Synthesis documents

What drives the dynamics of business growth? Bravo-Biosca, A., C. Criscuolo and C. Menon, OECD, 2013

    Using unique data for ten OECD countries the analysis sheds light on the factors that shape the distribution of firm growth and on what role policies play in driving cross-country differences. The paper provides new evidence on the link of labour market regulation, bankruptcy legislation, financial market development and R&D support policies with growth dynamics.

    Summary of results
    The results show that financial development, higher banking competition and better contract enforcement are associated with a more dynamic growth distribution, with a lower share of stable firms and higher shares of growing and shrinking firms, and with a more rapid expansion and contraction at the extremes of the growth distribution. Stringent employment protection legislation , as well as generous R&D fiscal incentives, are associated with a less dynamic firm growth distribution, with more stable firms and fewer growing and shrinking firms. The direction of the link between bankruptcy regime and growth dynamics is less clear-cut and varies according to the capital intensity and the dependence on external finance of the sector considered.