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Drivers of growth in Tunisia: young firms vs incumbents

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Abstract

The aim of this paper is to investigate the growth dynamics of young small firms (in contrast with larger and older incumbents) in a developing country context, using a unique and comprehensive dataset of non-agricultural Tunisian companies. Our results suggest that significant differences between young and mature firms can be found as far as the drivers of their growth are concerned. The key finding being that—while consistently with the extant literature Gibrat’s law is overall rejected—the negative impact of the initial size is significantly larger for young than mature firms. This result has interesting policy implications: since smaller young firms are particularly conducive to employment generation, they can be considered good candidate for targeted accompanying policies addressed to sustain their post-entry growth.

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Notes

  1. In Table A1 in the Appendix we report the results of a robustness check, including the squared sales on the right hand side of the growth equation. The overall results are confirmed. Interestingly enough, the additional variable SALES-squared shows a positive and significant coefficient. Given the massive dominance of very small firms in the sample, this result can be interpreted as the signal of strong increasing returns, due to the massive scale economies a small firm can enjoy before reaching the minimum efficient size (MES).

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Authors and Affiliations

  1. National Institute of Statistics, Tunis, Tunisia

    Hassan Arouri

  2. GREDEG-CNRS, University of Nice Sophia-Antipolis, Nice, France

    Adel Ben Youssef

  3. Department of Economics and Statistics Cognetti de Martiis, University of Torino, Turin, Italy

    Francesco Quatraro

  4. Universita’ Cattolica del Sacro Cuore, Milan, Italy

    Marco Vivarelli

  5. UNU-MERIT, Maastricht, The Netherlands

    Marco Vivarelli

  6. IZA, Bonn, Germany

    Marco Vivarelli

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  1. Hassan Arouri
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  2. Adel Ben Youssef
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  3. Francesco Quatraro
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  4. Marco Vivarelli
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Correspondence to Marco Vivarelli.

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APPENDIX

APPENDIX

Table 7 Robustness check
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Arouri, H., Youssef, A.B., Quatraro, F. et al. Drivers of growth in Tunisia: young firms vs incumbents. Small Bus Econ 54, 323–340 (2020). https://doi.org/10.1007/s11187-018-00133-6

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