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The Dynamics of Firm Growth in Sub-Saharan Africa: Evidence from Ethiopian Manufacturing Sector 1996–2017

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  • Kahsay Gerezihar Tsaedu

    (Policy Studies Institute (PSI)
    University of International Business and Economics (UIBE))

  • Zhihong Chen

    (University of International Business and Economics)

Abstract

Despite the pile of literature on firm growth dynamics, studies that use large census data have been greatly rare for developing countries mainly due to a paucity of data. This study, however, relies on a deep analysis of complete microdata of Ethiopian manufacturing firms over a very long enough period (22 years). Hence, this study adds to the ongoing debates on the firm growth dynamics, since we provided appealing econometric findings mainly emanating from the inclusive methodological approach implemented and the complete long period census data used, as it helped us to provide clear and consistent evidence against Gibrat’s law. The results revealed that conditional on survival, younger and smaller firms grow faster. On the contrary, there is a pattern of negative persistence growth, where positive growth is followed by a negative growth after a year. Overall these findings show the presence of firms formed by subsistence-seeking entrepreneurs in the economy.

Suggested Citation

  • Kahsay Gerezihar Tsaedu & Zhihong Chen, 2021. "The Dynamics of Firm Growth in Sub-Saharan Africa: Evidence from Ethiopian Manufacturing Sector 1996–2017," Journal of Industry, Competition and Trade, Springer, vol. 21(3), pages 367-392, September.
    • Handle: RePEc:kap:jincot:v:21:y:2021:i:3:d:10.1007_s10842-021-00361-9
    DOI: 10.1007/s10842-021-00361-9
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    More about this item

    Keywords

    Sub-Saharan Africa manufacturing; Firm size; Firm growth; System GMM;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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