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Does (average) size matter? Court enforcement, business demography and firm growth

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  • Miguel García-Posada

    ()

  • Juan Mora-Sanguinetti

    ()

Abstract

Previous literature finds that the quality of judicial enforcement has a positive impact on average firm size, but it has not disentangled its effect on the growth of incumbent firms from that on business demography. This distinction is crucial, as entrants are generally smaller than incumbents, but both high entry rates and high firm growth are associated with better economic performance. This paper fills this gap, finding that judicial efficacy fosters the growth of incumbents and promotes entry in Spain. The paper also shows for the first time that the specific type of judicial procedure that companies face in case of a conflict, rather than the overall functioning of courts, is the relevant matter. Specifically, judicial efficacy at the declaratory stage (when a debt is verified by a judge) has a positive impact on both firm growth and entry, while it has no impact at the execution stage (when the judge requires its payment). Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Miguel García-Posada & Juan Mora-Sanguinetti, 2015. "Does (average) size matter? Court enforcement, business demography and firm growth," Small Business Economics, Springer, vol. 44(3), pages 639-669, March.
  • Handle: RePEc:kap:sbusec:v:44:y:2015:i:3:p:639-669
    DOI: 10.1007/s11187-014-9615-z
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Miguel García-Posada & Juan Mora-Sanguinetti, 2015. "Entrepreneurship and enforcement institutions: disaggregated evidence for Spain," European Journal of Law and Economics, Springer, vol. 40(1), pages 49-74, August.
    2. Mora-Sanguinetti, Juan S. & Garoupa, Nuno, 2015. "Do lawyers induce litigation? Evidence from Spain, 2001–2010," International Review of Law and Economics, Elsevier, vol. 44(C), pages 29-41.
    3. repec:oup:jecgeo:v:17:y:2017:i:6:p:1251-1282. is not listed on IDEAS
    4. Juan S. Mora-Sanguinetti & Marta Martínez-Matute & Miguel García-Posada, 2017. "Credit, crisis and contract enforcement: evidence from the Spanish loan market," European Journal of Law and Economics, Springer, vol. 44(2), pages 361-383, October.
    5. Juan F. Jimeno & Marta Martínez-Matute & Juan S. Mora-Sanguinetti, 2015. "Employment protection legislation and labor court activity in Spain," Working Papers 1507, Banco de España;Working Papers Homepage.
    6. Juan S. Mora-Sanguinetti & Nuno Garoupa, 2015. "Litigation in Spain 2001-2010: Exploring the market for legar services," Working Papers 1505, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    Enforcement institutions; Judicial efficacy; Firm size; Firm growth; Business demography; D23; K41; K12; L11; L25; L26; O12; R12;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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