Explaining Enterprise Performance in Developing Countries with Business Climate Survey Data

Abstract

The authors survey the recent literature which examines the impact of the business climate on productivity and growth in developing countries using enterprise surveys. Comparable enterprise surveys today cover more than 100,000 firms in 123 countries. The literature that has analyzed this data provides evidence that a good business climate favors growth by encouraging investment and higher productivity. Various infrastructure, finance, security, competition, and regulation variables have been shown to have a significant impact on enterprise performance. The authors state their motivation for their review by explaining why a disaggregated, firm-level analysis of the relationship between enterprise performance and business climate-as opposed to a more macroaggregate analysis-is important to gaining insights into these issues. They review the main findings of the empirical microliterature based on enterprise surveys and consider the robustness of the results. To conclude they put forward some ideas to advance research on business climate and growth, and they suggest possible improvements in survey design. JEL codes: L51, O47, O12 In recent years, an unprecedented data collection effort has yielded a set of comparable enterprise surveys covering more than 100,000 firms from 123 countries. As a result, a number of studies have started to analyze the impact of the business climate variables contained in these surveys on different dimensions of firm performance. The general aim of this literature is to generate policy prescriptions based on the identification of the main constraints facing firms. Although many of these studies identify relevant constraints, contradictory or fragile results are also found, pointing to some weaknesses in the methodology The World Bank Research Observer

The Causal Effect of Access to Finance on Productivity of Small and Medium Enterprises in Vietnam

“…Since the capital markets in many developing economies have not been well-developed, firms in these countries, particularly small and medium enterprises, may face significant challenges in obtaining financing and other banking services at affordable rates and fair terms. From an empirical viewpoint, existing studies generally confirm that firms in developing countries often cite financial constraints as the main obstacle to their growth [3][4][5][6][7]. However, some evidence suggests that the development of the financial sector may not necessarily lead to a positive outcome in terms of growth for firms [8][9][10][11].…”

Exploring the associations between institutional constraints and entrepreneur’s perception in future business climate

“…It is widely recognised that entrepreneurship makes a significant contribution to economic growth (Bosma, Content, Sanders, & Stam, 2018), employment and competitiveness (Chowdhury, Audretsch, & Belitski, 2018). Also, it is known that firm growth leads to the enhancement of investment and productivity (Dethier, Hirn, & Straub, 2011), which in turn is affected by the business environment (Krasniqi & Desai, 2016). Consequently, it can be assumed an association between institutional environment and business climate.…”

“…Tax administration is reported by entrepreneurs as a problem for their activity in middle-income countries (Dethier et al, 2011). Likewise, firms operating in South East and Central European countries identified tax administration as one of the major obstacles for their activity (Batsakis, 2014;Hashi & Krasniqi, 2011).…”

Firm-Level Data in the Mena Region: Research Questions, Data Requirements and Possibilities

“…Many of these papers use data from the WES mentioned above. Dethier et al (2010) provide a detailed survey of this literature. Not surprisingly, they report overwhelming evidence that improvements in the business climate lead to better firm performance.…”