and coordination failures, government failures – both of omission and commission – represent a barrier restricting firms from investing in growth and job creation. The World Bank’s Doing Business Report (World Bank, 2017) highlights that “ _enabling growth... requires an environment where new entrants with drive and good ideas can get started in business and where good firms can invest and expand_ .” (emphasis added). Also, a large body of research highlights the impact of business regulation and the wider business and investment climate on firm entry, investment, and growth, and on wider economic outcomes (e.g., Djankov et al, 2002; Bastos and Nasir, 2004; Klapper et al, 2006; Sharma, 2009; Aterido and Hallward‐Driemeier, 2010; Aterido, Hallward‐Driemeier, and Pages, 2011; Commander and Svejnar, 2011).

The remainder of the paper is organized as follows: Section 2 describes the data used in the analysis; Sections 3‐6 summarize the results of each of the four research questions outlined above; Section 7 concludes briefly and discusses potential further research.

# 2. Data

The analysis presented in this paper draws on two primary data sources: Bureau Van Dijk’s _Orbis_ firm‐ level data set for measures of firm performance, and the _Subnational Doing Business_ (SBD) produced by the World Bank, which reports the business environment at regional (NUTS 2) level.

## a. Firm‐Level Data

We extract information about firms from Orbis, published by Bureau van Dijk. The Orbis database is a comprehensive database containing main accounting lines, including income statements and balance sheets, from ca. 17 million non‐financial companies across Europe,<sup>6</sup> the vast majority of which are private. Orbis also reports the identity, type (sector), and address of the firms. Even though very rare, firms may have a country of residence that is different from the one in which they are registered. We select countries based on the country of registration of the firm.

We select all companies reporting at least 10 employees at least once in the period 2008‐2013, excluding financial and insurance companies (2‐digits NACE Rev. 2 sectors 64‐66). We require companies to report total assets at least one time in the period of interest. Orbis provides a separate, so‐called ‘global format industrial template’ for these companies. One concern with the firm sample is that Orbis data may skew towards larger firms since these firms are more likely to provide information to the Chambers of Commerce, from whom Bureau van Djik collects the firm data. We use the address of the company for its location, and retain all those in the regions where we have the SDB indicators.

Table 1 reports the average number of firms by country in our sample, and compares with the numbers reported in Eurostat’s _Structural Business Statistics_ . Our sample includes an annual average of about 123,000 firms in both Spain and Italy, about 55,000 in Poland, and nearly 50,000 in Romania (see Table 1). Orbis coverage varies by country: 58 percent in Poland: 63 percent in Italy; 83 percent in Spain; and 89 percent in Romania.<sup>7</sup> A bigger concern may be the fact that coverage varies significantly across regions within countries. Annex 1 provides firm coverage in each NUTS‐2 region: in Spain from a low of 44 percent in Aragon to 100 percent in the Balearic Islands (although only 5 of 19 regions have coverage

> 6 The Orbis data set is a global data set, but for the purposes of this paper we use the European subset of overall Orbis data set and draw on observations only from Italy, Poland, Romania, and Spain.

> 7 Kalemli‐Ozcan et al. (2015) also show that the Orbis data has a good coverage of firms in Italy, Romania and Spain.

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