Tax Treaties and Enterprise Outcomes: Evidence Across Developing African Countries

Studies have noted the possibility of tax treaties constraining the tax policy autonomy of developing countries, while their impact on enterprise development within host economies remains an empirical issue. This study examines the effects and heterogeneous differences in estimated effects of tax treaties on small businesses in developing countries that agree to these agreements. The study uses the ICTD tax treaties dataset and the World Bank Enterprise Survey data to set up a quasi-experiment framework for selected African Countries. The framework compares countries’ outcomes for small businesses that ratify and enforce a tax treaty and those without a ratified tax treaty for the years pre-2005–2010 and post-2011–2019). We find that tax treaties signed and enforced by developing countries in Africa have a consistent, negative relationship with small business outcomes. These results are driven by the enterprise’s size and internationalisation status but not by the subsidiary status of the sampled small businesses. The findings have implications for policy targeted towards industrial development alongside tax treaty negotiations.

Formal and Informal Institutions: The Independent and Joint Impacts on Firm Innovation

ABSTRACT We study the impact of formal and informal institutions perceived and experienced by firms on their innovation using the 2012 World Bank Enterprise Survey data in China. We propose a framework to identify different innovator types of firms. Our analysis shows that (1) perceived constraints from the governmental system make firms more likely to be innovators than non-innovators; (2) perceived constraints from the legal system make firms more likely to be imitators than innovators; (3) lack of formal finance makes firms more likely to be non-innovators than innovators; (4) prevalence of bribery makes firms more likely to be non-innovators than innovators but less likely to be innovation pretenders than innovators. Our study enriches institutional theory and innovation research by establishing a framework that encompasses multiple dimensions of formal and informal institutions perceived and experienced by firms and the impacts of such perception and experience on firms’ propensity to become certain type of innovator.

Technological- and Non-Technological Innovation During the Growth Phase of Industry Life Cycle: An Evidence From Vietnamese Manufacturing Enterprises

In the context of Industrial 4.0, Vietnam has emerged to play a critical role in the global supply chain while facing intense competition and fast changes. However, what drives manufacturing enterprises in Vietnam to innovate themselves and how well they perform in coping with business obstacle remains one of the central questions in the extent of studies. Therefore, this research primarily attempts to establish how innovation investment and obstacles affect technological and non-technological innovations, especially in the growth phase of the industry life cycle (ILC), with an analysis of available data obtained from the General Statistics Office of Vietnam and World Bank Enterprise Survey data with the use of descriptive statistics and regression analysis. The outcome of this article highlights that researchers and practitioners should consider the importance of the industry life cycle in the choice of technological or non-technological innovation through third significant contributions. First, the innovation investment is driven by R&D, and formal training enables both technological- and non-technological innovation. Second, the innovation obstacle related to finance, policy, competition, and regulation directly impacts the choice of innovation activities. Third, this study demonstrates that the firm’s engagement in technological- and non-technological innovation in line with innovation investment can help maintain successful post-innovation performance.

Determinants of Informal Competition faced by Formal Firms inPakistan: AnEmpirical Evaluation from 2013 World Bank Enterprise Survey

There is no denying in the fact that informal sector of any economy offersemployment flexibility by absorbing a pool of labor force. However, the rapid progression of the informal sector in Pakistan andthe consequent increase in competition faced by the formal firms urge a need to understand the dynamics of informal competition.The current study is an attempt toidentifythecorefactors responsible for the incidence of informal competition faced by formal firms in Pakistan,along with an investigation of the determinantsof the severity of thiscompetition.The study investigates the variables of firm’s characteristics and regulatory measures in order to examine the incidence and severity of informal competition faced by formal firms employing World Bank Enterprise Survey 2013 (WBES).The study not only conducts frequency analysis of the variables but based on the nature of data;it uses thelogit and ordered logit techniques todetermine the significant variables.The results of the study show that out of totalof 1125 formal firms used inthe analysis, 583 firms (46.75%) reported facing informal competition. Among these firms facing informal competition, only 16.98% reported informal competition as no obstacle in terms of its severity, however, rests of the firms (almost 83 %) consider the severity of informal competition as an obstacle in one or the other form and consider informal competition as a threat to their businesses.The result of logit model shows thatcharacteristics of formal firms resembling more to the informal firms in terms of size and locality have more likelihood of facing the informal competition. However, indetermining the severityof informal competition through the ordered logit model, theregulatory variables such as taxation, licensing & permits and corruption are found to be more significant and relevant.These results call on to introduce regulatory reforms making the regulatory system less burdensome and better enforcement mechanism of those reforms. There’s a need to create ease for the existing formal firms to fulfill the regulatory requirements as well as encourage the informal firms to join the mainstream formal setup of economy. Furthermore, the current research can be extended by availing the latest datasettoexplore the dynamics of informal sector andthe resultant competitionfor the formal firms in an ever-changingbusiness environment.

Organizational Factors of Innovativeness in Serbian Enterprises

This paper analyses correlations between several organizational characteristics and product/process innovations in enterprises in Serbia. We used the World Bank Enterprise Survey data on 339 small, medium, and large companies from various industries. Many of the factors analysed in this study are consistent with theoretical conclusions in the literature on this topic and relate to organizational maturity. Also, factors such as the size of the company and the industry to which it belongs were analysed. For correlations testing, the Chi-square correlation coefficient and the Cramer’s V test were used. The analysis revealed correlations between innovativeness and many organizational characteristics. However, in some cases, contrary to theoretical claims, correlations were not confirmed. We found that the introduction of new products and/or processes in the company is influenced by business strategy, production targets, number of performance indicators monitored, establishment of quality management system, formal training programs for company’s full-time employees, ease of achieving the company’s production targets, level of awareness of management and employees about the company’s production targets, spending on research and development activities within the company, and acquisition of external knowledge, way of promoting non-managers in a company, time frame of the company’s production targets, company’s size and main market.

Does Foreign Presence Influence the Level of Firm Technical Efficiency? Evidence from Africa

This study investigates the impact of foreign direct investment on the level of firm technical efficiency in West Africa. Firms from Nigeria, Ghana, Sierra Leone and the Gambia were sampled due to the fact that they used to belong to the British Empire. The data, sourced from the World Bank enterprise survey, covers the period from 2006 to 2018, with the sampled countries having data for different years. A time varying stochastic frontier production function for panel was developed for this enquiry. The findings of the study show that foreign direct investment has a significant and positive impact on both technical efficiency and productivity of firms in West Africa. Controlling for other effects, international trade and firm size both have positive and significant effects on firm level technical efficiency. Therefore, policies should be aimed at encouraging more inflows and maintenance of the stock of foreign direct investment to avert divestments. This includes, but is not limited to, ensuring sociopolitical stability and introducing policies that would remove bureaucratic bottlenecks from the path of direct investment inflow and simplify the process of doing business in these countries.

Major obstacles facing business enterprises in an emerging economy: the case of Ghana using the World Bank Enterprise Survey

PurposeThis paper aims at identifying the major obstacles to business enterprise in an emerging economy and how these obstacles are associated with different characteristics of the enterprises.Design/methodology/approachThe study relied on the World Bank Enterprise Survey data on Ghana and applied binary and ordinal probit regression techniques to estimate the associations between the characteristics of the enterprises and the identified obstacles. Significance testing of the associations is also conducted.FindingsThe five main obstacles perceived by most of the enterprises in the study are access to finance, electricity, access to land, customs and trade regulations and tax rates. These obstacles are associated in different ways to growth rate (high vs low growth), scale (small and medium vs large), age, size of employees, the experience of the top manager and ownership (wholly domestic vs foreign ownership).Research limitations/implicationsAs a cross-sectional study focusing on Ghana, the findings are informative about the major obstacles facing business enterprises in an emerging economy; however, the ecological validity of these findings may be limited to factors specific to Ghana.Originality/valueGiven the representativeness of the Enterprise Survey, policymakers can rely on these findings to formulate useful policies to promote the operations of business enterprises.

Firm Performance Under Financial Constraints: Evidence from Sub-Saharan African Firms

Business environment in which a firm operates has an important impact on firm performance. This study examined the impact of credit constraint and power outages on the firm’s investment decision using World Bank Enterprise Survey data collected from firms operating in 13 SSA countries. The study employed a two-part model and the Heckman selection model to estimate the impact of lack of access to finance and poor power supply on a firm’s decision to invest in self-generation. The result obtained suggest that there is a negative correlation between credit constraint and a firm’s decision to invest in self-generation. This indicates that credit constraint negatively affects a firm’s decision to invest in self-generation and firms that are credit constrained have less incentive to invest in self-generation compared to those that are not credit constrained. To test the robustness of the result obtained, alternative definitions of credit constraints were used. Results from alternative regressions using different definitions of credit constraints show that credit constraint affects a firm’s decision to invest in self-generation but not the volume of investment.

Human Capital and Manufacturing Output in Nigeria: A Micro-Data Survey

In attempting to explain the rather inconsistent growth of manufacturing industries in Nigeria, this study seeks to investigate the effect of human capital on manufacturing output in the Nigerian industrial firms. The study adopts human capital theory as a basis for the theoretical framework. Micro-data from the World Bank Enterprise Survey (2014) is utilised to perform Spearman Correlation in investigating the specific effects of HC on manufacturing value-added for Nigerian industries. High-school education, formal training and research were found to have a weak positive but significant impact on levels of manufacturing output. Therefore, recommendations on improved human capital quality via public-private partnerships, fostering trainings, research activities and conducive business environment in terms of unbiased and efficient institutions for manufacturing sectors, among others were proffered.

Emerging Economies and Financing of SMEs

Existing evidence has shown that SMEs make great contributions to innovation, job creation and economic growth. This chapter reviews recent literature on (1) the important roles played by SMEs in emerging markets and (2) the impacts of financial development on SME finance in such markets. It also uses a unique database form World Bank Enterprise Survey (WBES) to document the financing patterns, constraints and other financial issues of SMEs in emerging markets. The descriptive statistics derived from WBES show clear variations of SME financing patterns between emerging and developed markets and shed light on the important role played by financial development in financing SMEs.