Bank Enterprise Survey Research Articles

Inclusive Trade Through Online Presence

ABSTRACTAdvances in information and communication technology (ICT) have reduced trade costs providing enterprises greater opportunity to access international markets. Using the World Bank's enterprise survey data covering more than 180 000 enterprises from 154 countries, we examine whether online presence contributes to inclusiveness by helping firms that traditionally struggle to enter export markets do so. We find that being online is associated with an increase in the probability of exporting by an average of 8 percentage points and with an increase in the level of a firm's exports by about 37%. We also find supporting evidence that online presence is linked with an increase in the likelihood of foreign market entry for enterprises owned and managed by women, firms with a majority female workforce, small and medium‐sized enterprises, firms from lower income countries and developing regions of the world and firms in the services sector. These results have accounted for possible endogeneity of online presence, self‐selection into exporting and industry and country‐year heterogeneity. They suggest that measures to promote digitalization and improve the business environment can offer effective ways of fostering more inclusive trade.

Employment, labor productivity and environmental sustainability: Firm‐level evidence from transition economies

AbstractThis article investigates the impact of investment in environmentally sustainable practices on employment and labor productivity growth in transition economies. It explores the influence of labor skill composition and geographical variations on sustainability dynamics. Utilizing data from the World Bank's Enterprise Survey 2019 across 24 transition economies, an environmental sustainability index is constructed using Principal Components Analysis. To address endogeneity concerns, a combination of fixed effects and instrumental variables is employed. The findings highlight the significance of environmental sustainability for both employment and labor productivity growth. However, the observed relationships diminish in significance when comprehensively addressing endogeneity, suggesting a more nuanced and time‐dependent connection between environmentally sustainable practices and job growth. Notably, high‐skill firms experience a deceleration in job creation following sustainability investments, while low‐skill firms benefit from improved labor productivity. Geographically, Central Europe exhibits more pronounced impacts on labor productivity, potentially attributed to higher levels of development and sustainability awareness compared to Southeast Europe and the Commonwealth of Independent States.

Size, geography, and GVC participation of firms in Nigeria and Rwanda: Implications for the AfCFTA

Global value chains (GVC) have recently become an important developmental issue and have become prominent within the development community. Empirical studies on the peculiar nature of firms (small-scale) in the GVC are sparse, especially in Africa. Thus, the present study empirically examines whether or not the size of the firm matters in their GVC participation in Africa. It also investigates if a firm’s geographical location spurs GVC participation. The study answers the above research questions using the World Bank's Enterprise Survey database for two African countries, namely: Nigeria, and Rwanda. Adopting a logit regression model, the findings show that firms in Africa are predominantly small-scale and sole proprietorships. The size of the firm, the legal status of the firm, firm access to ICTs, managerial experience, and the geographical location of the firm are crucial drivers of firms' GVC participation in Nigeria and Rwanda. Policy implications and recommendations for the AfCFTA are discussed in the paper.

Does Innovation Matter? Evidence from Enterprise Survey of ASEAN Countries

This study embarks on an investigation to unearth evidence that innovation may, in certain contexts, fail to foster enterprise development. Innovation has been identified as a key driver of firms’ growth. However, to have successful innovation requires some minimum capabilities and resources. Based on this notion, we tried to find evidence that innovation may fail to help enterprises develop. The study use the World Bank's enterprise survey. The survey collected samples from ASEAN firms. Respondents were chosen by using stratified random sampling technique based on the type of business for all small, medium and large non-agricultural companies in all geographical areas. We used instrumental variable regression to avoid simultaneous causality. The findings show that while innovation has a considerable impact on the growth of non-SMEs, it has little or no impact on SMEs. This confirms our prediction that innovation dampen firms’ development, particularly those with limited abilities to innovate successfully. The research emphasizing the importance of tailored approaches to accommodate the diverse landscape of businesses, particularly in the dynamic ASEAN market.

The impact of internet platform usage on firms' exports: New evidence for Turkish firms

AbstractIn the last decade, the key driver of e‐commerce growth has been the expansion of internet access. Studies indicate that the internet is transforming both the production and consumption of goods and services in the domestic and international markets. Internet platform usage has significantly decreased the barriers for firms to communicate with foreign clients and suppliers on their international market participation. Using the internet platform for marketing intelligence enables firms to access information about the external environment at a faster rate and lower cost. Thus, this paper adds to the limited literature by examining how using the internet platform can affect firms' export propensity and intensity by using the World Bank's Enterprise Survey dataset for Turkey. I use a theoretical framework introduced by Melitz (2003; Econometrica, 71, 1695) to identify the export difference between a firm that uses the internet platform and a firm that does not. I also add that fixed cost of internet adoption is firm specific due to heterogeneity in the firm's ability to access the internet. Results show that internet platform usage types have a positive impact on both the likelihood of exports and export intensity. These results are robust after controlling for the endogeneity in the telecommunication costs.

CEO's industry experience and emerging market SME performance: The effects of corruption and political uncertainty

We examine how Chief Executive Officer (CEO) industry-specific experience influences firm performance in small and medium enterprises (SMEs) in emerging markets. Drawing on the upper echelons perspective and learning theory, we propose an inverted U-shaped relationship between an SME CEO's industry-specific experience and firm performance. We also argue that country corruption and political instability moderate this relationship, resulting in lower performance for SME CEOs with little industry experience or many years of industry experience in countries with high corruption or political instability. We test our hypotheses using data from the World Bank's Enterprise Survey of firms in emerging economies from 2006 to 2019. The results support our hypotheses that corruption and political instability primarily hurt the performance of SMEs with CEOs having very long industry experience. We discuss implications of this research for scholars studying SMEs in lesser-developed institutional environments and how leaders may influence SME performance.

Corruption, homelessness and disasters

AbstractCorruption is widely believed to contribute to homelessness following a disaster triggered by natural hazards, as it is known to weaken resilience, deplete resources and stifle recovery. We test the association between corruption and post‐disaster homelessness using data from the Emergency Events Database and data on corruption in the construction sector from the World Bank's Enterprise Surveys. Using instrumental variables and other estimation techniques, we find that corruption is associated with significantly more people left homeless following disasters. Corruption in the construction sector appears to be driving this result. These findings underline the importance of tackling corruption and poor construction practices in vulnerable communities.

The nexus between economic policy uncertainty and access to finance: a study of developing countries

PurposeThis paper attempts to document the effect of economic uncertainty on financing constraints faced by private firms.Design/methodology/approachOrdered logistic regression is used to analyze the data of private firms from 101 developing countries. The data was provided by the World Bank's Enterprise Surveys and was gathered during the period between 2006 and 2019.FindingsThe findings show that firms headquartered in countries with high economic uncertainty face more financing constraints than firms headquartered in countries with low economic uncertainty. The authors argue that the increase in economic uncertainty allows capital providers to adjust their lending decisions by reducing the provision of capital to firms. The paper also shows that firms headquartered in countries with strong institutional infrastructure and well-functioning firms are less likely to be affected by economic uncertainty while accessing finance.Practical implicationsThe findings would help managers, investors, regulators, and policymakers better understand the implication of economic policy uncertainty on the real economy. This study also sheds the light on the importance of minimizing volatility, ambiguity, and randomness in governmental decisions and policies. Regardless of the pertinence of these policies, arbitrariness surrounding their development and communication can limit their effectiveness and produce unwanted effects.Originality/valueThis paper is closely related to prior literature that documents the behavior of credit providers and investors (the supply side) during the periods of economic uncertainty. The authors differ from this strand of literature by taking the perspective of firms – the demand side.

Competition and firm recovery post-COVID-19.

This paper examines the impact of the COVID-19 crisis on the reallocation of economic activity across firms and whether this reallocation depends on the competition environment. The paper uses the World Bank's Enterprise Surveys COVID-19 Follow-up Surveys for about 8000 firms, including both small and large firms, in 23 emerging and developing countries in Europe and Central Asia, matched with 2019 Enterprise Surveys data. It finds that during the COVID-19 crisis, smaller firms were hit harder, and economic activity was reallocated toward firms with higher pre-crisis labor productivity. Countries with a strong competition environment experienced more reallocation from less productive to more productive firms than countries with a weak competition environment. The evidence also suggests that reallocation from low- to high-productivity firms during the COVID-19 crisis was stronger compared with pre-crisis times. Finally, the analysis shows that government support measures implemented in response to the crisis may have adverse effects on competition and productivity growth since support went to less productive and larger firms, regardless of their pre-crisis innovation.

The effect of top managers’ years of experience on innovation

Managers' characteristics have been identified to have an influence on how they perceive innovation. This study examines the role of top managers' experience and how it influences their propensity to innovate. It employs a logit model to analyze data from the World Bank's Enterprise Surveys, primarily from small- and medium-sized enterprises in Russia. We justify the positive effect of managers' years of experience as an influential factor of enterprises' innovativeness in developing countries. The results show that top managers' years of experience directly affect innovation.

Business productivity and efficiency from aligning with sustainable development goals: Empirical evidence from ASEAN manufacturing firms

AbstractBusinesses' alignment with the United Nations' Sustainable Development Goals (SDGs) is enthusiastically highlighted in practitioner and academic literature. However, based on the existing evidence, it is still debatable whether the adoption of SDGs correlates with firm performance, especially in developing countries. Using Association of Southeast Asian Nations (ASEAN) manufacturing firms as a case study, we investigate the effects of businesses in developing countries aligning themselves with the SDGs might affect productivity and efficiency. Using 3471 firm‐level data from the World Bank's Enterprise Survey, our results reveal that aligning business strategies with the United Nations' SDGs helps promote productivity and efficiency. Paying higher wages (SDG 8) and promoting skills development (SDG4) can significantly boost productivity and efficiency. Investment in market innovation (SDG9), fostering foreign direct investment (SDGs 5–9), and adopting ISO certifications (SDGs 1–9 and 12–15) help firms increase their productivity and efficiency as well. Although a higher proportion of female workers correlate with reduced productivity and efficiency, supporting female workers with higher skills development (SDGs 4 and 5) and female CEOs (SDG 5) can increase productivity and efficiency. Therefore, policymakers in developing countries should provide supports and incentives for businesses to align their business strategies with the SDGs.

Corruption and firm performance

Corruption is a curse in Pakistan, neither public office nor any structure immune from this phenomenon. Inspired by this, the study commits to examine two significant research issues. First the study assesses to find whether corruption greases the wheel or sanding it. Second, the study commits to determine what causes corruption in firms. This study is based on the World Bank's enterprise survey, data of Pakistani firms. This study tries to associate the effects of corruption on firm performance after controlling for firm specific factors. We check two sets of variables; first set is the variables that cover firm specific characteristics and other is variable that cover intervention with government agencies. The overall conclusion depicts a mixed approach on corruption effects. Our evidence shows that there is a negative association of corruption on firm performance which supports that the hypothesis of ‘sand the wheels’ is widely applicable in Pakistan. The results conclude that younger firms, directly exporting firms, large size firms are more likely to experience a deteriorating effect on their performance. Our study interestingly shows that bureaucratic complexities faced by the firms increases the performance of the firms which supports ‘Grease the wheels’. Study finds that firms struggling in terms of sales growth, younger firms, firms in growing competition, large firms are more likely to pay bribes.

Democracy and access to finance in developing countries

PurposeThe aim of this paper is to document the effect of democracy on the financing constraints faced by private firms.Design/methodology/approachThis paper uses the data from the World Bank's Enterprise Surveys to test the arguments presented in this paper in a large sample of private firms from 92 developing countries.FindingsThe results show that firms headquartered in more democratic countries have better access to finance than firms headquartered in less democratic countries. The findings are robust to the comprehensive inclusion of relevant controls and to a number of sensitivity tests. The authors' findings highlight an important channel through which democracy can affect the business environment of a country.Originality/valueThe authors believe that this paper is an initial attempt to document the effect of democracy on the financing constraints faced by private firms.

On the path to sustainable development: The nexus among owner gender diversity, energy management, and firms' innovation radicalness

AbstractThis research focuses on the part of sustainable development related to energy management and thus aims to find the missing piece in research on the role of owner gender diversity (OGD) in processes of energy management (EM) introduction and the creation of radical and incremental innovation. Employing the World Bank's Enterprise Survey 2019 data covering 4646 firms from 11 European countries, we confirm the hypothesis that OGD increases firms' chance to reach radical and incremental innovation. Contrary to the majority of prior studies, we reject the hypothesis that OGD increases firms' chance to introduce EM; rather, we empirically prove the positive effects of firms' value drivers and market pressure on EM. We also confirm the link between firms' introduction of EM and the creation of radical and incremental innovations. This study expands research into the gender diversity of the upper echelons, addressing recent calls to expand open innovation research into new research categories and identify the determinants of firms' introduction of EM.

Does corruption have an impact on industrial growth? Evidence from Russia

We test the hypothesis that corruption has an impact on the growth of the manufacturing industry of Russia. An attempt was made to carry out an investigation on the impact of corruption collecting primary data from firm owners but we ended up with only a few firms— not enough for running regressions. Reluctance to reveal information about bribe payments indicates the culture of fear inherited through ages in Russia. Then we used the World Bank's Enterprise Survey data. An econometric exercise on the impact of the corrupt behavior of government officials on firm growth has been done. OLS, IV and GMM techniques have been applied to a panel dataset. To supplement the quantitative analysis and to have a better understanding of the issues, we also collected qualitative information through Focus Group Discussions (FGD) involving firm owners, bureaucrats and experts. The analysis of the World Bank data shows a positive impact of corruption on firm growth with a highly significant coefficient of the key variable of interest, which is bribe. The findings support the so-called speed money theory and the argument for this is that when bureaucracy is stuck in corruption, some extra informal payment would help to expedite the process. Most respondents in the primary survey and FGDs have not mentioned bribery as a barrier to growth, which means bribery helps them to speed up the firm growth.

Foreign ownership and the financing constraints of firms operating in a multinational environment

We examine the effects of foreign ownership as well as other firm-specific variables on enterprises' access to credit in 135 underdeveloped nations using micro survey data from the World Bank's Enterprise Surveys. The analysis takes into consideration the role of the multinational environment in the structure and operation of firms. The findings demonstrate that foreign ownership is a strong predictor of a company's ability to acquire financing, but with restrictions. Government ownership and local private owners tend to be significant in line with the control criteria in the research, but foreign ownership and often dominating investors are highly predictive of financing limitations. Whether the firm is a foreign subsidiary and operates separately from its mother company significantly mitigates the foreign ownership effect. Firm-specific traits including size, industry of operation, export status, and accounting auditing represent significant indicators as well. In addition, the caliber of institutions of governance, cultural and social circumstances, and overall measures of financial, political, and human development all seem to be important determinants of access to financing and greatly lessen the impact of ownership structure in various nations.

The effect of institutions on R&D investment: the case of four mediterranean euro area states

PurposeThis study investigates the impact of institutional factors on firms investing in R&D.Design/methodology/approachThe study uses data from the World Bank's Enterprise Surveys for the Republic of Cyprus, Greece, Italy and Portugal. A model with institutional factors as explanatory variables and firm performance factors as control variables is estimated with weighted least squares heteroscedasticity corrected regression. The reverse causality problem is addressed by using a two-stage least squares regression approach.FindingsThe findings indicate that institutional quality has a significant influence on firms' R&D expenditure. The results have several implications in relation to findings of previous research.Research limitations/implicationsThe inclusion of more countries that were affected by the European economic crisis will probably give more insights about the effect of institutional factors on R&D.Practical implicationsPolicy makers have to address short-comings in institutional quality, particularly in terms of the labor regulation burden. Policy makers should prioritize anti-corruption measures to foster an environment that would attract more R&D in the Republic of Cyprus and Greece.Originality/valueThis study contributes to the growing body of literature investigating the impact of institutional factors on R&D. It focuses on four developed European countries that bore the brunt of the European economic crisis and have to implement their recovery and resilience plans successfully, in order to recover from the effects of the COVID-19 pandemic on their economic activity.

Innovation as a driver of SMME performance in South Africa: a quantile regression approach

PurposeInnovation is regarded as a crucial determinant of growth and development in South Africa, and small, medium and micro enterprises (SMMEs) have been earmarked as instruments for the achievement of the socio-economic goals and innovation as set out in the National Development Plan. The purpose of this study is to investigate the effect of innovation on SMME performance in South Africa.Design/methodology/approachThe empirical analysis was conducted using the quantile regression technique to examine the effect of innovation on the performance of firms at different sales levels. Data from the World Bank's enterprise survey was used for the analysis.FindingsThe results of the empirical analysis showed that R & D expenditures have a positive and significant effect on performance for firms with higher sales (high growth or larger firms). There is evidence that the introduction of new products/services promotes performance for low growth/ smaller firms.Practical implicationsThe empirical results imply that innovation is crucial for SMMEs’ development and growth. However, smaller/low growth firms are not able to spend on R & D due to a lack of funds which could be the reason for their low survival rate. More support needs to be provided to smaller firms with lower sales growth, given the large financial outlay required for R & D expenditures. Despite the lack of funding for R & D expenditure, smaller firms are encouraged to introduce new products and methods of production that do not require major financial outlays.Originality/valueThere is scant empirical evidence on the impact of innovation on firm performance in South Africa. Most studies investigate the challenges faced by SMMEs and the different types of innovation approaches used by firms. Furthermore, the study employs the quantile regression approach which highlights the effect of innovation on firms of different sizes.

Does innovation matter for firm’s financial inclusion? Evidence from Enterprise Surveys in Cameroon

This study aims at evaluating the impacts of innovation on financial inclusion in Cameroon. This specifically involves evaluating the effects of innovation on access, availability, use and the composite index of financial inclusion of companies in Cameroon. To achieve these goals, we used data from the World Bank (Enterprise Survey) from a survey of 361 manufacturing and service companies in 2016. Using the probit model, several results were obtained. (i) The more the company’s new products or services are new to its main market, and the more it invests in Research & Development activities, the more access it has to financial services; (ii) the more the company invests in Research & Development, the more it has overdraft or overdraft facilities; (iii) the more a company invests in Research & Development, the more it is financially included. Thus, we can recommend to Cameroonian companies to invest more in Research & Development in order to benefit from financial services from financial institutions.

How do digital capabilities affect firm performance? The mediating role of technological capabilities in the “new normal”

This study proposes a model to explain the effect of digital capabilities on firm performance in the “new normal” context from a firm-level perspective. Moreover, it analyzes the mediating role of technological capabilities and the Human Development Index (HDI) in explaining firm performance. Our study used data from the World Bank's Enterprise Surveys 2020, which included 999 firms from 27 countries. We applied the methodological approach, partial least square structural equation modeling (PLS-SEM), to test the hypothetical model. The results show that digital capabilities positively influence firm performance only through technological capabilities. We also empirically demonstrate that digital skills in low HDI economies have a more significant indirect effect on firm performance than in high HDI countries. Finally, some promising avenues for future research and implications for managers and policymakers are suggested based on these findings.