Many studies have shown that firm growth decreases monotonically with size and age. In this study, the
authors investigate employment growth of firms in Turkey with an emphasis on small and medium size
enterprises. In Turkey, small and medium size enterprises account for almost 77 percent of employment
and play a crucial role in the economy. However, the analysis of firm dynamics in Turkey shows that
medium-size firms (51-250 workers) are the slowest growing group in the economy. Moreover, small
and medium size enterprises grow at a slower rate in Turkey than in several comparator countries in the
Eastern Europe and Central Asia region. After determining this irregularity, the paper analyzes how the
investment climate affects firm growth and finds that improved access to finance is the most important
factor that significantly increases firm growth rates.