Big Constraints to Small Firms’ Growth? Business Environment and Employment Growth across Firms

By Reyes Aterido, Mary C. Hallward-Driemeier, Carmen Pagés. Economic development and cultural change, 2009

316 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/cc3adca15214f1ae086991713520496ed957127d

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Citations in the corpus

The cost of growth: small firms and the pricing of bank loans (2015, unknown): “Size has been shown to affect both access to and price of credit (Aterido et al. 2011; Beck et al. 2005; Binks and Ennew 1996; Freel 2007; Vos et al. 2007).”
Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries (2013, background): “(2000) and Aterido et al. (2009), imperfections in the credit and financial markets, a non-transparent regulatory environment, the lack of infrastructures, and the high incidence of bribing are important hindering factors affecting firm’s growth in DCs.”
Drivers of Entrepreneurship and Post-Entry Performance of Newborn Firms in Developing Countries (2014, unknown): “As extensively discussed by Tybout (2000), Aterido, Hallward-Driemeier, and Pagés (2009), and Vivarelli (2012), imperfections in the credit and financial markets, a non-transparent regulatory environment, the lack of infrastructure and the high incidence of bribing are important factors that hinder…”
Market Facilitation by Local Government and Firm Efficiency: Evidence from China (2013, background): “Please cite this article as: Cull, R., et al., Market facilitation by local government and firm efficiency: Evidence from China, J. Corp. Finance (2015), http://dx.”