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Firm Heterogeneity and Market Selection in Sub-Saharan Africa: Does It Spur Industrial Progress?

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Author Info
Admasu Shiferaw

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Abstract

This article investigates the processes of market selection and industry dynamics in a sub-Saharan Africa context. Using census-based longitudinal data, it examines the distribution of productivity within an industry to determine whether patterns of firm entry, exit, and survival are driven by underlying efficiency differences. It also estimates the contributions to industry-level productivity growth of producer turnover and the reallocation of resources from less efficient producers to more efficient ones. The article shows that markets in sub-Saharan Africa, as represented by Ethiopia, are at least as strong as those in other regions in selecting efficient firms. Tolerance of inefficient firms also declines with the degree of exposure to international competition. While reallocation of resources played a positive and significant role for industry-level productivity growth, it only managed to offset the declining trend in intrafirm productivity. The article concludes that although markets have played the expected disciplinary role, long-term industrial growth requires more than functional markets, particularly in addressing firm-level innovation.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/508713
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Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 55 (2007)
Issue (Month): ()
Pages: 393-423
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Handle: RePEc:ucp:ecdecc:v:55:y:2007:p:393-423

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Shiferaw, A., 2006. "Entry, survival, and growth of manufacturing firms in Ethiopia," Working Papers - General Series 425, Institute of Social Studies. [Downloadable!]
  2. Admasu Shiferaw, 2009. "Which Firms Invest Less Under Uncertainty? Evidence from Ethiopian Manufacturing," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 2, Courant Research Centre PEG. [Downloadable!]
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