in the sample have sales credit). We also include a dummy variable indicating whether a firm has a positive share of investment financed with external funds (this applies to 24 percent of firms in the sample).

The World Bank Enterprise Surveys also provide important information on firm characteristics, including size, age, sector,<sup>5</sup> export activity, and ownership as well as whether a firm is an independent, single establishment. The sample used in this paper is stratified by size, age, sector, region, and other firm characteristics. (Variable descriptions and distributions are reported in tables 1, 2 and 3.) Firms are divided into four categories by size: _micro_ (1–10 permanent employees), _small_ (11–50), _medium_ (51–200), and _large_ (more than 200). The sample includes mostly micro firms (39 percent of the total) and small firms (37 percent); only 16 percent are medium-size and 7 percent large. Firms are divided into three categories by age: _young_ (1–5 years),<sup>6</sup> _mature_ (6–15), and _older_ (more than 15). Most are mature (47 percent) or older (41 percent); only 11 percent are young firms. Ownership is defined as being _foreign_ or _government_ if “10 percent or more” of the firm is foreign or government owned; 12 percent of the firms in the sample are foreign owned and only 2 percent are government owned. _Exporter_ is a dummy variable indicating that direct exports account for 10 percent or more of a firm’s sales; 13 percent of the sample firms are exporters.

Whether a firm has a single establishment or multiple ones matters for firm growth, especially in the manufacturing sector (see Dunne, Roberts, and Samuelson 1989). We therefore include a dummy variable indicating whether a firm is an independent, single establishment. Most of the firms in the sample are single establishments (85 percent), while 14 percent are part of multi-establishment entities. Finally, we divide the firms into three sectors: _manufacturing_ (55 percent), _sales_ (23 percent are in the retail and wholesale sector), and other _services_ (20 percent). The sample includes firms from six regions: 31 percent from Sub-Saharan Africa, 28 percent from Latin America and the Caribbean, 27 percent from Europe and Central Asia, 11 percent from East Asia and Pacific, and only 3 percent from the Middle East and North Africa and South Asia.<sup>7</sup> Table 1 provides an overview of firm growth by firm characteristics and by region. Young, small firms experience rapid growth in their labor force. The mean growth rate for micro firms is twice that for small firms and three times that for medium-size firms. There appears to be little growth in employment for large firms on average. The mean growth rate for young firms is nearly twice that for mature firms and more than three times that for older firms. On average, there is little difference in growth rate between single, independent establishments and those that are part of multiestablishment entities or between the manufacturing, sales, and services sectors. Firms in Africa and Latin America grow faster than those in Europe and Central Asia and East Asia and Pacific.

# **4. The Most Binding Constraint of the Business Environment**

> 5 The questionnaire provides information on industry, and we use this information to establish the sector variable.

> 6 Firms operating for less than one year are classified as young firms.

> 7 Because of space limitations, abbreviations are sometimes used for the regions in tables: AFR for Sub-Saharan Africa, LAC for Latin America and the Caribbean, ECA for Europe and Central Asia, and EAP for East Asia and Pacific.

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