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Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries


  • Carol Newman
  • John Rand
  • Finn Tarp


Much of the literature on industry evolution has found firm dynamics to be an important source of sector-level productivity growth. In this paper, we ask whether the delineation of entry and exit firms matters in assessing the impact of firm turnover. Using detailed firm level data from Vietnam, it emerges that efficiency differences between sector switchers and exit/entry firms exist. Distinguishing between switchers and firm entry/exit is crucial for understanding the contribution of firm turnover to overall productivity growth. Moreover, we uncover distinct and illuminating firm and sector-level determinants of firm exit and switching, which need to be carefully considered in the search for effective policy.

Suggested Citation

  • Carol Newman & John Rand & Finn Tarp, 2007. "Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries," The Institute for International Integration Studies Discussion Paper Series iiisdp230, IIIS.
  • Handle: RePEc:iis:dispap:iiisdp230
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    References listed on IDEAS

    1. Van Biesebroeck, Johannes, 2008. "The Sensitivity of Productivity Estimates," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 311-328.
    2. Johannes Sauer & Klaus Frohberg & Henrich Hockmann, 2006. "Stochastic efficiency measurement: The curse of theoretical consistency," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 139-166, May.
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    Cited by:

    1. Henrik Hansen & John Rand & Finn Tarp, 2009. "Enterprise Growth and Survival in Vietnam: Does Government Support Matter?," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1048-1069, August.
    2. Atsushi Kawakami & Tsutomu Miyagawa, 2013. "Product Switching and Firm Performance in Japan - Empirical Analysis Based on the Census of Manufacturers," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(2), pages 287-314, March.
    3. KAWAKAMI Atsushi & MIYAGAWA Tsutomu, 2010. "Product Switching and Firm Performance in Japan," Discussion papers 10043, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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