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How important are management practices for the productivity of small and medium enterprises?

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  • Demenet Axel
  • Hoang Quynh

Abstract

Is the lack of ‘managerial capital’, alongside human and financial capital, a constraint on the growth of firms in developing countries? The evidence on this is still mixed, especially among small and medium enterprises.This paper uses a panel of Vietnamese small and medium enterprises to investigate this question. We build a multidimensional measure of managerial capital, combining both practices and attitudes, and link it with consistent estimates of firm-level productivity and mark-up. Even though bias may still affect the estimation of the overall influence of managerial capital on productivity, we show that there is a positive and significant association.Changes in management practices allow firms to be more efficient. Furthermore, we compare this association by firm size, and show that managerial capital is arguably as important for micro and small firms as it is for medium firms. Finally, it appears that the indicators related to ‘entrepreneurial attitudes’ play a more important role than elementary business skills.

Suggested Citation

  • Demenet Axel & Hoang Quynh, 2018. "How important are management practices for the productivity of small and medium enterprises?," WIDER Working Paper Series 69, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2018-69
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    Keywords

    Small and medium enterprises; Informal sector (Economics); Entrepreneurship;

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