Firm growth in a regional trade integration context

It is widely acknowledged that young ventures and fast growing firms have a strong impact on economic growth and employment creation. It is not only entrepreneurial dynamics associated to entry and exit of new ventures, but also the ability of firms to survive and grow, that is important for economic development. Fast growing firms (not necessarily new), are the most dynamic agents in the economy and play a key role in job creation. Despite the economic impact of fast growing ventures, knowledge about the factors driving their growth path is unclear. A better understanding about how these factors work is important for developing countries, particularly for Latin American economies. Our study intends to contribute to entrepreneurship literature in two ways: a) integrating firm level factors associated to growth, with the local or sectorial environment within which those firms operate, in a small Latin American economy (Uruguay); b) framing that analysis within the context of a regional trade block (Mercosur). Entrepreneurship literature about these issues is scarce for developing economies, and our conjecture is that factors associated to micro and meso level of analysis, in this regional context, matter for how firms overcome the growth barriers they face. In our study, we analyze how firm and context level factors interact so as to explain employment growth of a sample of Uruguayan SMEs, during 2003-2007, period of strong economic expansion that followed a deep recession. Uruguay is a small and relatively open economy, located between Argentina and Brazil, partners in a regional trade agreement (Mercosur). We intend also to analyze how being part of this trade block has influence on firm growth. Preliminary results show, as expected, that small, young and internationalized firms tend to grow faster. Also, that regional and sectorial characteristics influence the ability of SMEs to surmount barriers to growth. Finally, some characteristics of the integration of the regional trade block into the world economy seem to be relevant to explain firm growth in Uruguay.