Abstract

Many countries experience slow productivity growth. One of the possible reasons for this is over-bureaucratization and over-regulation that obstruct dynamic adaptation, innovative power and entrepreneurial activity. Alternatively, such bureaucracy and regulation could be interpreted as phenomena which society just has to learn to live with and which otherwise do no real economic harm. This paper explores both opposite hypotheses. We do so by studying whether or not administrative tape determines the performance of private companies. Administrative tape is a multidimensional concept. We distinguish three dimensions: regulatory burden, regulatory quality, and regulatory change. The impact of these dimensions of administrative tape on private firm performance is estimated with unique survey data from 625 Dutch companies. We controlled for a variety of organizational, contextual and entrepreneurial characteristics. The results show that regulatory quality and regulatory change limit the performance of private companies.