IDEAS home Printed from https://ideas.repec.org/a/pal/buseco/v54y2019i4d10.1057_s11369-019-00137-4.html
   My bibliography  Save this article

Diehard or delicate? Violence and young firm performance in a developing country

Author

Listed:
  • Ummad Mazhar

    (Lahore University of Management Sciences (LUMS))

  • Fahd Rehman

    (Lahore University of Management Sciences (LUMS))

Abstract

The genesis and survival of new businesses is an important determinant of entrepreneurial dynamism. With the recent surge in security challenges, the issue of young firms’ resilience has surfaced. How do changes in external risks affect firms of different ages? Using Enterprise Surveys, we construct a unique data set of more than 2000 firms locating across Pakistan. The information is used to estimate the link between firms’ employment growth and alternative measures of political violence at the provincial level. The key estimates suggest that the youngest firms in our sample experience 45% lesser growth in employment each year when terrorism escalates at its average rate. The growth cut is 31% for old firms. These findings are not conditional on firm size or the way political violence is measured. A battery of statistical tests, including an instrumental variables estimator, validates the inference.

Suggested Citation

  • Ummad Mazhar & Fahd Rehman, 2019. "Diehard or delicate? Violence and young firm performance in a developing country," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 54(4), pages 236-247, October.
    • Handle: RePEc:pal:buseco:v:54:y:2019:i:4:d:10.1057_s11369-019-00137-4
    DOI: 10.1057/s11369-019-00137-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s11369-019-00137-4
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s11369-019-00137-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Reyes Aterido & Mary Hallward-Driemeier & Carmen Pagés, 2011. "Big Constraints to Small Firms' Growth? Business Environment and Employment Growth across Firms," Economic Development and Cultural Change, University of Chicago Press, vol. 59(3), pages 609-647.
    2. Robert Cressy, 2006. "Why do Most Firms Die Young?," Small Business Economics, Springer, vol. 26(2), pages 103-116, March.
    3. Timothy Besley & Hannes Mueller, 2018. "Predation, Protection, and Productivity: A Firm-Level Perspective," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 184-221, April.
    4. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    5. United Nations & World Bank, 2018. "Pathways for Peace," World Bank Publications - Books, The World Bank Group, number 28337, December.
    6. Asif Islam, 2014. "Economic growth and crime against small and medium sized enterprises in developing economies," Small Business Economics, Springer, vol. 43(3), pages 677-695, October.
    7. Alex Coad & Sven-Olov Daunfeldt & Daniel Halvarsson, 2018. "Bursting into life: firm growth and growth persistence by age," Small Business Economics, Springer, vol. 50(1), pages 55-75, January.
    8. Colombelli, Alessandra & Krafft, Jackie & Vivarelli, Marco, 2016. "To Be Born Is Not Enough: The Key Role of Innovative Startups," IZA Discussion Papers 9733, Institute of Labor Economics (IZA).
    9. Chakraborty, Pavel, 2016. "Judicial quality and regional firm performance: The case of Indian states," Journal of Comparative Economics, Elsevier, vol. 44(4), pages 902-918.
    10. Eric Bartelsman & Stefano Scarpetta & Fabiano Schivardi, 2005. "Comparative analysis of firm demographics and survival: evidence from micro-level sources in OECD countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(3), pages 365-391, June.
    11. Mazhar Ummad, 2019. "Terrorism and Firm Performance: Empirical Evidence from Pakistan," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-17, January.
    12. David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, INFORMS, vol. 63(9), pages 2967-2981, September.
    13. Bates, Timothy, 2005. "Analysis of young, small firms that have closed: delineating successful from unsuccessful closures," Journal of Business Venturing, Elsevier, vol. 20(3), pages 343-358, May.
    14. Goel, Rajeev K. & Mazhar, Ummad & Nelson, Michael A. & Ram, Rati, 2017. "Different forms of decentralization and their impact on government performance: Micro-level evidence from 113 countries," Economic Modelling, Elsevier, vol. 62(C), pages 171-183.
    15. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    16. Thomas F Siems, 2005. "Who Supplied My Cheese? Supply Chain Management in the Global Economy," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 40(4), pages 6-21, October.
    17. Aga,Gemechu A. & Francis,David C. & Rodriguez Meza,Jorge Luis, 2015. "SMEs, age, and jobs : a review of the literature, metrics, and evidence," Policy Research Working Paper Series 7493, The World Bank.
    18. Marco Grazzi & Daniele Moschella, 2018. "Small, young, and exporters: New evidence on the determinants of firm growth," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 125-152, January.
    19. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    20. Graeme Blair & C. Christine Fair & Neil Malhotra & Jacob N. Shapiro, 2013. "Poverty and Support for Militant Politics: Evidence from Pakistan," American Journal of Political Science, John Wiley & Sons, vol. 57(1), pages 30-48, January.
    21. Marc Rockmore, 2017. "The Cost of Fear: The Welfare Effect of the Risk of Violence in Northern Uganda," The World Bank Economic Review, World Bank, vol. 31(3), pages 650-669.
    22. Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2014. "Who creates jobs in developing countries?," Small Business Economics, Springer, vol. 43(1), pages 75-99, June.
    23. Manuel Adelino & Song Ma & David Robinson, 2017. "Firm Age, Investment Opportunities, and Job Creation," Journal of Finance, American Finance Association, vol. 72(3), pages 999-1038, June.
    24. Rehman, Faiz Ur & Vanin, Paolo, 2017. "Terrorism risk and democratic preferences in Pakistan," Journal of Development Economics, Elsevier, vol. 124(C), pages 95-106.
    25. Alex Coad, 2018. "Firm age: a survey," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 13-43, January.
    26. Gabriele Pellegrino, 2018. "Barriers to innovation in young and mature firms," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 181-206, January.
    27. Brück, Tilman & Llussá, Fernanda & Tavares, José A., 2011. "Entrepreneurship: The role of extreme events," European Journal of Political Economy, Elsevier, vol. 27(S1), pages 78-88.
    28. Alex Coad & Jacob Rubæk Holm & Jackie Krafft & Francesco Quatraro, 2018. "Firm age and performance," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 1-11, January.
    29. Brambor, Thomas & Clark, William Roberts & Golder, Matt, 2006. "Understanding Interaction Models: Improving Empirical Analyses," Political Analysis, Cambridge University Press, vol. 14(1), pages 63-82, January.
    30. Paul Davidson Reynolds, 2017. "When is a Firm Born? Alternative Criteria and Consequences," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(1), pages 41-56, January.
    31. Flavio Calvino & Chiara Criscuolo & Carlo Menon, 2015. "Cross-country evidence on start-up dynamics," OECD Science, Technology and Industry Working Papers 2015/6, OECD Publishing.
    32. Michael S. Dahl & Steven Klepper, 2015. "Whom do new firms hire?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(4), pages 819-836.
    33. Mary Hallward-Driemeier & Lant Pritchett, 2015. "How Business Is Done in the Developing World: Deals versus Rules," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 121-140, Summer.
    34. Michael R Czinkota & Gary Knight & Peter W Liesch & John Steen, 2010. "Terrorism and international business: A research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(5), pages 826-843, June.
    35. Paul Davidson Reynolds, 2017. "Erratum to: When is a Firm Born? Alternative Criteria and Consequences," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(1), pages 81-83, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sorin M. S. Krammer & Addisu A. Lashitew & Jonathan P. Doh & Hari Bapuji, 2023. "Income inequality, social cohesion, and crime against businesses: Evidence from a global sample of firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(2), pages 385-400, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ummad Mazhar, 2021. "Women empowerment and insecurity: firm-level evidence," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(1), pages 43-53, January.
    2. Mazhar Ummad, 2019. "Terrorism and Firm Performance: Empirical Evidence from Pakistan," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-17, January.
    3. Alex Coad, 2018. "Firm age: a survey," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 13-43, January.
    4. Ummad Mazhar, 2021. "Terrorism Risk and the Mediating Role of Manager Experience: Empirical Evidence," Asian Economic Journal, East Asian Economic Association, vol. 35(3), pages 317-337, September.
    5. Hassan Arouri & Adel Ben Youssef & Francesco Quatraro & Marco Vivarelli, 2020. "Drivers of growth in Tunisia: young firms vs incumbents," Small Business Economics, Springer, vol. 54(1), pages 323-340, January.
    6. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    7. Alex Coad & Jacob Rubæk Holm & Jackie Krafft & Francesco Quatraro, 2018. "Firm age and performance," Journal of Evolutionary Economics, Springer, vol. 28(1), pages 1-11, January.
    8. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    9. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute of Labor Economics (IZA).
    10. Blessing Atwine & Ibrahim Mike Okumu & John Bosco Nnyanzi, 2023. "What drives the dynamics of employment growth in firms? Evidence from East Africa," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-25, December.
    11. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    12. Niklas Elert, 2014. "What determines entry? Evidence from Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 55-92, August.
    13. Rui Baptista & Murat Karaöz & João Correia Leitão, 2020. "Diversification by young, small firms: the role of pre-entry resources and entry mistakes," Small Business Economics, Springer, vol. 55(1), pages 103-122, June.
    14. Masatoshi Kato & Koichiro Onishi & Yuji Honjo, 2022. "Does patenting always help new firm survival? Understanding heterogeneity among exit routes," Small Business Economics, Springer, vol. 59(2), pages 449-475, August.
    15. Rajeev K. Goel & Ummad Mazhar & Rati Ram, 2022. "Dimensions of size and corruption perceptions versus corruption experiences by firms in emerging economies," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 46(2), pages 374-396, April.
    16. Colombelli, Alessandra & Krafft, Jackie & Vivarelli, Marco, 2016. "New Firms and Post-Entry Performance: The Role of Innovation," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201602, University of Turin.
    17. Alessandra Colombelli & Jackie Krafft & Marco Vivarelli, 2016. "Entrepreneurship and Innovation: New Entries, Survival, Growth," GREDEG Working Papers 2016-04, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    18. Diwan, Ishac & Jamal Ibrahim Haidar, "undated". "Do Political Connections Reduce Job Creation? Evidence from Lebanon," Working Paper 414186, Harvard University OpenScholar.
    19. Florian Léon, 2020. "Firm growth in developing countries: Driven by external shocks or internal characteristics?," Working Papers hal-03004383, HAL.
    20. Pietro Santoleri, 2020. "Innovation and job creation in (high-growth) new firms [An international cohort comparison of size effects on job growth]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 29(3), pages 731-756.

    More about this item

    Keywords

    Firm age; Firm performance; Political violence; Terrorism; Pakistan;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:buseco:v:54:y:2019:i:4:d:10.1057_s11369-019-00137-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.