On Entry and Growth: Theory and Evidence
Philippe Aghion
Evguenia Bessonova
This paper analyzes the relationship between the entry of new firms and the innovation and productivity growth within existing firms. In particular, we argue that liberalizing entry has a boosting effect on innovation and growth in those existing enterprises that are the most productive prior to the liberalisation, whereas it discourages them in the least productive firms. This prediction is confronted to firm-level panel data from the UK, India and especially Russia over the period 1996-2002.
JEL Classification: O11, O12, O30, O31, O32, O40.Keywords :
entry, growth, productivity, foreign investment.
• Introduction
• A simple growth model with entry
— The argument
— The theory
— Main theoretical predictions
• Entry and growth in the UK
• The Indian liberalization experiment
• Entry and Growth in Russia
— Data
— Empirical specification
— Regression results
• Conclusion
• References