I nternational Growth Centre 2014 Grow t h W eek 2014 Firms: Entrepreneurship Greg Fischer I mran Rasul
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 - 1
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 - 2
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? 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] 80 40 % of firms reported as main obstacle % of firms reported as main obstacle 60 30 40 20 10 20 0 0 India Pakistan Ghana Bangladesh Zambia Tanzania Uganda Sierra Leone Rwanda Mozambique Ethiopia Liberia Bangladesh Uganda Sierra Leone Rwanda Mozambique Liberia India Pakistan Ghana Zambia Tanzania Ethiopia taxes licencing/customs crime/courts finance institutions infrastructure labor reg corruption/instability land other Countries ordered from richest to poorest according to GDP per capita(PPP) in 2006. Countries are ordered from richest to poorest according to GDP per capita, PPP, in 2006. I GC Growth Week 2014 Entrepreneurship - 3
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) Taxes Licencing/Customs Crime/Courts 5 5 5 ranking-large firms ranking-large firms ranking-large firms 4 4 4 3 3 3 2 2 2 1 1 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 ranking-small firms ranking-small firms ranking-small firms Labor Regulation Corruption/Instability 5 5 ranking-large firms ranking-large firms 4 4 3 3 2 2 1 1 1 2 3 4 5 1 2 3 4 5 ranking-small firms ranking-small firms 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 Entrepreneurship - 4
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 outcomes 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 I GC Growth Week 2014 Entrepreneurship - 5
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