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What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania

J. David Brown (), John Earle () and Daniela Lup ()

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

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, and there is only weak evidence for the effectiveness of technical assistance, and only when it is provided by foreign partners. 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.

Keywords: Small Firms; Entrepreneurship; Microfinance; Business Environment; Romania (search for similar items in EconPapers)
JEL-codes: M13 O16 O19 P26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent and nep-tra
Date: 2004-05-01
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http://deepblue.lib.umich.edu/bitstream/2027.42/40088/3/wp702.pdf

Related works:
Journal Article: What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania (2005) Downloads
Working Paper: What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance and the Business Environment in Romania (2004) Downloads
Working Paper: What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania (2004) Downloads
Working Paper: What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania (2003) Downloads
Working Paper: What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania Downloads
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