Working Paper
Measuring the Business Environment for Entrepreneurship in Fragile States

This paper aims towards better understanding the role of entrepreneurship in fragile states, which despite the practical interest and relevance has been somewhat disregarded in academic research. Given the necessity to support policy formulation with appropriate and relevant measurement of entrepreneurship and the business environment, the primary focus in this paper is to scrutinize existing international indicators, in particular the World Bank’s Doing Business (DB) indicators and ask whether they are able to capture entrepreneurial dynamics and constructively guide policy-making towards entrepreneurship in fragile state. The paper argues that DB indicators give a partial picture of the nexus between institutional context, policy reforms, entrepreneurship and economic development. In particular, DB indicators’ analysis fails to address three pivotal aspects: first, the process through which individuals become entrepreneurs, second, industrial cooperative and competitive relationships both intersectoral and across different sectors of the economy, and third, the characteristics of workers employed in enterprises. Consequently, DB indicators are not able to capture innovation and changing processes, and miss some pivotal features of both the internal and the external environment of the enterprise. The paper maintains that these shortcomings are particularly serious when referred to fragile countries and discusses how and to what extent DB indicators lead to adverse effect policy recommendations, being inadequate for policy planning in fragile areas.