Big Constraints to Small Firms’ Growth? Business Environment and Employment Growth across Firms
Using data on more than 56,000 enterprises in 90 countries, this paper finds that objective conditions in the business environment vary substantially across firms of different sizes and that there are important non-linearities in their impact on em...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090831130412 http://hdl.handle.net/10986/4224 |
| Summary: | Using data on more than 56,000
enterprises in 90 countries, this paper finds that objective
conditions in the business environment vary substantially
across firms of different sizes and that there are important
non-linearities in their impact on employment growth. The
paper focuses on four areas: access to finance, business
regulations, corruption, and infrastructure. The results,
particularly on the impacts of finance and corruption on
growth, depend on whether and how the analysis accounts for
the possible endogeneity of the business environment.
Controlling for endogeneity revises the finding that small
firms benefit most from access to finance, particularly for
sources of finance associated with investment and growth.
The findings are also sensitive to how small is defined.
Differentiating micro (less than 10 employees) from other
small firms shows that, while small firms can be
disadvantaged in such an environment, micro firms tend to be
proportionally less affected by a weak business climate
and, on occasion, it can help them to grow. Overall,
allowing different size classifications provides insights
into the impact of the business environment that are lost in
more aggregate analyses. |
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