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The Effects of Business Environments on Development: Surveying New Firm-level Evidence

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  • Lixin Colin Xu

Abstract

In the past decade, the World Bank has promoted improving business environments as a key strategy for development, which has led to a significant effort in collecting surveys of the investment climate at the firm level across countries. The author examines the lessons that have emerged from the papers using these new data. The key finding is that the effects of business environments are heterogeneous and depend crucially on industry, initial conditions, and complementary institutions. Some elements of the business environment, such as labor flexibility, low entry and exit barriers, and a reasonable protection from the "grabbing hands" of the government, seem to matter a great deal for most economies. Other elements, such as infrastructure and contracting institutions (that is, courts and access to finance), hinge on their initial status and the size of the market. Copyright 2011, Oxford University Press.

Suggested Citation

  • Lixin Colin Xu, 2011. "The Effects of Business Environments on Development: Surveying New Firm-level Evidence," World Bank Research Observer, World Bank Group, vol. 26(2), pages 310-340, August.
  • Handle: RePEc:oup:wbrobs:v:26:y:2011:i:2:p:310-340
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    Cited by:

    1. Harrison, Ann E. & Lin, Justin Yifu & Xu, Lixin Colin, 2014. "Explaining Africa’s (Dis)advantage," World Development, Elsevier, vol. 63(C), pages 59-77.
    2. Cull, Robert & Li, Wei & Sun, Bo & Xu, Lixin Colin, 2015. "Government connections and financial constraints: Evidence from a large representative sample of Chinese firms," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 271-294.
    3. Franco, Chiara & Sanfilippo, Marco & Seric, Adnan, 2015. "What makes linkages "good" linkages? Firms, the investment climate and business support services in Vietnam," IOB Working Papers 2015.09, Universiteit Antwerpen, Institute of Development Policy (IOB).
    4. repec:rss:jnljms:v3i2p1 is not listed on IDEAS
    5. Lant Pritchett & Mary Hallward-Driemeier, 2010. "How Business is Done and the 'Doing Business' Indicators: The Investment Climate when Firms have Climate Control," CID Working Papers 211, Center for International Development at Harvard University.
    6. George Clarke & Yue Li & Lixin Colin Xu, 2016. "Business environment, economic agglomeration and job creation around the world," Applied Economics, Taylor & Francis Journals, vol. 48(33), pages 3088-3103, July.
    7. Liu,Tingting & Ullah,Barkat & Wei,Zuobao & Xu,L. Colin, 2015. "The dark side of disclosure : evidence of government expropriation from worldwide firms," Policy Research Working Paper Series 7254, The World Bank.
    8. Firth, Michael & Gong, Stephen X. & Shan, Liwei, 2013. "Cost of government and firm value," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 136-152.
    9. Nurullah Gur, 2012. "Financial Constraints, Quality of Institutions and Firm Size: What Do Perceptions Tell Us?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 2(2), pages 17-36, December.
    10. Wang, Yuanyuan & You, Jing, 2012. "Corruption and firm growth: Evidence from China," China Economic Review, Elsevier, vol. 23(2), pages 415-433.
    11. Jonathan Munemo, 2014. "Business start-up regulations and the complementarity between foreign and domestic investment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 745-761, November.
    12. Chen, Deqiu & Li, Sifei & Xiao, Jason Zezhong & Zou, Hong, 2014. "The effect of government quality on corporate cash holdings," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 384-400.
    13. Clarke, George R.G. & Qiang, Christine Zhenwei & Xu, Lixin Colin, 2015. "The Internet as a general-purpose technology: Firm-level evidence from around the world," Economics Letters, Elsevier, vol. 135(C), pages 24-27.
    14. Cull, Robert & Xu, Lixin Colin & Yang, Xi & Zhou, Li-An & Zhu, Tian, 2017. "Market facilitation by local government and firm efficiency: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 460-480.
    15. Amr Hosny, 2017. "Political Stability, Firm Characteristics and Performance: Evidence From 6,083 Private Firms in the Middle East," Working Papers 1137, Economic Research Forum, revised 09 2003.

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