A natural experiment is used to identify the causal relationship between employment protection legislation and …rm growth. The natural experiment occurred in Sweden in 2001, when an exemption made it possible for …rms with less than eleven employees to exclude two workers from the last-in-…rst-out principle when dismissing personel. The estimated average treatment e¤ect of the reform show that the number of employees increased with 0.135 percent in …rms with 5-9 employees relative to …rms with 10-15 employees, which corresponds to over 5,000 additional jobs per year created by the reform. Firms with ten employees, just below the size threshold, became 3.4 percent less likely to increase their workforce to a level surpassing the threshold, indicating that the last-in-…rst-out rule prevented these …rms from growing. Thus, employment protection legislation seems to act as a growth barrier for small …rms.

Among 104,231 limited liability firms in Sweden with at least two employees during 1997-2010, almost 10% did not hire new employees in any given 3-year period despite having high profits. Nearly half of these firms continued to have high or medium profits in the next threeyear period, but still no growth. Regression analysis indicates that these firms were not randomly distributed; rather they were small and young, did not belong to an enterprise group, and operated in local markets with high profit-opportunities. We conclude that it might be more beneficial to focus policy towards these firms instead of towards a few high-growth firms that, having just grown exponentially, may not be best positioned to grow further.

A natural experiment is used to identify the causal relationship between employment protection legislation and Örm growth in Sweden. A reform of the last-in-Örst-out principle increased employment growth with over 4,000 additional jobs per year in Örms with less than eleven employees. Firms with ten employees became 3.4 percentage points less likely to increase their workforce, indicating that an introduced threshold kept them from growing. Thus, employment protection legislation seems to act as a growth barrier for small Örms.

Purpose-The purpose of this paper is to investigate the importance of the entrepreneur's quest for independence and control over the firm for governance and financing strategies with a special focus on family firms and how they differ from nonfamily firms. Design/methodology/approach-The analysis is based on 1,000 telephone interviews with Swedish micro and small firms. The survey data are matched with firm-level data from the Bureau van Dijks database ORBIS. Findings-The analysis shows that independence is a prime motive for enterprises, statistically significantly more so for family owners. Family owners are more prone to use either their own savings or loans from family and are more reluctant to resort to external equity capital. Our results indicate a potential "capital constraint paradox"; there might be an abundance of external capital while firm growth is simultaneously constrained by a lack of internal funds. Research limitations/implications-The main limitation is that the study is based on crosssection data. Future studies could thus be based on longitudinal data. Practical implications-The authors argue that policy makers must recognize independence and control aversion as strong norms that guide entrepreneurial action and that micro-and small-firm growth would profit more from lower personal and corporate income taxes compared to policy schemes intended to increase the supply of external capital. Originality/value-The paper offers new insights regarding the value of independence and how it affects strategic decisions within the firm.