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Fernando Alexandre (NIPE), Hélder Costa (NIPE) and Miguel Portela (NIPE)
This paper explores the role of the business context and entrepreneurs’ education in productivity and firms’ growth. Our econometric estimates show that the entry of new firms fosters resource allocation efficiency and productivity growth in sectors with a higher degree of product market competition and more flexible labour markets. On the other hand, sectors with a high share of zombie firms seem to annihilated the benefits of the entry of new firms on productivity. We do not find a significant impact of the exit of firms on productivity dispersion, indicating the existence of inefficient exit mechanisms. The relevance of those components of the business context for firms’ performance is corroborated by the estimates of the probability of firms joining the group of frontier firms or moving upward in firm size and productivity distributions. Finally, our results show that, besides the business environment, firm founders’ education is also relevant for firms’ growth and productivity performance.