Business Environment and Firm Performance in European Lagging Regions
This paper explores the relationship between the regional business environment, lagging regions, and firm performance in four European countries: Italy, Poland, Romania, and Spain. It combines firm-level data from Orbis measuring sales, employment,...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/908471513612361961/Business-environment-and-firm-performance-in-European-lagging-regions http://hdl.handle.net/10986/29073 |
| Summary: | This paper explores the relationship
between the regional business environment, lagging regions,
and firm performance in four European countries: Italy,
Poland, Romania, and Spain. It combines firm-level data from
Orbis measuring sales, employment, productivity, and
profitability, with indicators from recently completed
Subnational Doing Business studies in the four countries to
examine if and how the business environment is associated
with firm outcomes, and whether this is mediated by being
located in a lagging region. The results indicate that firms
located in regions with better business environments indeed
display better performance, in employment and sales growth,
as well as profitability. Moreover, the paper finds evidence
that being located in a lagging region aggravates the impact
of a poor business environment on firm performance. The
results also highlight that it matters to distinguish
between regions that are "low income" (relatively
poor) and those that are "low growth" (stagnating
but not necessarily poor). Firm performance, the business
environment, and the relationship between the two are much
stronger in the latter than in the former. Overall, the
results suggest that policies that improve the business
environment in lagging regions would be beneficial to the
performance of firms in these regions, in growth,
profitability, and investment. |
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