Private sector project
Private Sector Development in EMs
The literature has recognised the imperative of company entry for economic growth and development. The policy significance is also increasingly well appreciated. Indeed, the recent stress in policy circles on lower tariffs, free-er trade, foreign direct investment and liberalisation of domestic markets has been in part an attempt to bring the pressures of entry to bear in emerging markets via foreign competition. However, it seems likely that much more can be achieved by carefully developed policies at a sectoral level which act to reduce the cost of entry and to reduce the inherent advantages of incumbency in developing economies. To go deeper into these matters is the key objectives of this project.
Research Team:
Saul Estrin (London School of Economics)
Sumon Bhaumik (Brunel University)
Subhashis Gangopadhyay (India Development Foundation, India)
Stephen Gelb (EDGE Institute, South Africa)
Stephanie Levy (ODI)
Nauro F Campos (Brunel University)
Mariana Iootty (Instituto de Economia)
Klara Sabirianova (Andrew Young School of Policy Studies, University of Kentucky)
Jan Svejnar (University of Michigan)
Lihui Tian (Guanghua School of Management, Univ of Peking)
The project is focused on the following four topics:
1. The relationship between the institutional, legal and policy environment and the entry rate. This work was to be largely qualitative and descriptive drawing on interviews and data but could include material on entry and exit rates by sector and, if relevant, by region. The economic environment in each country was to be captured by an institutional study focusing on two sectors; textiles and one other higher barriers, higher technology sector e.g. plastics or electrical machinery.
2. The determinants of entry rates, econometric work at a sectoral (3/4 digit) level, seeking to understand the inter-sectoral, inter-regional (where relevant) and cross-time patterns of entry, net entry and exit in each country. This would build on work for developed economies by e.g. Geroski, with explanatory factors including sunk, market power, scale economies and other barrier to entry (e.g. Research and Development intensity, advertising intensity, etc.)
3. The effects of entry on productivity and growth, econometric work at an enterprise level examining the relative efficiency of entrants and existing firms. The analysis would build on Roberts et al. Important issues in this area concern:
a. The relative efficiency of domestic and foreign entrants
b. Whether efficiency of entrants/existing firms is correlated with other factors: e.g. size, ownership, regional factors
c. The relative efficiency of firms in the formal and informal sector (where relevant and possible to measure)
d. The relative efficiency of exiters as against the general population of firms
e. The times path of efficiency of entrants in the early post-entry years i.e. if firms enter with lower than average productivity, do they then either exit or catch up. Do foreign firms enter with higher productivity, and if so, is the difference maintained over time or does it narrow (e.g. via spillover).
4. A comparative analysis of entry across the countries; the effects of institutions and policy on entry.
