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 study finds that objective conditions in the business environment vary substantially across firms of different sizes and that there are important nonlinearities in their impact on employment growth. The study 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 (fewer 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.
| Main Authors: | , , |
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| Format: | Journal Article biblioteca |
| Language: | EN |
| Published: |
2011
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| Subjects: | Capital Budgeting, Fixed Investment and Inventory Studies, Capacity G310, Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure G320, Firm Performance: Size, Diversification, and Scope L250, Economic Development: Financial Markets, Saving and Capital Investment, Corporate Finance and Governance O160, |
| Online Access: | http://hdl.handle.net/10986/4787 |
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