Search

Small and medium sized enterprises (SMEs) play a crucial role in the economic development of emerging countries. The lack of access to finances is one of the important growth constraints the SMEs face. This study investigates the firm and country specific determinants of the financial constraint levels of SMEs in selected emerging Western Balkan economies. The main determinants of the financing obstacles examined in the sampled countries were: firm size, ownership type, and age, accounting information transparency, the depth of credit information indexes, the banking sector concentration, property registration costs; and per capita GDP. The findings confirm that firm size is a significant determinant of the financial constraint levels of SMEs in the selected economies. Moreover, we found that older firms are financially more constrained in the region. The possible economic implications of the positive association between firm age and financial constraint are discussed. Banking sector concentration level plays crucial role in the external financing of SMEs in developing countries. By closely examining the firm characteristics and country-level factors that determine the degree of the financing obstacles faced by SMEs, we observed that in developing economies overall institutional and financial problems are more important than firm-specific determinants. [ABSTRACT FROM AUTHOR]

Highlights • The paper employs newly constructed structural reform indexes that focus on reforms "genuinely" implemented. • Reforms under consideration increase productivity growth, with real sector reforms having the most sizeable effects. • The pace of reforms matters since being a "strong reformer" is associated with clear productivity dividends. • The relationship between reforms and productivity is nonlinear and shaped by certain firms' characteristics. • There are complementary effects between reforms except for trade and financial reforms. Abstract This paper assesses the effects of selected structural reforms on labor productivity growth for 37 developing countries over the 2006–14 period. It combines newly constructed reform indexes using the IMF Monitoring of Fund Arrangements dataset and firm-level productivity from the World Bank Enterprise Surveys. The paper highlights the following results. Structural reforms under consideration in this study, i.e., financial, fiscal, real sector, and trade reforms, significantly improve productivity at the firm level. Interestingly, real sector reforms have the most sizeable effects on firms' productivity. The relationship between reforms and productivity is nonlinear and shaped by certain firms' characteristics, including financial access, a distortionary environment, and firms' size. The pace of reforms matters since being a "strong reformer" is associated with a clear productivity dividend for firms. Finally, except for financial and trade reforms, all macroeconomic reforms considered are bilaterally complementary in improving firms' productivity. The findings are robust to several sensitivity checks including alternatives measure of productivity, and a counterfactual experiment based on unsuccessful reforms. [ABSTRACT FROM AUTHOR]

Using firm-level data from 2006 to 2013 for a set of developing countries, we examine the effects of financial development on innovation. Financial development boosts innovation by improving resource allocation and investment in strategic sectors as well as facilitating technology to promote growth. Using binary response models and instrumental variable techniques to correct for endogeneity, we find robust but puzzling results. Contrary to most of the existing literature, financial development has a negative effect on the probability of a firm to innovate in developing countries. This effect is conditional on firm size, and only larger firms benefit from financial development. These results are robust to different measures of financial development and econometric specifications. We argue that this is a result of the design of the financial system in regard to the lack of capital and institutional system. Consequently, developing countries should first generate appropriate institutional conditions if they want financial development to spur growth through innovation. [ABSTRACT FROM AUTHOR]

Crime and corruption are ubiquitous worldwide. They have long been both cause and consequence of poverty and various other societal problems around the world, especially in underdeveloped countries. Crime and corruption take different forms, existing at all levels of society and deeply affecting people's lives, from underground exchanges inside or between businesses, to judiciary or police functions and municipal or national government departments. Undermining both political and economic development, crime and corruption can worsen income polarities and harm the poorest most. Currently there are quite many studies focusing on why firms pay for briberies; however, very few studies have considered how firms deal with crime. This paper empirically studies how firms in developing economies cope with both crime and corruption. To be specific, I look into the potential determinants on why and how much worldwide firms spend on protection payments. Using a unique firm-level dataset extracted from the World Bank's Enterprise Surveys from 2006 to 2014, this paper focuses on two types of protection payments made by firms operating in developing economies: (1) open security payments, intended to avoid criminal losses exoterically, and (2) underground bribery payments, intended to meet corrupt government officials' needs secretly. Overall data on 120 developing countries were extracted, and 105,282 observations became available. I start with ordinary least squares (OLS) to estimate the determinants of how much a firm decides to pay for protection. Furthermore, to alleviate the potential simultaneity problem embedded in the OLS method, I also use probit estimation for the firms' decisions to pay. Results obtained through multiple statistical and econometric examinations suggest that firm-level characteristics such as employment size, international business connections, labor quality, and expansion experience exert profound and differentiated influence on firms' payments. Meanwhile, bureaucratic inefficiency and social instability significantly raise firms' incentive to pay. Firms that are smaller with fewer foreign business connections, lower labor quality, and defective infrastructure tend to pay, and pay more, for protection, as do those firms that have grown faster and longer. Besides, fast expansion makes firms more vulnerable to extortion, and more likely to encounter with crime and corruption. Various tests confirmed the robustness of these findings. There are several important policy implications based on these findings. First of all, governments need to enhance the quality of the society's infrastructure. This will effectively decrease firms' extra security expenditures. Also, the government must endeavor to control corruption, especially among those small and less productive firms. Enhanced supervision and auditing procedures must be developed, and create a better growth atmosphere for all firms. [ABSTRACT FROM AUTHOR]

In developing countries, informal firms account for up to about half of all economic activity. Using data from World Bank firm-level surveys, we find that informal firms are small and extremely unproductive compared with even the small formal firms in the sample, and especially relative to the larger formal firms. Formal firms are run by much better educated managers than informal ones and use more capital, have different customers, market their products, and use more external finance. Few formal firms have ever operated informally. This evidence supports the dual economy ("Wal-Mart") theory of development, in which growth comes about from the creation of highly productive formal firms. Informal firms keep millions of people alive but disappear as the economy develops. [ABSTRACT FROM AUTHOR]

Offers observation on the importance of small and medium-sized enterprises' (SME) foreign direct investments (FDI) to a country's economic development. Reason it would not be too difficult for developing countries to invite big companies; Explanation why it would be quite difficult for developing countries to invite SME as investors; Ways to increase the FDI of SME in developing countries.