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What influences firms' perceptions?

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  • Kaplan, David S.
  • Pathania, Vikram

Abstract

Perceptions-based indicators are sometimes used to measure the quality of the business environment. For instance, firms are asked about the major constraints on business operations and expansion. Little is known, however, about what shapes their responses. In this paper, using perceptions-based indicators from 38 countries (84 country-year pairs) from the World Bank Enterprise Surveys, we argue that firm responses are critically influenced by macroeconomic conditions. Paradoxically, we find that perceptions worsen during periods of high GDP growth. We also examine other indicators from the Enterprise Surveys that are objective measures of constraints, and find mixed evidence on how business constraints vary with the business cycle. Finally, we find that firms that introduce new product lines, which are likely those with the most interactions with regulatory agencies, have particularly bad perceptions of the business environment. We conclude that changes in firms' perceptions over time may not reflect changes in the business environment.

Suggested Citation

  • Kaplan, David S. & Pathania, Vikram, 2010. "What influences firms' perceptions?," Journal of Comparative Economics, Elsevier, vol. 38(4), pages 419-431, December.
    • Handle: RePEc:eee:jcecon:v:38:y:2010:i:4:p:419-431
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    Cited by:

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    2. Jahedi, Salar & Méndez, Fabio, 2014. "On the advantages and disadvantages of subjective measures," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 97-114.
    3. ROUGIER Eric, 2015. ""The parts and the whole”: Unbundling and re-bundling institutional systems and their effect on economic development," Cahiers du GREThA (2007-2019) 2015-12, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    4. Michael Peneder & Hans Pitlik & Alexandros Charos, 2023. "Standortqualität und Vertrauen in öffentliche Institutionen. Executive Opinion Survey 2022," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(3), pages 167-175, March.
    5. Van-Ha Le & Jakob de Haan & Erik Dietzenbacher & Jakob de Haan, 2013. "Do Higher Government Wages Reduce Corruption? Evidence Based on a Novel Dataset," CESifo Working Paper Series 4254, CESifo.
    6. Michael Peneder & Hans Pitlik & Alexandros Charos, 2023. "Business Location Quality and Trust in Public Institutions. Executive Opinion Survey 2022," WIFO Reports on Austria, WIFO, issue 4, March.
    7. World Bank Group, 2015. "Myanmar Investment Climate Assessment : Sustaining Reforms in a Time of Transition," World Bank Publications - Reports 21596, The World Bank Group.
    8. Şeker, Murat & Yang, Judy S., 2014. "Bribery solicitations and firm performance in the Latin America and Caribbean region," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 246-264.
    9. Seker, Murat & Yang, Judy S., 2012. "How bribery distorts firm growth : differences by firm attributes," Policy Research Working Paper Series 6046, The World Bank.
    10. Lu, Jiangyong & Liu, Xiaohui & Filatotchev, Igor & Wright, Mike, 2014. "The impact of domestic diversification and top management teams on the international diversification of Chinese firms," International Business Review, Elsevier, vol. 23(2), pages 455-467.

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