I nternational Growth Centre 2014 Grow t h W eek 2014 Firms: - - PowerPoint PPT Presentation

I nternational Growth Centre

Grow t h W eek 2014 2014

Firms: Entrepreneurship

Greg Fischer I mran Rasul

I GC Growth Week 2014 Entrepreneurship - 1

Firm capabilities

• Sustainable increases in income are not

possible without similar increases in productivity

• Within broad universe of firms, our research

agenda focuses on the role of smaller firms

• SME entrepreneurial activity plays a critical role:

– Creating jobs – Fostering innovation – Generating economic growth

I GC Growth Week 2014 Entrepreneurship - 2

Entrepreneurship programme aims to answer three core questions

• How can entrepreneurship and employment

provide basic subsistence and increase labour productivity?

– transitions from agriculture into basic entrepreneurship – occupational choices of households – Bandiera et al. 2013, Banerjee et al. 2013,…

I GC Growth Week 2014 Entrepreneurship - 3

Entrepreneurship programme aims to answer three core questions

• What are the barriers to the efficient allocation of

resources across small firms

– What prevents the best firms from growing and the worst from exiting?

20 40 60 80

% of firms reported as main obstacle

India Pakistan Ghana Bangladesh Zambia Tanzania Uganda Sierra Leone Rwanda Mozambique Ethiopia Liberia

Countries are ordered from richest to poorest according to GDP per capita, PPP, in 2006.

finance institutions infrastructure land

• ther

Main Const raint Report ed by Sm all Firm s [ 5-19] 19] I nst it ut ional Const raint s Report ed by Sm all Firm s [ 5-19] 19]

10 20 30 40

% of firms reported as main obstacle

India Pakistan Ghana Bangladesh Zambia Tanzania Uganda Sierra Leone Rwanda Mozambique Ethiopia Liberia

Countries ordered from richest to poorest according to GDP per capita(PPP) in 2006.

taxes licencing/customs crime/courts labor reg corruption/instability

I GC Growth Week 2014 Entrepreneurship - 4

Entrepreneurship programme aims to answer three core questions

• What drives the formality-informality decisions of

individuals and firms and what effect does this have on growth and state capacity?

– firms may overestimate the costs to formalization, the short-run gains are similarly muted (Alcázar et al 2010; De Mel et al 2012)

1 2 3 4 5 ranking-large firms 1 2 3 4 5 ranking-small firms

Taxes

1 2 3 4 5 ranking-large firms 1 2 3 4 5 ranking-small firms

Licencing/Customs

1 2 3 4 5 ranking-large firms 1 2 3 4 5 ranking-small firms

Crime/Courts

1 2 3 4 5 ranking-large firms 1 2 3 4 5 ranking-small firms

Labor Regulation

1 2 3 4 5 ranking-large firms 1 2 3 4 5 ranking-small firms

Corruption/Instability

Notes: each observation represents the ranking by importance of a constraint within a country. Location of points has been perturbated to show overlapping observations.

I GC Growth Week 2014

Must improve quality & comparability of measurement around these issues

• Much of the data required to answer these

questions is unreliable

– e.g. measures of revenues, profits, and other firm

• utcomes are generally sparse and unreliable for

SMEs

• need for methodological developments to meas

asur ure cash flows/outlays, business/management practices

• Working closely with the country programmes,

central banks, and business associations in member countries the IGC can stimulate far- reaching methodological advances

Entrepreneurship - 5