Size Matters: Entrepreneurship and Institutions
Size Matters: Entrepreneurship and Institutions

Summary/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 testwhether 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 andfirm growth data from the World Bank's Enterprise Surveys. It shows that betterinstitutions increase the number of medium firms and encourage their growth, but donot have an effect on the number or growth of micro, small or large firms. These resultssuggest that changes in public policies are needed to improve institutions and fosterthe survival and growth of medium firms.

• Details
• Contents