published in: Economic Development and Cultural Change, 2005, 54 (1), 33-70
Although the development of a new private sector is generally considered crucial to economic
transition, there has been rather little empirical research on the determinants of startup firm
growth. This paper uses panel data techniques to analyze a survey of 297 new small
enterprises in Romania containing detailed information from the startup date through 2001.
We find strong evidence that access to external credit increases the growth of both
employment and sales. Taxes appear to constrain growth. The data suggest that
entrepreneurial skills have little independent effect on growth, once demand conditions are
taken into account. The evidence for the effectiveness of technical assistance is weak: only
assistance provided by foreign partners yields a positive effect. A wide variety of alternative
measures of the business environment (contract enforcement, property rights, and
corruption) are tested, but none are found to have any clear association with firm growth.
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