This paper focuses on non–Information Technology businesses operating in the city of Bangalore, India. Data on firms compiled from statutory regulatory filings suggest that the number and proportion of businesses that expand rapidly are much lower than in the United States. In-depth interviews with over 100 entrepreneurs in Bangalore suggest that deficiencies in the performance of basic governmental functions (such as in collecting taxes and maintaining land records) play a significant role in discouraging businesses from starting at or expanding to an economically efficient scale of operation.

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