Central Data Catalog

Citation Information

Type Working Paper - The World Bank
Title The Business Climate, Innovation, and Firm Profitability
Author(s)
Publication (Day/Month/Year) 2014
URL http://www.doingbusiness.org/special-features/conference/~/media/GIAWB/Doing​Business/Documents/Miscellaneous/Conference2014/S1-3.pdf
Abstract
Firm success can be affected by internal and external factors. This paper examines the relationship between the business climate, innovation, and firm profitability in emerging economies using firm-level panel data. The impact of the business climate on profitsis differentiated between innovative and non-innovative firms. The profits of innovative firms are less negatively affected compared to non-innovative firms, when nonregulatory factors of the business climate are poor (e.g. infrastructure or crime). However, profits of innovative firms are more negatively impacted when the regulatory or governance related factors are poor (e.g. corruption, starting a business time and cost). This suggests that innovative firms are better able to cope in poor conditions, but also suffer from red tape.

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