Exploring the Peer Effects of SMEs: A Graph-Based Study on Government Tender Success and Financing Decisions

This thesis delves into the intricate interplay between social capital and entrepreneurial decision-making. Through a graph-based approach, this study aims to uncover the dynamic networks and relationships among small and medium enterprises' (SMEs) owners and managers, and how these connections influence their capital structure decisions and competitive advantages. This work proposes a novel approach to defining the connections between firms by leveraging phone books’ entries and examines both the strengths and weaknesses of this approach. Our findings provide robust evidence of herding behavior in the context of leveraging policy decisions and weaker evidence in obtaining government procurement contracts. However, we were unable to find conclusive evidence to support the notion that these firm connections have a causal effect on peer behavior, particularly in terms of transmitting exogenous effects.