Size Matters: Entrepreneurship and Institutions

Authors

  • Ioana PETRESCU University of Maryland

Abstract

Encouraging the growth of firms is a priority for many governments, so identifying the factors that keep firms small is extremely important for public policy. One of these factors might be the poor quality of institutions. In this paper, I test whether institutions such as corruption, law and order, regulations, bureaucracy, investment friendliness of the government and property rights affect the number micro, small and medium firms and their rate of growth. This paper uses data on micro, small, and medium enterprises (MSME's) from the International Finance Corporation and firm growth data from the World Bank's Enterprise Surveys. It shows that better institutions increase the number of medium firms and encourage their growth, but do not have an effect on the number or growth of micro, small or large firms. These results suggest that changes in public policies are needed to improve institutions and foster the survival and growth of medium firms.

References

Aidis, R., Estrin, S., and Mickiewicz, T. (2009). Entrepreneurial Entry: Which Institutions Matter? CEPR Discussion Paper DP7278. London: Centre for Economic Policy Research.

Antunes, A., Cavalcanti, T., and Villami, A. (2008). The effect of Financial Repression and Enforcement on Entrepreneurship and Economic Development. Journal of Monetary Economics, 55(2), 278-297.

Bjørnskov, C., and Foss, N.J. (2008). Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence. Public Choice, 1343(4), 307-328.

Bonini, S., and Alkan, S. (2012). The Political and Legal Determinants of Venture Capital Investments around the World. Small Business Economics, 39(4), 997-1016.

Chemin, M. (2009). The Impact of the Judiciary on Entrepreneurship: Evaluation of Pakistan's "Access to Justice Programme". Journal of Public Economics, 93(1-2), 114-125.

Clarke, G.R. (2011). How Petty is Petty Corruption? Evidence from Firm Surveys in Africa. World Development, 39(7), 1122-1132.

Faccio, M. (2010). Differences between Politically Connected and Nonconnected Firms: A Cross-Country Analysis. Financial Management, 39(3), 905-928.

Fafchamps, M. (1994). Industrial Structure and Microenterprises in Africa. The Journal of Developing Areas, 29(1), 1-30.

Fisman, R., and Svensson, J. (2007). Are Corruption and Taxation Really Harmful to Growth? Firm Level Evidence. Journal of Development Economics, 83(1), 63-75.

Foellmi, R., and Oechslin, M. (2007). Who Gains from Non-collusive Corruption? Journal of Development Economics, 82(1), 95-119.

Grilo, I., and Thurik, R. (2008). Determinants of Entrepreneurial Engagement Levels in Europe and the US. Industrial and Corporate Change, 17(6), 1113-1145.

Gwartney, J., Lawson, R., and Hall, J. (2012). Economic Freedom Dataset. Retrieved from http://www.freetheworld.com/datasets_efw.html.

Klapper, L., Laeven, L., and Rajan, R. (2006). Entry Regulation as a Barrier to Entrepreneurship. Journal of Financial Economics, 82(3), 591-629.

Kozak, M. (2007). Micro, Small, and Medium Enterprises: A Collection of Published Data. Washington, D.C.: International Finance Corporation (IFC).

Little, I.M. (1987). Small Manufacturing Enterprises in Developing Countries. World Bank Economic Review, 1(2), 203-235.

Petrescu, I. (2012a). Financial Sector Quality and Tax Revenue: Panel Evidence. (Working Paper).

Petrescu, I. (2012b). Entrepreneurship, Bribes, and the Taxation of Personal Income. (Working Paper).

PRS Group (2013). International Country Risk Guide. Retrieved from www.countrydata.com.

Sanandaji , T., and Leeson, P.T. (2012). Billionaires. IFN Working Paper No. 893. Research Institute of Industrial Economics (IFN). Retrieved from http://ssrn.com/abstract=2051036

Schiffer, M., and Weder, B. (2001). Firm Size and the Business Environment: Worldwide Survey Results. IFC working paper number 43. Washington, D.C.: International Finance Corporation.

Shleifer, A., and Vishny, R. W. (1994). Politicians and Firms. The Quarterly Journal of Economics, 109(4), 995-1025.

Ufere, N., Perelli, S., Boland, R., and Carlsson, B. (2012). Merchants of Corruption: How Entrepreneurs Manufacture and Supply Bribes. World Development, 40(12), 2440-2453.

World Bank (2006). Doing Business in 2006: Creating Jobs. Washington, D.C.: World Bank.

World Bank (2013a). Enterprise Surveys. Retrieved from http://www.enterprisesurveys.org

World Bank (2013b). World Development Indicators 2013. Washington, D.C.: World Bank.

Downloads

Published

2016-03-24

How to Cite

PETRESCU, I. (2016). Size Matters: Entrepreneurship and Institutions. Management Dynamics in the Knowledge Economy, 4(1), 63–80. Retrieved from https://www.managementdynamics.ro/index.php/journal/article/view/168

Issue

Section

Articles