Here, there is a clear role for institutions such as the one whose centenary we are celebrating today to aid this diffusion of knowledge and best 4/7  BIS central bankers' speeches  practice across firms. Second, productive firms need to be able to grow, to attract both capital and skilled workers. This requires well-functioning capital, product and labour markets.
It is crucial that the Single Market is completed, particularly in the services sector where misallocation is largest. Regulatory barriers that inhibit small firms from gaining headcount need to be relaxed – there is evidence that productive firms choose not to grow rather than cross the threshold and incur greater administrative expenses. Recent reforms in Italy and Spain have sought to address this problem.