Young businesses, entrepreneurship, and the dynamics of employment and ouput in Colombia´s manufacturing industry

In this paper, we study the characteristics and growth dynamics of young businesses, and the contribution of these businesses to aggregate growth, in a developing economy: Colombia. Our study covers the 17 years between 1993 and 2009. We limit our study to manufacturing plants of 10 or more employees (and some with less employees but large production). By doing so, we concentrate our attention on the segment of young businesses that are most likely truly entrepreneurial efforts. We characterize young manufacturing plants and compare them to older ones. This characterization covers several dimensions of business performance: employment, output, exports, survival patterns, productivity and investment. We contrast these patterns with those observed in the US. We also study the contribution of establishments of different ages to overall employment and output growth over our 17 year period. The paper makes several contributions to the existing literature. First, it characterizes young business dynamics for a developing economy. Second, it focuses on establishments that are born large enough that they plausibly represent truly entrepreneurial initiatives. That focus enables us to show that part of the wide variation in growth patterns among young businesses found by previous studies reflects the poor performance of micro establishments. In particular, we find much less destruction from exit of young businesses when the micro segment is removed from the data.