly €100,000), 48 hectares for the average areal size of the proper- ties. The value of both variables increases over time. Most of the forest owners are resident on their forest property (meta mean 88% local own- ership in terms of both value and area). Concerning the characteristics (Table 1) of the firm owners, those who are also forest owners are somewhat older than their non-forest-own- ing counterparts, and also have a higher average number of adult children. Men and native Swedes dominate the sample, particularly among the forest owners. Two-thirds of the firm owners are married (non-significant differences across the groups). Level of education is lower among the forest owners, and work is the domi- nating type of occupation in both groups. The non-forest owners have higher levels of wage in- come and overall work-related income. There were no significant differences in entrepreneuri- al experience in terms of the sum of their busi- ness income from 1990 and onwards. Forest owners have substantially higher average capital income, presumably stemming from forest in- come, and hence also higher disposable in- come.11 The forest owners are more oriented to- wards rural residential environments in their residential characteristics compared to the non- forest owners, who live in urban environments to a greater extent. As regards the characteristics of the micro- firms (Table 2), there are both similarities and differences in the types of business activities they are engaged in. Commonplace lines of business for firms owned by forest owners and non-forest owners alike are manufacturing, con- struction, wholesale and retail, transport and communications, and real estate. However, con- struction and transport activities, for example, are more common among the forest owners’ firms, and non-forest owners’ firms are more of- ten involved in, e.g., real estate, wholesale and retail, and services. Private firms are by far the most common firm type for forest owners and non-forest owners alike (non-significant differ- ences across the groups). Concerning the perfor- mance of the firms, forest owners’ firms clearly perform better on several indicators, including net turnover and the dependent variables value added and EBIT. Thus, there are grounds for fur- ther exploring the hypothesis concerning the re- lationship between forest ownership and the economic performance of micro-firms. 132 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren Results The results of the statistical analyses are presented in this section. Table 3 shows estimation results from the models on value added and earnings (EBIT) using the full sample of firms. On the basis of previous discussions, there is reason to assume that the importance of the value of forest holdings for firm performance may vary between different types of firms and different owner categories. In order to further explore these potential differences, the model specification exhibited in Table 3 was rerun on a number of sub-samples. Due to space restrictions we focus on the presentation of Forest value, which is the principal independent variable of the analysis. In Table 4 the estimates of Forest value are displayed for 36 additional models scru- tinizing the importance of type of company, sex of the owner and age of the owner for the two chosen firm performance indicators. Going back to Table 3, it can be concluded that Forest value has a positive effect on firm perfor- mance only when operationalized as earnings (EBIT). Apparently, the value of forest holdings Table 1. Characteristics of firm owners by forest ownership status. Meta mean values for the 2000–2008 period and mean age for 2003. Source: ASTRID database. Micro-firm owners according to forest ownership status Variable Variable levels (where applicable) Forest owners Non-forest owners Mean age in 2003 52.1 50.4 M e t a m e a n s 2 0 0 0 - 2 0 0 8 Sex Male 91.8% 81.9% Female 7.1% 17.5% No data 1.1% 0.6% Marital status Married 65.3% 65.9% Other 34.7% 34.1% No. children >age 18 1.5 1.3 Level of education Low (primary) 36.6% 27.7% Mid (secondary) 46.1% 48.8% High (tertiary) 16.5% 22.9% Unspecified 0.8% 0.6% Main occupation Work 95.7% 96.1% Other 4.3% 3.9% Sum. income 1990- (SEK) 644,270 624,912 Country of birth Sweden 99.0% 92.4% Other 1% 7.6% Residential characteristics Metropolitan 2.5% 12.3% Suburban metropolitan 7.9% 20.8% Major cities 23.0% 26.5% Suburbs of major cities 2.4% 3.2% Commuter municipalities 10.7% 8.1% Tourism municipalities 7.7% 4.0% Manufacturing municipalities 18.5% 9.5% Sparsely populated municipalities 6.8% 1.7% Municipalities in densely populated regions 12.9% 10.2% Municipalities in sparsely populated regions 7.7% 3.6% Income (SEK) Disposable income (individual) 324,517 266,231 Disposable income (individual + partner) 497,504 447,388 Work-related income 251,783 271,695 Wage income 197,989 226,286 Business income 40,924 39,376 Capital income 129,838 42,910 Unemployment benefit 308 311 Early retirement benefit 2,079 1,998 Income support 4,284 3,998 FENNIA 191: 2 (2013) 133On the importance of forest assets for micro-firm performance does not boost the firms’ value added or, indirect- ly, GDP. However, when performance is defined in terms of a profitability measure (EBIT) it seems that the value of forest holdings may play an important role in the evolution of the firm. In line with the hypothesis, a likely interpretation of the estimation result is that firm owners who own forest estates make use of forest revenues in their micro-firms. The analyses do not reveal the exact ways this re- source transfer is done, i.e. whether it is chan- nelled via money transfers from cutting or via other non-pecuniary forest-property benefits.12 In regard to the other person-specific covari- ates13, it can be concluded that age of the owner (Age), number of adult children (No. children > 18), experience of running businesses in the past (Sum. income 1990–), and education level (Educa- tion) are those factors that show significant effects on firm performance in terms of either value added or earnings (EBIT). Highly educated firm owners perform better, as do more seasoned firm owners, as measured in age and experience of running firms in the past. Having adult children may also add to firm performance, potentially as a result of family-driven contributions in firm operations. Concerning line of business, we find no signifi- cant differences in firm performance. However, there seem to be clear regional variations between the metropolitan regions and other parts of the country. Both performance indicators show similar patterns by which micro-firms tend to do better outside metropolitan regions. The year dummies mostly exhibit significant estimates, indicating time-specific fluctuations (e.g., changes in the economic situation) that the panel regression can account for. In Table 4 we turn back to the principal inde- pendent variable, Forest value, and look more closely at its importance for firm performance. After subdividing the micro-firms according to type of company, we ran two models estimating effects on value added and earnings, respec- tively. The analyses reveal a distinct difference between businesses registered as private firms and as limited companies. It is only in private firms that forest value has a positive effect on firm performance. The estimates are highly sig- nificant (p<0.01) for this group, whereas the corresponding estimates for limited companies indicate p-values far from significant effects. Table 2. Characteristics of micro-firms by the owners’ forest ownership status. Meta mean values for the 2000–2008 period. Source: ASTRID database. Micro-firms according to owners’ forest ownership status Variable Forest owners Non-forest owners M e t a m e a n s 2 0 0 0 - 2 0 0 8 Firm type Private firm 28.0% 27.9% Limited company 72.0% 72.1% Line of business Mining 0.6% 0.1% Manufacturing 13.5% 12.8% Electricity & water suppl. 0.1% 0.0% Construction 25.8% 18.6% Wholesale & retail 21.7% 25.3% Hotel & restaurants 0.5% 1.7% Transport & communications 14.6% 9.7% Financial intermediation 0.4% 0.5% Real estate 14.7% 20.9% Public administration 0.1% 0.1% Education 0.4% 0.8% Health & social work 2.5% 4.5% Other services 2.2% 4.5% Primary sector 2.6% 0.2% No data 0.2% 0.2% Economic performance (SEK) Earnings before interest and taxes (EBIT) 37,257 27,255 Value added 154,584 136,354 Net turnover 467,027 403,049 Other running revenue 9,241 5,797 Wage cost 68,306 68,414 Labour cost 29,201 29,618 134 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren Table 3. Fixed-effects estimations of firm performance defined as value added and earnings before interest and taxes (EBIT). Cluster-robust standard errors were used. Source: ASTRID database. Performance indicator Value added EBIT Coef. P>t SS Coef. P>t SS Forest value 0.068 0.118 0.043 **0.081 0.019 0.034 Age -22.536 0.402 26.874 *-17.076 0.092 10.085 Married 36.751 0.704 96.580 -3.996 0.909 34.862 No. children > 18 **90.745 0.031 41.941 17.225 0.272 15.641 Sum. income 1990- ***0.050 0.001 0.015 ***0.014 0.002 0.004 Partner’s income -0.000 0.754 0.000 -0.000 0.358 0.000 Local forest ownership -35.348 0.790 132.661 -4.635 0.956 83.468 Education Primary educ. 59.067 0.760 192.899 283.429 0.156 199.005 Upper secondary educ. 294.270 0.466 402.740 ***216.173 0.003 73.229 University educ. -186.868 0.684 458.477 ***229.189 0.002 72.800 Unspecified educ. (ref.) Line of business Mining 1,810.736 0.280 1,674.055 188.175 0.315 186.941 Manufacturing -151.509 0.412 184.471 -12.041 0.879 79.312 Electricity & water suppl. 312.413 0.745 959.896 174.015 0.705 458.967 Construction -166.097 0.221 135.307 -20.125 0.629 41.636 Wholesale & retail -143.981 0.531 229.706 11.406 0.888 81.111 Hotel & restaurants 621.050 0.386 715.924 276.280 0.150 191.580 Transport & communic. 189.897 0.527 299.868 1.264 0.990 103.598 Financial intermediation -830.445 0.117 528.143 -224.017 0.361 244.929 Real estate -1,737.977 0.215 1,398.773 -363.012 0.343 382.412 Public administration -5.155 0.988 343.940 94.362 0.414 115.293 Education -510.918 0.241 286.783 -146.083 0.277 134.014 Health & social work 322.239 0.262 286.783 107.315 0.319 107.542 Other services 3,414.919 0.312 3,372.658 995.545 0.270 900.901 Primary sector (ref) Municipality type Major cities **-703.084 0.029 320.115 ***-992.485 0.000 115.842 Suburbs of major cities ***-1,060.291 0.000 298.126 ***-1,036.146 0.000 105.350 Commuter municipalities ***-1,952.051 0.000 278.259 ***-1,631.650 0.000 110.774 Tourism municipalities omitted omitted Manufacturing municip. ***2,729.431 0.000 167.675 **544.649 0.000 131.663 Sparsely pop. municip. ***1,953.245 0.000 139.791 100.597 0.362 110.279 Municip. densely pop. reg. ***2,458.913 0.000 175.265 ***373.720 0.005 131.737 Municip. sparsely pop. reg. ***1,907.387 0.000 192.555 ***1,113.818 0.000 154.955 Metropolitan regions (ref) Year 2001 **-32.441 0.090 19.066 -2.215 0.856 12.19 2002 Missing data 2003 23.942 0.656 53.695 **-42.510 0.018 17.899 2004 ***-187.713 0.001 54.705 **-49.082 0.020 20.990 2005 ***-191.401 0.001 56.347 **-54.374 0.038 26.093 2006 ***-187.373 0.001 55.189 -32.082 0.144 21.894 2007 11.823 0.677 28.374 **53.683 0.021 23.090 2008 (ref) Constant 914.418 0.447 1,201.790 880.205 0.042 430.060 Observations 11,771 11,771 R-squared 0.076 0.039 rho 0.766 0.769 *** p<0.01 ** p<0.05 * p<0.1 FENNIA 191: 2 (2013) 135On the importance of forest assets for micro-firm performance This result is in line with what may be antici- pated, considering the different regulations af- fecting the different types of companies. The owner of a private firm cannot make a clear distinction between private money and firm money – everything is intertwined, and the owner is personally responsible for all firm transactions and liabilities. If the private firm gets into financial problems and insolvency, owner assets including forest holdings are at stake. As a consequence, there are potential in- centives for the firm owner to use forest reve- nues in the operation of the private firm. In re- gard to micro-firms registered as limited com- panies, however, there are no such incentives since bankruptcy of the limited company does not affect the owner’s private economy. Anoth- er factor of importance might be that limited companies sometimes have more than one owner. The use of forest revenues in multi-own- ership settings may be complicated and disad- vantageous for the firm owner in possession of forest holdings. Private firms, on the other hand, are by definition one-owner firms. In cases in which two or more persons want to start up a business in accordance with the regu- lations of a private firm, it is registered as a lim- ited liability partnership, another category in the data. In the next step we made yet another subdi- vision of the micro-firms, carrying out analyses separately for men and for women. According to the literature (see above), women are less likely than men to become entrepreneurs and are also likely to be less successful in these en- deavours. There are also gender differences re- garding forest management perspectives (Lid- estav & Ekström 2000; Nordlund & Westin 2011). Women appear to have a slightly differ- ent view of forest ownership whereby other val- ues than cutting revenues are put at the fore- front. This means that women are possibly less likely to employ conventional production man- agement routines, and therefore have less mon- ey transferable to their micro-firms. The results of the analyses confirm this line of argument, Table 4. Fixed-effects estimations of firm performance defined as value added and earnings before interest and taxes (EBIT) for theoretically justified sub-groups. Same set of covariates as in Table 3, but due to space restrictions only the forest value variable is presented. Cluster-robust standard errors were used. Source: ASTRID database. Value added EBIT Coef. P>t SS Coef. P>t SS Forest value All cases 0.068 0.118 0.043 **0.081 0.019 0.034 Private firm (PF) ***0.149 0.001 0.044 ***0.135 0.001 0.039 Limited company (Ltd) -0.030 0.489 0.044 -0.171 0.513 0.026 PF; men ***0.149 0.001 0.045 ***0.136 0.001 0.039 PF; women 0.023 0.895 0.177 0.049 0.621 0.099 Ltd; men -0.036 0.424 0.044 -0.019 0.470 0.027 Ltd; women 0.023 0.895 0.177 0.199 0.151 0.137 PF; men; aged < 35 0.318 0.366 0.349 -0.015 0.930 0.168 PF; men; aged 35-49 *0.515 0.057 0.269 0.412 0.128 0.270 PF; men; aged  50 ***0.110 0.001 0.032 ***0.108 0.000 0.028 PF; women; aged <35 -0.866 0.600 1.564 -2.943 0.759 0.917 PF; women; aged 35-49 -0.067 0.741 0.202 0.127 0.298 0.120 PF; women; aged  50 0.064 0.802 0.256 -0.069 0.566 0.120 Ltd; men; aged < 35 *0.823 0.060 0.429 **0.420 0.025 0.183 Ltd; men; aged 35-49 -0.049 0.533 0.078 -0.074 0.172 0.054 Ltd; men; aged -0.039 0.492 0.057 -0.007 0.846 0.038 Ltd; women; aged <35 omitted omitted Ltd; women; aged 35-49 -0.183 0.684 0.445 -0.124 0.769 0.421 Ltd; women; aged  50 0.188 0.398 0.221 0.098 0.484 0.139 *** p<0.01 ** p<0.05 * p<0.1 136 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren since we find no significant positive effects of forest ownership on the performance of firms run by women. This result holds for private firms as well as limited companies. In regard to men who run private firms, however, forest val- ue seems to be beneficial to both value added and earnings, which hints at systematic varia- tions related to gender and type of firm. In the last step of the analysis we also inves- tigated potential differences across combina- tions of age, sex and type of company. It can be concluded that for women it makes no differ- ence whether they run private firms or limited companies, or whether they are young, middle- aged or old, concerning the connection be- tween forest value and performance. For these groups of firm owners, forest value makes no difference for either earnings (EBIT) or value added, which indicates restricted or non-exist- ent transfer flows of resources between forest holdings and micro-firms. However, for men the patterns are somewhat different and more complicated. In brief, the analyses show posi- tive effects of forest value on firm performance for older men who run private firms and for younger men who run limited companies. The reasons why forest value is important for these groups are probably manifold, but it could be speculated that young firm owners have a greater need of capital than do their older col- leagues, who have had more time to accumu- late resources. Even though there are certain disadvantages to inserting private money into the limited company, this might be their only option to raise money for investments. Banks sometimes have a tendency to be restrictive in their lending policies towards companies, and this is particularly the case for small and young firms with a non-proven business concept. Nevertheless, forest value also seems to have a positive effect on performance for older men running private firms. It is known from the lit- erature that older men are more prone to take on production-oriented management. This im- plies that this group is likely to have converted their forest value into liquid assets, which may be easily available for use in their micro-firms. To conclude, it can also be added that the results clearly show that possessing assets in the form of forest holdings never seems to be a burden for micro-firm owners; there are no sig- nificant negative effects in any combination of owners. Concluding discussion This research set out to explore the importance of the value of forest holdings owned by entrepre- neurs for the economic performance of micro- firms, with a hypothesis that assets stemming from forest ownership benefit firms and provide them with financial stability and resilience to economic fluctuations. The empirical study is based on offi- cial register panel data for the period 2002–2008 comprising all Swedish micro-firms operating in non-forestry-related lines of business. In response to the first research question, the fixed-effects panel regression analyses reveal that there are differences in economic performance be- tween firms depending on the value of the forest holdings owned by the entrepreneur. The value of the forest assets is positively associated with firm earnings, thus supporting the hypothesis and sug- gesting that there are resource transfers – presum- ably principally in the form of monetary transfers, but possibly also through other types of non-pecu- niary resources – between the entrepreneurs’ for- est holdings and their firms which can then be used for investing in and boosting the performance of the firms. Concerning the second research question, we find that the impact of the value of forest assets on the economic performance of micro-firms varies across different categories of entrepreneurs with regard to socioeconomic and demographic char- acteristics, as well as the properties of the firms. From a somewhat generalized point of view, forest assets are primarily beneficial to private firms run by older men. The connection with firm type can most likely be explained by the strength of the economic connections between private firms and their owners. While no significant effects of forest assets were found for female-headed firms, male- headed firms do benefit from these areal resourc- es. This is possibly related to gender differences in forest valuations and forest management strate- gies; male forest owners have previously been found to have production-oriented views and strat- egies and thus to extract more capital from their forest holdings (Lidestav & Ekström 2000; Nord- lund & Westin 2011). The results suggest the pos- sibility that these differences are present not only among female forest owners in general, but also among the sub-group who are entrepreneurs as well. These women could be expected to place more emphasis on economic outcomes compared to their non-entrepreneur peers. It may also be the FENNIA 191: 2 (2013) 137On the importance of forest assets for micro-firm performance case that the gendered views of the forest come forth not only regarding forest management but also in women’s entrepreneurial endeavours, which may as a consequence be at higher risk of ‘underperformance’ (e.g. Fairlie & Robb 2009; Swedish Agency for Growth Analysis 2010) and exit compared to firms owned by male forest own- ers. Another possibility is that the gender diver- gence stems from differences in terms of processes of acquisition of forest property, ownership struc- ture and social expectations (Lidestav 2010). Firm performance also benefits from increasing maturity in terms of age or previous experience of running a business on the part of the entrepreneur, and from human capital in the form of high educa- tion. The entrepreneur’s social/family context also matters, indicating the possibility that support mechanisms based on family ties are in place. These findings are largely in line with previous re- search reported in the literature concerning, e.g., the importance of the entrepreneur’s human and social capital. Concerning geographical differenc- es across firms in different types of municipalities, micro-firms located outside the metropolitan re- gions tended to perform better. This is relevant from a local and regional development perspec- tive, not least since entrepreneurship may be an important constituent of rural livelihood strategies based on ‘multifunctional’ approaches which in turn can be one way of strengthening local labour markets and providing employment and economic development in otherwise weak labour markets (e.g. Alsos & Carter 2006; Wilson 2010). The re- sults suggest that forest holdings, by definition a rural resource location-wise, matter most for firm development outside the regions at the top of the urban hierarchy, although not only in sparsely populated areas. Not least considering the increas- ing share of non-resident forest owners living in cities (e.g. Lindroos et al. 2005, cf. Ziegenspeck et al. 2004; Schraml 2006), it is clear that the impor- tance of the forest – a key rural resource – is not restricted to those who live or operate in the coun- tryside, and there is potentially some risk that re- source transfers from the forest to firms engaged in other activities may potentially cause a drainage of resources from rural areas (cf. Karlsson 2007). However, since most forest owners still live in places closer to the rural end of the urban–rural continuum, and presumably also locate their firms in these places to a large extent, there are never- theless grounds to be more optimistic about the use of forest-related resources for the benefit of ru- ral entrepreneurship and endogenous develop- ment. To summarize, we find substantial support for the hypothesis that resources stemming from forest holdings contribute to the economic performance and development of micro-firms in non-forestry lines of business, thus adding to their chances of long-term survival. The vulnerability of micro-firms is well-established in the research literature, and resources stemming from forest holdings can make an important difference for small-scale entrepre- neurs struggling to keep their firms afloat in the challenging context of competition and economic fluctuation. While this is clearly beneficial to the individual firm and entrepreneur, its relevance stretches beyond this scale. From a wider perspec- tive, it improves the prospects for endogenous lo- cal and regional development, for instance in rural areas where labour market opportunities may be few and far between. This is also relevant at the macro-economic level, not least since entrepre- neurship is frequently identified as an important means of economic development and employ- ment. This study shows that the importance of for- est, which as a natural resource is of key impor- tance for the national economy in Sweden, lies not only in its direct forms (i.e. forestry and related activities) but also indirectly in that it provides a way of supporting micro-firms in other lines of business, particularly outside the metropolitan re- gions. Thus, this study has revealed important con- nections between areal resources in the form of forest holdings and non-forestry small-scale entre- preneurship in ways which have not previously been explored in empirical research, and which may inform both research and policy in the fields of entrepreneurship and economic development as well as forestry. Moreover, it seems likely that the findings presented here are relevant and ap- plicable beyond the Swedish context, for instance in the other Scandinavian countries and elsewhere where forest land is to a substantial extent owned by small-scale private forest owners and where challenges are posed by the current rural develop- ment trends. A potential path for future research that arises, departing from questions based on the findings that micro-firms benefit from resources stemming from the forest, concerns the forest and perhaps local rural development more generally. What are the potential effects if the forest is used as a ‘cash cow’ for non-forestry and non-rural business ac- tivities, and how does this correspond to the aims 138 FENNIA 191: 2 (2013)Katarina Haugen and Urban Lindgren of socially, economically and ecologically sustain- able forest management in the long term? The pos- sible scenarios for the possible courses of action of forest owners may include, for instance, a lack of re-investment in the forest when the revenue is used for other purposes, or perhaps an augmented interest and improved management of the forest stemming from the insight that its value can be converted into other types of activities. Also, as to the precise ways the resource transfers between forest holdings and micro-firms take place, this could be explored more in-depth in, e.g., inter- view studies or survey research whereby the entre- preneurs can be asked directly about their strate- gies and courses of action. NOTES 1 In the official statistics, a ‘new’ firm is defined as either a newly established firm or a firm which has resumed activity after being non–practicing for a pe- riod of at least two years (Swedish Agency for Growth Analysis 2011). 2 This issue is somewhat related to ‘lifestyle entrepre- neurs’, a concept which refers to entrepreneurs whose aim through their firms is, inter alia, to gain personal independence (cf. Gray 2002) and ‘support a desired lifestyle’. Such firms also tend to be small in terms of employees – as opposed to firms owned by ‘high–growth entrepreneurs’ (Henderson 2002: 49). Thus, entrepreneurs need not necessarily prioritize or strive for firm growth (Greenbank 2001) but rather to sustain a livelihood by way of their business (Rei- jonen & Komppula 2007). 3 The present paper investigates the possibility that forest ownership may be advantageous for the perfor- mance of firms run by the forest owner. However, it is appropriate to acknowledge that resource transfers between businesses may also be detrimental under certain circumstances (Alsos & Carter 2006), e.g. im- pairing the firm’s ability to recognize business oppor- tunities because of, inter alia, ‘core rigidities’ and ‘reduced experimentation’ (Mosakowski 2002). 4 However, the effect of entrepreneurship is not nec- essarily on a par with the level of expectations. In a study by Baumgartner et al. (2013), the effect of local entrepreneurship potential on local development was found to be largely positive but modest. Also, in the short and medium term, structural differences be- tween rural communities were found to exert a more substantial influence. 5 While firm closures need not necessarily be regard- ed as wholly negative from a macro point of view, but rather as part of the function of a dynamic economy, such occurrences are of course usually interpreted negatively from a micro point of view, i.e. for the in- dividual entrepreneur (Bartelsman et al. 2005; Black- burn & Kovalainen 2009). However, the exit of a firm may also be due to either voluntary or involuntary causes (Headd 2003; van Praag 2003; Cressy 2006), either ‘death’ or other types of exit such as mergers and acquisitions by other companies (Cefis & Marsili 2005, cf. Storey 1994), the owner’s accepting em- ployment elsewhere, retirement or cases in which exiting is part of a conscious strategy. Thus, a substan- tial part of what may be deemed business failures may in fact be more correctly interpreted as ‘positive exits’ (Headd 2003). 6 Sweden was not among these countries. 7 However, the role of, e.g., size does not necessarily adhere to the straightforwardness of the general pat- tern. For instance, Holmes et al. (2010) found that while initial size had a positive effect on the survival of small- and medium-sized firms, the effect was the opposite for the smallest micro-firms. 8 Two types of models can be used for estimating pan- el data: the fixed-effects estimator and the random- effects estimator (Wooldridge 2003). The underlying assumptions of the random-effects model are that vi is a random variable and that Cov(xit , vi) = 0. If there is correlation between the covariates and the individ- ual-specific error, random-effects estimates will be biased. We used the Hausmann test to check for dif- ferences between the two models. The statistics indi- cated that the use of random effects is inconsistent, so we decided to use fixed-effects models. 9 For the year 2002, data on the tax value of forest property are unavailable. 10 Since significance tests are performed for each year of the panel, separate significance levels are not pro- vided for each variable each year as this would clut- ter the presentation of results. 11 The capital income variable is statistically signifi- cant for all years in the time series except 2002 and 2008. The disposable income of the individual varia- ble is statistically significant for the years 2001 and 2004–2007. The disposable income of the individu- al’s household variable is statistically significant for the years 2004–2008. 12 Concerning the explanatory power of the models, low levels of explanatory power are to be expected since micro data opens up for full individual hetero- geneity. People can be extremely different compared to one another, something which is effectively hidden in aggregated data where categories are represented by mean values. Therefore, regression models using aggregated data usually show higher levels of explan- atory power. Low explanatory power is not a problem as long as the model is not used for projections. In this case we are only interested in the partial effects of covariates, whose reliability is much more related to the significance level of the point estimates. 13 In Table 3, the gender variable is absent as a result of the specific properties of the fixed effects model. The model cannot estimate time-constant variables simply due to the fact that since these variables do not change over time there is no variation, and since most people remain mem- bers of the same sex, gender estimations are impossible. 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