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What determines enterprises' technical efficiency? An empirical investigation of informal enterprises in Burkina Faso

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  • Denis B. Akouwerabou

Abstract

Although the creation rate of new informal enterprises is very high in the cities of developing countries, the bankruptcy rate of such enterprises is also significant. This article studies the determinants of the growth rate and technical inefficiency of informal production units (IPUs). The data used in this study were collected from enterprises in Ouagadougou based on a survey of informal enterprises in the business of hairdressing, two-wheeled mechanics, carpentry, and sewing. Analysis of the data showed that IPUs run by skilled entrepreneurs are less dynamic than those run by non-qualified entrepreneurs in the short run. Detailed results further showed that qualified entrepreneurs conducting business in the informal sector expect the formal sector to offer a more profitable opportunity than the informal sector. Our data also showed that the IPUs become more inefficient as their workers contract more diseases. However, having qualified workers enables IPUs to reduce technical inefficiencies.

Suggested Citation

  • Denis B. Akouwerabou, 2016. "What determines enterprises' technical efficiency? An empirical investigation of informal enterprises in Burkina Faso," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 28(2/3), pages 359-379.
    • Handle: RePEc:ids:ijesbu:v:28:y:2016:i:2/3:p:359-379
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