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What Determines Entrepreneurial Outcomes in Emerging Markets? The Role of Initial Conditions

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  • Meghana Ayyagari
  • Asli Demirguc-Kunt
  • Vojislav Maksimovic

Abstract

We study how institutions influence start-up characteristics of firms and how these characteristics predict entrants’ growth trajectories over the early firm life cycle. Using census data from India, we find that greater financial development is associated with higher entry rates and smaller-sized entrants. Following entry, however, large and small entrants grow at the same rates across states with different institutions or industries with differing reliance on external finance. The impact of access to finance is greater on start-up size and entry rates than on the subsequent growth of firms during the early life cycle.Received April 30, 2015; editorial decision August 5, 2016 by Editor Andrew Karolyi.

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  • Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2017. "What Determines Entrepreneurial Outcomes in Emerging Markets? The Role of Initial Conditions," The Review of Financial Studies, Society for Financial Studies, vol. 30(7), pages 2478-2522.
    • Handle: RePEc:oup:rfinst:v:30:y:2017:i:7:p:2478-2522.
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    Cited by:

    1. Aditya Bhattacharjea, 2019. "Labour Market Flexibility in Indian Industry A Critical Survey of the Literature," Working papers 296, Centre for Development Economics, Delhi School of Economics.
    2. Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2021. "Are large firms born or made? Evidence from developing countries," Small Business Economics, Springer, vol. 57(1), pages 191-219, June.
    3. Florian Leon, 2019. "The elusive quest for high- growth firms in Africa: The (lack of) growth persistence in Senegal," Working Papers hal-02493326, HAL.
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    5. HONJO, Yuji & IWAKI, Yunosuke & KATO, Masatoshi, 2024. "Outside or inside the firm? The impact of debt financing on the exit routes of start-up firms," TDB-CAREE Discussion Paper Series E-2023-02, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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