The results of the WBES show that important dimensions in the climate for business operations

and investment can be measured, analyzed, and compared across countries, and that important
governance aspects are centrally related to the business environment. Further, the survey
findings suggest that key policy, institutional, and governance indicators are connected to
important outcomes, including saes by firms, investment growth, and the extent of unfficialdom.
And they point to the value of monitoring such indicators over time, because progress in these
areas should yield real improvements in enterprise performance.

In particular, the WEBS provides empirical confirmation for some commonly held truths but
provides little evidence for others. For example, it shows a clear connection between taxation,
financing, and corruption on one hand, and growth and investment on the other. It suggests the
importance of government consultation with key economic stakeholders as it attempts to provide
an effective environment in which firms can grow, as well as the potential gains in investment
climate conditions associated with macroeconomic instability, regulatory and tax constraints, and
weak governance all play a role in unofficialdom and affect the size of the shadow economy.

At the same time, the WBES discourages generalizations about the global business environment.
Rather, it sheds light on the enormous variance in the nature and severity of different types of
constraints across countries and regions, as well as among firms of different characteristics. This
variance implies that generalizations regarding the severity of a particular constraint are of
limited value. It also suggests the importance of unbundling generic clusters of constraints. For
example, although two countries may have severe regulatory or governance constraints, the
components for each nation may be quite different. The detail afforded by the survey also
suggests that generalizations about firm size and formality may benefit from a nuanced analysis
of actual conditions. The country-specific data, initial analysis, and findings emerging from this
report, as well as related papers and outputs from the WBES data (see the bibliography) point to
the value of repeating the WBES in the future.

The complex interaction between firm size and the severity of reported constraints poses a
challenge for policy makers who would target interventions to a single type of firm. The
relationship between firm size and the severity of a constraint, while clearly there, is not equally
strong for all constraints. Instead, for some constraints, medium0size firms show no difference
from small ones, for several they are actually more constrained. If such findings are validated
through further empirical studies, some implications will emerge. First, it would then be prudent
to focus specifically on each particular constraint and the ways they affect frims of different sizes
because, depending on the constraint, small, medium, firms may be affected most gravely.
Second, these results would argue against policies targeted to small enterprises, based on the
notion that such policies are needed to level the playing field.

At the same time, this type of business survey paves the way toward a deeper understanding of a
firm’s behavior in shaping its business environment and investment climate. A major finding of a
research project associated with this survey effort was that, contrary to conventional wisdom, a
firm should not be seen as merely a passive business and investment climate taker, for which the
government presumably is the primary source of all business constraints. Instead, the data from
transition countries that permitted an in-depth analysis of state capture high-lighted empirically
the extent to which powerful firms play a key role in shaping the policies, laws, and regulations
that form the business environment and investment climate. This data leads to the notion that
some firms become business climate makers, particularly in countries where state capture or
other related forms of firm influence is prevalent. In these cases, the actions of selected firms in
many countries contribute to the shaping of such governance an investment climate in the first
place. The effect of a firm’s strategy on the business climate through its effect on public
misgovernance further illustrates how important it is to view both governance and the investment
climate within an integrated framework.

The implementation of the WBES offered a few lessons that apply to similar future projects.
First, because WBES was a multipartner venture, coordination by all participants on a core
instrument and uniform implementation would have enhanced its reliability and comparability
across many more variables. Second, it is important to account for inherent biases and
measurement errors in any survey of this type. This necessitates care in interpretation and the use
of control variables, as discussed in chapter four. Furthermore, it points to the need for
complementing the results of a firm survey with other data rather than considering a single
survey as the single source of data for an assessment of the investment climate.

Next as the extensive use of country control variables and the discussion of kvetch control
indicates, even though perceptions matter significantly for the firm;s behavior and
decisionmaking, they are only imperfectly related to underlying physical and cost conditions.
This underscores the desirability, when possible, of complementing questions of perception with
more quantitative evaluations of a firm’s experience of costs associated with more quantitative
evaluations of a firm’s experience of costs associated with various constraints. The World Bank
Group’s current core investment climate survey moves in this direction.

Furthermore, for the next survey of firms, it will be important to obtain a larger sample size in
each country and to ensure that implementation is comparable with the approach taken during
WBES 2000. This is particularly true for economy-wide sampling, for replicating the core
questions, and for ensuring a similar interview framework for gathering information on a firm’s
influence and response to the fovernance and policy environment.

Finally, the country-specific data, initial analysis, and findings emerging from the WBES in this
paper and other empirical work poins to the importance of measuring and monitoring business
environment indicators over time. The relationship shown between key WBES indicators and
firm-level outcomes suggess that progress in these business and governance indicators should be
associated with real improvements in enterprise performance over extended periods. Now that
this survey approach, involving such a large number of partnerships, has been implemented
simultaneously across so many regions and countries, it would be extremely valuable to
institutionalize its implementation every three to five years. 15, p.89-91.