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...

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Main Authors:	McKenzie, David, Woodruff, Christopher
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	PARTICULAR COUNTRY BUSINESS EXPENSES EQUIPMENT ACCOUNTING CUSTOMER COMPETITIONS GOOD PRACTICES MATERIALS INCOME INTEREST SALES MEDIUM ENTERPRISES EXCHANGE COST OF FINANCE INFORMATION DEVELOPING COUNTRIES SELLING POLITICAL ECONOMY INTERNATIONAL LABOUR ORGANIZATION FINANCIAL STATEMENTS IMPACTS DISTRIBUTION FINANCIAL STATEMENT CASHFLOW FACTORS OF PRODUCTION CAPITAL STOCK PRICE PLANNING RETAIL TRADE QUALITY REPORTING TRAINING COURSE OPEN ACCESS ECONOMIC ACTIVITY HUMAN RESOURCE LABOR MARKET DATA ADVERTISING FINANCIAL PLANNING TARGETS PRODUCTIVITY FINANCIAL PERFORMANCE MARKETING WEB LINKS BUSINESS PRACTICES PRIVATE SECTOR DEVELOPMENT MATERIAL MIDDLE-INCOME COUNTRIES INVENTORIES INVENTORY BALANCE SHEET SUBSIDIES MARKET PRICE TAXES EXPENDITURE MANUFACTURING COSTING TECHNOLOGY HUMAN CAPITAL TRAINING COURSES INSPECTION BUSINESS PLAN EXPENSES AUDITORS SMALL ENTERPRISES TIME FRAME BEST PRACTICES RESULTS TRAINING WORKSHOP TURNOVER ELECTRICITY DAY-TO-DAY OPERATIONS COUNTRY DUMMIES WORKING CAPITAL MAINTENANCE FIRM PERFORMANCE COST PRIVATE SECTOR MIDDLE- INCOME COUNTRIES MARKET COMPETITION OUTPUT RESULT TRADE BANK LOAN BUSINESS BUSINESS SECTOR BUSINESSES BUSINESS PRACTICE PERFORMANCE SALES GROWTH INNOVATION PROFIT MISSING VALUES RAPID GROWTH AUDIT CUSTOMERS FIRM GROWTH PROFITS BUSINESS PERFORMANCE GROWTH POTENTIAL TARGET SMALL BUSINESSES PRICES USES COST OF CAPITAL CASH FLOW AUDITING BUSINESS TRAINING COMPETITION
Online Access:	http://documents.worldbank.org/curated/en/2015/08/24959833/business-practices-small-firms-developing-countries http://hdl.handle.net/10986/22662

id	okr-10986-22662
recordtype	oai_dc
spelling	okr-10986-226622021-04-23T14:04:10Z Business Practices in Small Firms in Developing Countries McKenzie, David Woodruff, Christopher PARTICULAR COUNTRY BUSINESS EXPENSES EQUIPMENT ACCOUNTING CUSTOMER COMPETITIONS GOOD PRACTICES MATERIALS INCOME INTEREST SALES MEDIUM ENTERPRISES EXCHANGE COST OF FINANCE INFORMATION DEVELOPING COUNTRIES SELLING POLITICAL ECONOMY INTERNATIONAL LABOUR ORGANIZATION FINANCIAL STATEMENTS IMPACTS DISTRIBUTION FINANCIAL STATEMENT CASHFLOW FACTORS OF PRODUCTION CAPITAL STOCK PRICE PLANNING RETAIL TRADE QUALITY REPORTING TRAINING COURSE OPEN ACCESS ECONOMIC ACTIVITY HUMAN RESOURCE LABOR MARKET DATA ADVERTISING FINANCIAL PLANNING TARGETS PRODUCTIVITY FINANCIAL PERFORMANCE MARKETING WEB LINKS BUSINESS PRACTICES PRIVATE SECTOR DEVELOPMENT MATERIAL MIDDLE-INCOME COUNTRIES INVENTORIES INVENTORY BALANCE SHEET SUBSIDIES MARKET PRICE TAXES EXPENDITURE MANUFACTURING COSTING TECHNOLOGY HUMAN CAPITAL TRAINING COURSES INSPECTION BUSINESS PLAN EXPENSES AUDITORS SMALL ENTERPRISES CAPITAL STOCK TIME FRAME BEST PRACTICES RESULTS TRAINING WORKSHOP TURNOVER ELECTRICITY DAY-TO-DAY OPERATIONS COUNTRY DUMMIES WORKING CAPITAL MAINTENANCE FINANCIAL PERFORMANCE FIRM PERFORMANCE COST PRIVATE SECTOR BALANCE SHEET MIDDLE- INCOME COUNTRIES MARKET COMPETITION OUTPUT RESULT TRADE BANK LOAN BUSINESS BUSINESS SECTOR BUSINESSES BUSINESS PRACTICE PERFORMANCE SALES GROWTH FINANCIAL PLANNING INNOVATION PROFIT MISSING VALUES RAPID GROWTH AUDIT CUSTOMERS FIRM GROWTH PROFITS BUSINESS PERFORMANCE GROWTH POTENTIAL TARGET SMALL BUSINESSES PRICES USES COST OF CAPITAL CASH FLOW AUDITING BUSINESS TRAINING COMPETITION 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. 2015-09-23T19:00:29Z 2015-09-23T19:00:29Z 2015-08 Working Paper http://documents.worldbank.org/curated/en/2015/08/24959833/business-practices-small-firms-developing-countries http://hdl.handle.net/10986/22662 English en_US Policy Research Working Paper;No. 7405 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Bangladesh Chile Ghana Kenya Mexico Nigeria Sri Lanka
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	PARTICULAR COUNTRY BUSINESS EXPENSES EQUIPMENT ACCOUNTING CUSTOMER COMPETITIONS GOOD PRACTICES MATERIALS INCOME INTEREST SALES MEDIUM ENTERPRISES EXCHANGE COST OF FINANCE INFORMATION DEVELOPING COUNTRIES SELLING POLITICAL ECONOMY INTERNATIONAL LABOUR ORGANIZATION FINANCIAL STATEMENTS IMPACTS DISTRIBUTION FINANCIAL STATEMENT CASHFLOW FACTORS OF PRODUCTION CAPITAL STOCK PRICE PLANNING RETAIL TRADE QUALITY REPORTING TRAINING COURSE OPEN ACCESS ECONOMIC ACTIVITY HUMAN RESOURCE LABOR MARKET DATA ADVERTISING FINANCIAL PLANNING TARGETS PRODUCTIVITY FINANCIAL PERFORMANCE MARKETING WEB LINKS BUSINESS PRACTICES PRIVATE SECTOR DEVELOPMENT MATERIAL MIDDLE-INCOME COUNTRIES INVENTORIES INVENTORY BALANCE SHEET SUBSIDIES MARKET PRICE TAXES EXPENDITURE MANUFACTURING COSTING TECHNOLOGY HUMAN CAPITAL TRAINING COURSES INSPECTION BUSINESS PLAN EXPENSES AUDITORS SMALL ENTERPRISES CAPITAL STOCK TIME FRAME BEST PRACTICES RESULTS TRAINING WORKSHOP TURNOVER ELECTRICITY DAY-TO-DAY OPERATIONS COUNTRY DUMMIES WORKING CAPITAL MAINTENANCE FINANCIAL PERFORMANCE FIRM PERFORMANCE COST PRIVATE SECTOR BALANCE SHEET MIDDLE- INCOME COUNTRIES MARKET COMPETITION OUTPUT RESULT TRADE BANK LOAN BUSINESS BUSINESS SECTOR BUSINESSES BUSINESS PRACTICE PERFORMANCE SALES GROWTH FINANCIAL PLANNING INNOVATION PROFIT MISSING VALUES RAPID GROWTH AUDIT CUSTOMERS FIRM GROWTH PROFITS BUSINESS PERFORMANCE GROWTH POTENTIAL TARGET SMALL BUSINESSES PRICES USES COST OF CAPITAL CASH FLOW AUDITING BUSINESS TRAINING COMPETITION
spellingShingle	PARTICULAR COUNTRY BUSINESS EXPENSES EQUIPMENT ACCOUNTING CUSTOMER COMPETITIONS GOOD PRACTICES MATERIALS INCOME INTEREST SALES MEDIUM ENTERPRISES EXCHANGE COST OF FINANCE INFORMATION DEVELOPING COUNTRIES SELLING POLITICAL ECONOMY INTERNATIONAL LABOUR ORGANIZATION FINANCIAL STATEMENTS IMPACTS DISTRIBUTION FINANCIAL STATEMENT CASHFLOW FACTORS OF PRODUCTION CAPITAL STOCK PRICE PLANNING RETAIL TRADE QUALITY REPORTING TRAINING COURSE OPEN ACCESS ECONOMIC ACTIVITY HUMAN RESOURCE LABOR MARKET DATA ADVERTISING FINANCIAL PLANNING TARGETS PRODUCTIVITY FINANCIAL PERFORMANCE MARKETING WEB LINKS BUSINESS PRACTICES PRIVATE SECTOR DEVELOPMENT MATERIAL MIDDLE-INCOME COUNTRIES INVENTORIES INVENTORY BALANCE SHEET SUBSIDIES MARKET PRICE TAXES EXPENDITURE MANUFACTURING COSTING TECHNOLOGY HUMAN CAPITAL TRAINING COURSES INSPECTION BUSINESS PLAN EXPENSES AUDITORS SMALL ENTERPRISES CAPITAL STOCK TIME FRAME BEST PRACTICES RESULTS TRAINING WORKSHOP TURNOVER ELECTRICITY DAY-TO-DAY OPERATIONS COUNTRY DUMMIES WORKING CAPITAL MAINTENANCE FINANCIAL PERFORMANCE FIRM PERFORMANCE COST PRIVATE SECTOR BALANCE SHEET MIDDLE- INCOME COUNTRIES MARKET COMPETITION OUTPUT RESULT TRADE BANK LOAN BUSINESS BUSINESS SECTOR BUSINESSES BUSINESS PRACTICE PERFORMANCE SALES GROWTH FINANCIAL PLANNING INNOVATION PROFIT MISSING VALUES RAPID GROWTH AUDIT CUSTOMERS FIRM GROWTH PROFITS BUSINESS PERFORMANCE GROWTH POTENTIAL TARGET SMALL BUSINESSES PRICES USES COST OF CAPITAL CASH FLOW AUDITING BUSINESS TRAINING COMPETITION McKenzie, David Woodruff, Christopher Business Practices in Small Firms in Developing Countries
geographic_facet	Bangladesh Chile Ghana Kenya Mexico Nigeria Sri Lanka
relation	Policy Research Working Paper;No. 7405
description	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.
format	Working Paper
author	McKenzie, David Woodruff, Christopher
author_facet	McKenzie, David Woodruff, Christopher
author_sort	McKenzie, David
title	Business Practices in Small Firms in Developing Countries
title_short	Business Practices in Small Firms in Developing Countries
title_full	Business Practices in Small Firms in Developing Countries
title_fullStr	Business Practices in Small Firms in Developing Countries
title_full_unstemmed	Business Practices in Small Firms in Developing Countries
title_sort	business practices in small firms in developing countries
publisher	World Bank, Washington, DC
publishDate	2015
url	http://documents.worldbank.org/curated/en/2015/08/24959833/business-practices-small-firms-developing-countries http://hdl.handle.net/10986/22662
_version_	1764451703176822784

Business Practices in Small Firms in Developing Countries

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