What influences firms’ perceptions?

Kaplan, David S and Pathania, Vikram (2010) What influences firms’ perceptions? Journal of Comparative Economics, 38 (4). pp. 419-431. ISSN 01475967

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Perceptions-based indicators are sometimes used to measure the quality of the business environment. For instance, firms are asked about the major constraints on business operations and expansion. Little is known, however, about what shapes their responses. In this paper, using perceptions-based indicators from 38 countries (84 country-year pairs) from the World Bank Enterprise Surveys, we argue that firm responses are critically influenced by macroeconomic conditions. Paradoxically, we find that perceptions worsen during periods of high GDP growth. We also examine other indicators from the Enterprise Surveys that are objective measures of constraints, and find mixed evidence on how business constraints vary with the business cycle. Finally, we find that firms that introduce new product lines, which are likely those with the most interactions with regulatory agencies, have particularly bad perceptions of the business environment. We conclude that changes in firms’ perceptions over time may not reflect changes in the business environment.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography
Depositing User: Catrina Hey
Date Deposited: 10 Sep 2013 16:09
Last Modified: 10 Sep 2013 16:09
URI: http://srodev.sussex.ac.uk/id/eprint/45178
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