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Patterns of business creation, survival and growth : evidence from Africa

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  • Klapper, Leora
  • Richmond, Christine

Abstract

The authors study firm dynamics using a novel database of all formally registered firms in Cote d'Ivoire from 1977 to 1997, which account for about 60 percent of gross domestic product. First, they examine entry and exit patterns and the role of new and exiting firms versus incumbents in job creation and destruction. They find that while the rate of job creation at new firms is quiet high -- at 8 percent on average -- the number of jobs added by new firms is small in absolute terms. Next, they examine survival rates and find that the probability of survival increases monotonically with firm size, but manufacturing and foreign-owned firms face higher likelihoods of exit compared with service oriented and domestically owned firms. They find that higher growth of gross domestic product increases the probability of firm survival, but this is a broad impact with no firm size disproportionately affected. In robustness checks, they find that after 1987 size is no longer a significant determinant of firm survival for new entrants, suggesting that the operating environment for firms changed. Finally, they find that trade and fiscal reform episodes raised the probability of firm exit and attenuated the survival disadvantages faced by smaller firms, but exchange rate revaluation and pro-private sector reforms did not significantly lower the likelihood of exit.

Suggested Citation

  • Klapper, Leora & Richmond, Christine, 2011. "Patterns of business creation, survival and growth : evidence from Africa," Policy Research Working Paper Series 5828, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5828
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    References listed on IDEAS

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    Cited by:

    1. Guimarães Barbosa, Evaldo, 2016. "External determinants of small business survival – The overwhelming impact of GDP and other environmental factors and a new proposed framework," MPRA Paper 73346, University Library of Munich, Germany.
    2. Nasr, Sahar & Rostom, Ahmed, 2013. "SME contributions to employment, job creation, and growth in the Arab world," Policy Research Working Paper Series 6682, The World Bank.
    3. Rijkers, Bob & Arouri, Hassen & Freund, Caroline & Nucifora, Antonio, 2014. "Which firms create the most jobs in developing countries? Evidence from Tunisia," Labour Economics, Elsevier, vol. 31(C), pages 84-102.
    4. Andrew Kerr & Martin Wittenberg & Jairo Arrow, 2014. "Job Creation and Destruction in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 82(1), pages 1-18, March.
    5. Dodlova, Marina & Göbel, Kristin & Grimm, Michael & Lay, Jann, 2015. "Constrained firms, not subsistence activities: Evidence on capital returns and accumulation in Peruvian microenterprises," Labour Economics, Elsevier, vol. 33(C), pages 94-110.
    6. Aga,Gemechu A. & Francis,David C., 2015. "As the market churns : estimates of firm exit and job loss using the World Bank's enterprise surveys," Policy Research Working Paper Series 7218, The World Bank.
    7. repec:bla:tvecsg:v:108:y:2017:i:6:p:768-785 is not listed on IDEAS
    8. repec:ldr:wpaper:92 is not listed on IDEAS
    9. Xi, Guoqian & Block, Jörn & Lasch, Frank & Robert, Frank & Thurik, Roy, 2017. "How Does Firm Survival Differ between Business Takeovers and New Venture Start-ups?," IZA Discussion Papers 11155, Institute for the Study of Labor (IZA).
    10. Calá, Carla Daniela & Manjón-Antolín, Miguel & Arauzo-Carod, Josep-Maria, 2017. "Regional determinants of exit across firms' size: evidence from a developing country," Nülan. Deposited Documents 2548, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    11. Cathcart, Lara & El-Jahel, Lina & Jabbour, Ravel, 2015. "Can regulators allow banks to set their own capital ratios?," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 112-123.
    12. repec:wsi:jdexxx:v:22:y:2017:i:03:n:s1084946717500170 is not listed on IDEAS
    13. Pelkmans, Jacques & Renda, Andrea, 2014. "Does EU regulation hinder or stimulate innovation?," CEPS Papers 9822, Centre for European Policy Studies.
    14. Nagler, Paula & Naudé, Wim, 2017. "Non-farm entrepreneurship in rural sub-Saharan Africa: New empirical evidence," Food Policy, Elsevier, vol. 67(C), pages 175-191.
    15. Nagler, Paula & Naude, Wim, 2014. "Non-farm enterprises in rural Africa : new empirical evidence," Policy Research Working Paper Series 7066, The World Bank.

    More about this item

    Keywords

    Microfinance; Environmental Economics&Policies; Labor Markets; Small Scale Enterprise; Economic Theory&Research;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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