Business Practices in Small Firms in Developing Countries
Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? This study developed 26 questions that measure business prac...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/08/24959833/business-practices-small-firms-developing-countries http://hdl.handle.net/10986/22662 |
| Summary: | Management has a large effect on the
productivity of large firms. But does management matter in
micro and small firms, where the majority of the labor force
in developing countries works? This study developed 26
questions that measure business practices in marketing,
stock-keeping, record-keeping, and financial planning. These
questions have been administered in surveys in Bangladesh,
Chile, Ghana, Kenya, Mexico, Nigeria, and Sri Lanka. This
paper shows that variation in business practices explains as
much of the variation in outcomes — sales, profits, and
labor productivity and total factor productivity — in
microenterprises as in larger enterprises. Panel data from
three countries indicate that better business practices
predict higher survival rates and faster sales growth. The
effect of business practices is robust to including many
measures of the owner’s human capital. The analysis finds
that owners with higher human capital, children of
entrepreneurs, and firms with employees employ better
business practices. Competition has less robust effects. |
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