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The Determinants of Survival among African Manufacturing Firms

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Author Info

  • Soderbom, Mans
  • Teal, Francis
  • Harding, Alan

Abstract

Recent reforms in many African economies of their trading and exchange rate regimes have eliminated much of the protection that previously limited competition. Despite these reforms, African manufacturing firms remain unsuccessful, particularly in international export markets. In this article we focus on the role of total factor productivity (TFP) in determining whether or not firms can survive in the subsequent period. We use a pooled panel data set of firms in Ghana, Kenya, and Tanzania that spans a period of 5 years. We find that productivity influences subsequent firm survival among large, but not small, firms. We investigate whether this result can be explained by differences in risk or the persistence of TFP. We find no evidence that this is the case. The result may be driven by covariance between the unobserved outside option and the value in remaining in existence that makes optimal exiting for small firms largely independent of productivity in the previous period.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 54 (2006)
Issue (Month): 3 (April)
Pages: 533-55

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Handle: RePEc:ucp:ecdecc:y:2006:v:54:i:3:p:533-55

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Web page: http://www.journals.uchicago.edu/EDCC/

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Cited by:
  1. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
  2. Arne Bigsten & Mans Söderbom, 2006. "What Have We Learned from a Decade of Manufacturing Enterprise Surveys in Africa?," World Bank Research Observer, World Bank Group, vol. 21(2), pages 241-265.
  3. Francesca Marchetta, 2012. "Return Migration and the Survival of Entrepreneurial Activities in Egypt," Working Papers halshs-00693988, HAL.
  4. Abigail Barr & Pieter Serneels, 2009. "Reciprocity in the workplace," Experimental Economics, Springer, vol. 12(1), pages 99-112, March.
  5. Waldkirch, Andreas & Ofosu, Andra, 2008. "Foreign Presence, Spillovers, and Productivity: Evidence from Ghana," MPRA Paper 8577, University Library of Munich, Germany.
  6. Pierre Blanchard & Jean-Pierre Huiban & Claude Mathieu, 2012. "The determinants of firm exit in the French food industries," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 93(2), pages 193-212.
  7. Erol Taymaz & Şule Özler, 2007. "Foreign Ownership, Competition, and Survival Dynamics," Review of Industrial Organization, Springer, vol. 31(1), pages 23-42, August.
  8. Serneels, Pieter, 2008. "Human capital revisited: The role of experience and education when controlling for performance and cognitive skills," Labour Economics, Elsevier, vol. 15(6), pages 1143-1161, December.
  9. Blanchard, Pierre & Huiban, Jean-Pierre & Mathieu, Claude, 2011. "Productivity, sunk costs and firm exit in the French food industry," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114526, European Association of Agricultural Economists.
  10. Mary Hallward-Driemeier & Bob Rijkers, 2013. "Do Crises Catalyze Creative Destruction? Firm-level Evidence from Indonesia," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1788-1810, December.
  11. Shiferaw, Admasu & Bedi, Arjun S., 2010. "The Dynamics of Job Creation and Job Destruction: Is Sub-Saharan Africa Different?," Proceedings of the German Development Economics Conference, Hannover 2010 59, Verein für Socialpolitik, Research Committee Development Economics.
  12. Riadh Ben Jelili, . "Firm Heterogeneity and Productivity: The Contribution of Microdata," API-Working Paper Series 1013, Arab Planning Institute - Kuwait, Information Center.
  13. Klapper, Leora & Richmond, Christine, 2011. "Patterns of business creation, survival and growth : evidence from Africa," Policy Research Working Paper Series 5828, The World Bank.
  14. Rooks, Gerrit & Szirmai, Adam & Sserwanga, Arthur, 2009. "The Interplay of Human and Social Capital in Entrepreneurship in Developing Countries: The Case of Keywords: social capital, human capital, entrepreneurship, developing countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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