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Title:What Makes Small Firms Grow? : Finance, Human Capital, Technical Assistance, and the Business Environment in Romania PDF Logo
Authors:Brown, J. David
Earle, John S.
Lup, Dana
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1343
Abstract:Although the development of a new private sector is generally considered crucial to economic transition, there has been rather little empirical research on the determinants of startup firm growth. This paper uses panel data techniques to analyze a survey of 297 new small enterprises in Romania containing detailed information from the startup date through 2001. We find strong evidence that access to external credit increases the growth of both employment and sales. Taxes appear to constrain growth. The data suggest that entrepreneurial skills have little independent effect on growth, once demand conditions are taken into account. The evidence for the effectiveness of technical assistance is weak: only assistance provided by foreign partners yields a positive effect. A wide variety of alternative measures of the business environment (contract enforcement, property rights, and corruption) are tested, but none are found to have any clear association with firm growth.
Subjects:small firms
entrepreneurship
microfinance
business environment
Romania
JEL:P26
O16
M13
O19
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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