2011/03/21 by Reyes Aterido, Mary Hallward-Driemeier, Mary Hallward‐Driemeier +1 · 252 citations
Business, Management and Accounting · Computer Science · Economics, Econometrics and Finance · #Access to finance #Business #Business environment #Corporate Finance and Governance #Disadvantaged #Econometrics #Economic Growth and Development #Economic growth #Economics #Endogeneity #Finance #Firm Innovation and Growth #Investment (military) #Labour economics #Language change #Politics #Small business
paper · doi:10.1086/658349
published in Economic Development and Cultural Change 59(3), 609-647 (University of Chicago Press)
openalex publication_date 2011/03/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
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.