What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions

Is it the institutions or firm characteristics at birth that shape startups and their early growth in developing countries? Using comprehensive data from the Indian Annual Survey of Industries this paper addresses this question by studying the early lifecycle of firms across diverse institutional en...

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Main Authors:	Ayyagari, Meghana, Demirguc-Kunt, Asli, Maksimovic, Vojislav
Format:	Publications & Research
Language:	en_US
Published:	World Bank Group, Washington, DC 2015
Subjects:	jobs employment banking regulation monetary policy unpaid family workers accounting deposits production excise taxes skilled workers informal sector inflexible labor income interest industry characteristics industry banking system reserve requirements banking services water supply services reserve bank of india primary source effects labor market regulation banking reform trade reforms firm size employment size industry characteristic rural banks small business present value labor market total factor productivity development economics banking sector reforms transport firm level declining industries worker outputs private banks productivity entry rate local financial institutions attrition financial institutions debt markets state owned banks organizations legislation flexible labor markets local firms firm size distribution economic policies labor loans labor regulation finance efficiency infrastructure taxes banking sector banks emerging markets firm entry entrepreneurial ability productivity growth human capital workers capital policies employment protection legislation value bank credit large cities macroeconomics labour market private firms labor market institutions property firm performance foreign banks labor market outcomes employment growth private sector productivity distribution economics management profitability social capital manufacturing industries new entrants employment growth rates retained earnings investment commercial banks financial markets labor market regulations supply banking employee institutional development labor intensity revenue employment dynamics law profit financial structure age category private companies firm growth entrepreneurship labour financial systems labor markets adb governments outcomes high-entry industries labor regulations production processes employees
Online Access:	http://hdl.handle.net/10986/21646

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recordtype	oai_dc
spelling	okr-10986-216462021-04-23T14:04:03Z What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav jobs employment banking regulation monetary policy unpaid family workers accounting deposits production excise taxes skilled workers informal sector inflexible labor income interest industry characteristics industry banking system reserve requirements banking services water supply services reserve bank of india primary source effects labor market regulation banking reform trade reforms firm size employment size industry characteristic rural banks small business present value labor market total factor productivity development economics banking sector reforms transport firm level declining industries worker outputs private banks productivity entry rate local financial institutions attrition financial institutions debt markets state owned banks organizations legislation flexible labor markets local firms firm size distribution economic policies labor loans labor regulation finance efficiency infrastructure taxes banking sector banks emerging markets firm entry entrepreneurial ability productivity growth human capital workers capital policies employment protection legislation value bank credit large cities macroeconomics labour market private firms labor market institutions property firm performance foreign banks labor market outcomes employment growth private sector productivity distribution economics management profitability social capital manufacturing industries new entrants employment growth rates retained earnings investment commercial banks financial markets labor market regulations supply banking employee institutional development labor intensity revenue employment dynamics law profit financial structure age category private companies firm growth entrepreneurship labour financial systems labor markets adb governments outcomes high-entry industries labor regulations production processes employees Is it the institutions or firm characteristics at birth that shape startups and their early growth in developing countries? Using comprehensive data from the Indian Annual Survey of Industries this paper addresses this question by studying the early lifecycle of firms across diverse institutional environments of regions in India. It finds that the size and characteristics of a start-up at entry are persistent over the first eight years of a firm's life. However, given these initial conditions at entry, institutions do not have much explanatory power in determining growth. The comparative growth rates of large and small start-ups are not significantly different across states with different local institutions or industries with differing reliance on external finance or need for fixed capital. But institutions, particularly the availability of credit, do have an impact on the initial entry process. Access to external finance is associated with greater overall entry, and also smaller sized entry. The results do not appear to be driven by endogeneity of access to credit or sample selection. The results show that the channel through which institutions affect the relative outcomes of young firms is through the initial distribution of firm characteristics at entry rather than their effect on the performance of the firms post entry. 2015-03-30T20:39:25Z 2015-03-30T20:39:25Z 2015-03 http://hdl.handle.net/10986/21646 en_US Policy Research Working Paper;No. 7207 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank Group, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper South Asia India
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	jobs employment banking regulation monetary policy unpaid family workers accounting deposits production excise taxes skilled workers informal sector inflexible labor income interest industry characteristics industry banking system reserve requirements banking services water supply services reserve bank of india primary source effects labor market regulation banking reform trade reforms firm size employment size industry characteristic rural banks small business present value labor market total factor productivity development economics banking sector reforms transport firm level declining industries worker outputs private banks productivity entry rate local financial institutions attrition financial institutions debt markets state owned banks organizations legislation flexible labor markets local firms firm size distribution economic policies labor loans labor regulation finance efficiency infrastructure taxes banking sector banks emerging markets firm entry entrepreneurial ability productivity growth human capital workers capital policies employment protection legislation value bank credit large cities macroeconomics labour market private firms labor market institutions property firm performance foreign banks labor market outcomes employment growth private sector productivity distribution economics management profitability social capital manufacturing industries new entrants employment growth rates retained earnings investment commercial banks financial markets labor market regulations supply banking employee institutional development labor intensity revenue employment dynamics law profit financial structure age category private companies firm growth entrepreneurship labour financial systems labor markets adb governments outcomes high-entry industries labor regulations production processes employees
spellingShingle	jobs employment banking regulation monetary policy unpaid family workers accounting deposits production excise taxes skilled workers informal sector inflexible labor income interest industry characteristics industry banking system reserve requirements banking services water supply services reserve bank of india primary source effects labor market regulation banking reform trade reforms firm size employment size industry characteristic rural banks small business present value labor market total factor productivity development economics banking sector reforms transport firm level declining industries worker outputs private banks productivity entry rate local financial institutions attrition financial institutions debt markets state owned banks organizations legislation flexible labor markets local firms firm size distribution economic policies labor loans labor regulation finance efficiency infrastructure taxes banking sector banks emerging markets firm entry entrepreneurial ability productivity growth human capital workers capital policies employment protection legislation value bank credit large cities macroeconomics labour market private firms labor market institutions property firm performance foreign banks labor market outcomes employment growth private sector productivity distribution economics management profitability social capital manufacturing industries new entrants employment growth rates retained earnings investment commercial banks financial markets labor market regulations supply banking employee institutional development labor intensity revenue employment dynamics law profit financial structure age category private companies firm growth entrepreneurship labour financial systems labor markets adb governments outcomes high-entry industries labor regulations production processes employees Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions
geographic_facet	South Asia India
relation	Policy Research Working Paper;No. 7207
description	Is it the institutions or firm characteristics at birth that shape startups and their early growth in developing countries? Using comprehensive data from the Indian Annual Survey of Industries this paper addresses this question by studying the early lifecycle of firms across diverse institutional environments of regions in India. It finds that the size and characteristics of a start-up at entry are persistent over the first eight years of a firm's life. However, given these initial conditions at entry, institutions do not have much explanatory power in determining growth. The comparative growth rates of large and small start-ups are not significantly different across states with different local institutions or industries with differing reliance on external finance or need for fixed capital. But institutions, particularly the availability of credit, do have an impact on the initial entry process. Access to external finance is associated with greater overall entry, and also smaller sized entry. The results do not appear to be driven by endogeneity of access to credit or sample selection. The results show that the channel through which institutions affect the relative outcomes of young firms is through the initial distribution of firm characteristics at entry rather than their effect on the performance of the firms post entry.
format	Publications & Research
author	Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav
author_facet	Ayyagari, Meghana Demirguc-Kunt, Asli Maksimovic, Vojislav
author_sort	Ayyagari, Meghana
title	What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions
title_short	What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions
title_full	What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions
title_fullStr	What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions
title_full_unstemmed	What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions
title_sort	what determines entrepreneurial outcomes in emerging markets? : the role of initial conditions
publisher	World Bank Group, Washington, DC
publishDate	2015
url	http://hdl.handle.net/10986/21646
_version_	1764448866424324096

What Determines Entrepreneurial Outcomes in Emerging Markets? : The Role of Initial Conditions

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