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Finance, Human Capital, Technical Assistance, and the Business Environment in Romania

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Author Info
J. David Brown
John S. Earle ()
Dana Lup

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Abstract

Although the development of a new private sector is generally considered crucial to economic transition and development, there has been 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 finance (loans) increases the growth of both employment and sales. Taxes appear to constrain growth. There is some evidence that entrepreneurial skills increase growth, but only weak evidence for the effectiveness of technical assistance, and only when it is provided by foreign partners or international agencies. A wide variety of alternative measures of the business environment (contract enforcement, property rights, and corruption) are tested, but are found to have little or no association with firm growth.

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Publisher Info
Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 2004-639.

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Length: 49 pages
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-639

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Related research
Keywords: small firms; entrepreneurship; microfinance; business environment;

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Find related papers by JEL classification:
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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References listed on IDEAS
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  1. Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September. [Downloadable!] (restricted)
  2. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
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  3. John McMillan & Christopher Woodruff, 2002. "The Central Role of Entrepreneurs in Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 153-170, Summer. [Downloadable!] (restricted)
  4. Schneider, Friedrich, 2002. "The Size and Development of the Shadow Economies of 22 Transition and 21 OECD Countries," IZA Discussion Papers 514, Institute for the Study of Labor (IZA). [Downloadable!]
  5. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November. [Downloadable!] (restricted)
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  6. Andrzej Bratkowski & Irena Grosfeld & Jacek Rostowski, 2000. "Investment and Finance in "de novo" private firms: Empirical Results from the Czech Republic, Hungary and Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 101-116, March. [Downloadable!] (restricted)
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  7. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Francesca Pissarides & Miroslav Singer & Jan Svejnar, 2000. "Objectives and Constraints of Entrepreneurs: Evidence from Small and Medium Size Enterprises in Russia and Bulgaria," William Davidson Institute Working Papers Series 346, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  9. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December. [Downloadable!] (restricted)
  10. A. Richter & M.E. Schaffer, 1996. "The Performance of De Novo Private Firms in Russian Manufacturing," CERT Discussion Papers 9610, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
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