World Bank, 1994). In the literature, deficiency in infrastructure is seen as a burden for enterprises operations and investment. Infrastructures are considered, as well, as a complementary factor to other production inputs. In particular, infrastructure stimulates private productivity by raising profitability of investment<sup>30</sup> . Furthermore, infrastructure increases firms’ productive performances by generating externalities across firms, industries and regions<sup>31</sup> .

The “Business-Government Relations” indicator ( _Gov_ ) includes three to six variables (depending on the industries): Obstacle for the operation of the enterprise caused by ( **_a_** ) Tax Rate, ( **_b_** ) Tax Administration, ( **_c_** ) Customs and Trade Regulations, ( **_d_** ) Labor Regulation, ( **_e_** ) Business Licensing and Operating Permits, and ( **_f_** ) Corruption. This indicator illustrates the capacity of the government to provide an investment-friendly environment and reliable conditions to the private sector. Corruption is seen as having an adverse effect on firms’ productive performances. This fact is well documented and often described as one of the major constraints facing enterprises in the developing world (see the World Bank, 2005). Corruption increases costs, as well as uncertainties about the timing and effects of the application of government regulations (see Tanzi and Davooli, 1997). Taxation and regulations have also a first order implication on firms’ costs and productivity. Although government regulations and taxation are reasonable and warranted in order to protect the general public and to generate revenues to finance the delivery of public services and infrastructures, over-regulation and over-taxation deter productive performances by raising business start-up and firms’ operating costs.

The “Human Capacity” indicator ( _H_ ) is represented by three to four variables: Obstacle for the operation of the enterprise caused by deficient ( **_a_** ) Skill and Education of Available Workers; ( **_b_** ) Education level<sup>32</sup> and ( **_c_** ) Years of Experience of the Top Manager; ( **_d_** ) Training of the Firm’s Employees. Human capital constitutes an essential factor of firms’ productive performances. Human capital stimulates capital formation by raising firms’ profitability. Human capital is also at the origin of positive externalities<sup>33</sup> . Because skilled workers are better in dealing with changes, a skilled work force is essential for firms to adopt new and more productive technologies (see Acemoglu and Shimer, 1999). Besides, new technologies generally require significant organizational changes, which are better handled by a skilled workforce (see Bresnahan, Brynjolfsson and Hitt, 2002). Human capital gives also the opportunity to the enterprises to expand or enter new markets.

The “Financing Constraints” indicator ( _Fin_ ) consists of three variables: Obstacle for the operation of the enterprise caused by: ( **_a_** ) Cost, and ( **_b_** ) Access to Financing; ( **_c_** ) Access to an Overdraft Facility or a Line of Credit. Access to (and cost of) financing represent major determinant(s) of firms’ productive performances. Access to financing allows firms to finance more investment projects, what leads to an increased productivity through higher capitalistic intensity and technical progress embodied in the new equipments. Besides, financial development has a positive effect on productivity as a result of better selection of investment projects and higher technological specialization through diversification of risk. A developed financial system creates more profitable investment opportunities by mobilizing and allocating resources to the projects that will generate the most surplus (see Levine, 1997, for a synthesis).

All four aggregated indicators have been generated at the branch level, thus defining in each country the specific investment climate of each industry. This has implied to produce 32 aggregated indicators (four indicators multiplied by eight industries) by applying Principal Component Analysis ( _PCA_ ) to the initial indicators<sup>34</sup> . The analysis usually treats investment 15