What Holds Back Bangalore Businesses?

As in the U.S., the number of small low growth enterprises in underdeveloped economies is known to be large. But what about the developing economy counterparts of high-growth businesses in the U.S.? In what way do differences in technological, institutional and cultural factors matter? Do they make high-growth businesses more or less numerous in underdeveloped economies than in the U.S.? How, if at all, do they lead to differences in characteristics, growth rates and economic role of high growth businesses? This paper focuses on businesses operating in the city of Bangalore, India. Data compiled from statutory regulatory filings suggest that the number and proportion of businesses that expand rapidly are much lower than in the U.S. In-depth interviews with over a hundred entrepreneurs in Bangalore suggest that deficiencies in the performance of basic governmental functions (such as in collecting taxes and the maintaining land records) play a significant role in discouraging businesses from starting at or expanding to an economically efficient scale of operation.