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Business practices in small firms in developing countries

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  • Mckenzie,David J.
  • Woodruff,Christopher M.

Abstract

Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? This study developed 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria, and Sri Lanka. This paper shows that variation in business practices explains as much of the variation in outcomes ? sales, profits, and labor productivity and total factor productivity ? in microenterprises as in larger enterprises. Panel data from three countries indicate that better business practices predict higher survival rates and faster sales growth. The effect of business practices is robust to including many measures of the owner?s human capital. The analysis finds that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices. Competition has less robust effects.

Suggested Citation

  • Mckenzie,David J. & Woodruff,Christopher M., 2015. "Business practices in small firms in developing countries," Policy Research Working Paper Series 7405, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7405
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Measuring Business Practices in Small Firms
      by David McKenzie in Development Impact on 2015-10-05 18:20:00

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    Cited by:

    1. Naudé, Wim, 2017. "Entrepreneurship, Education and the Fourth Industrial Revolution in Africa," IZA Discussion Papers 10855, Institute of Labor Economics (IZA).
    2. Emily A. Beam & Joshua Hyman & Caroline Theoharides, 2020. "The Relative Returns to Education, Experience, and Attractiveness for Young Workers," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 391-428.
    3. Axel Demenet & Quynh Hoang, 2018. "How important are management practices for the productivity of small and medium enterprises?," WIDER Working Paper Series wp-2018-69, World Institute for Development Economic Research (UNU-WIDER).
    4. Adhvaryu, Achyuta & Bassi, Vittorio & Nyshadham, Anant & Tamayo, Jorge, 2020. "No Line Left Behind: Assortative Matching Inside the Firm," CEPR Discussion Papers 14554, C.E.P.R. Discussion Papers.
    5. Atonu Rabbani, 2017. "Can Leaders Promote Better Health Behavior? Learning from a Sanitation and Hygiene Communication Experiment in Rural Bangladesh," Working Papers id:11904, eSocialSciences.
    6. Powell-Jackson, Timothy & Purohit, Bhaskar & Saxena, Deepak & Golechha, Mahaveer & Fabbri, Camilla & Ganguly, Partha Sarthi & Hanson, Kara, 2019. "Measuring management practices in India's district public health bureaucracy," Social Science & Medicine, Elsevier, vol. 220(C), pages 292-300.
    7. Lucia Foster & Patrice Norman, 2015. "The Annual Survey of Entrepreneurs: An Introduction," Working Papers 15-40, Center for Economic Studies, U.S. Census Bureau.
    8. Axel Demenet & Quynh Hoang, 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).
    9. Macchiavello, Rocco & Menzel, Andreas & Rabbani, Atonu & Woodruff, Christopher, 2015. "Challenges of Change: An Experiment Training Women to Manage in the Bangladeshi Garment Sector," Economic Research Papers 269725, University of Warwick - Department of Economics.
    10. David McKenzie, 2017. "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition," American Economic Review, American Economic Association, vol. 107(8), pages 2278-2307, August.
    11. Olivier Sterck & Antonia Delius, 2020. "Cash Transfers and Micro-Enterprise Performance: Theory and Quasi-Experimental Evidence from Kenya," CSAE Working Paper Series 2020-09, Centre for the Study of African Economies, University of Oxford.
    12. Mckenzie,David J. & Puerto,Susana & Mckenzie,David J. & Puerto,Susana, 2017. "Growing markets through business training for female entrepreneurs : a market-level randomized experiment in Kenya," Policy Research Working Paper Series 7993, The World Bank.
    13. Mahfuz Kabir, "undated". "Valuation of Subsoil Minerals: Application of SEEA for Bangladesh," Working papers 120, The South Asian Network for Development and Environmental Economics.
    14. Mayra Buvinic & Megan O’Donnell, 2017. "Gender Matters in Economic Empowerment Interventions: A Research Review," Working Papers id:11926, eSocialSciences.
    15. Achyuta Adhvaryu, 2018. "Managerial quality and worker productivity in developing countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 429-429, February.
    16. Lucia Foster & Patrice Norman, 2015. "The Annual Survey of Entrepreneurs: An Introduction," Working Papers 15-40r, Center for Economic Studies, U.S. Census Bureau.
    17. Achyuta Adhvaryu & Anant Nyshadham & Jorge A. Tamayo, 2019. "Managerial Quality and Productivity Dynamics," NBER Working Papers 25852, National Bureau of Economic Research, Inc.
    18. Lall, Saurabh A. & Chen, Li-Wei & Roberts, Peter W., 2020. "Are we accelerating equity investment into impact-oriented ventures?," World Development, Elsevier, vol. 131(C).
    19. Achyuta Adhvaryu & Namrata Kala & Anant Nyshadham, 2019. "Management and Shocks to Worker Productivity," NBER Working Papers 25865, National Bureau of Economic Research, Inc.
    20. Lungisani Dladla & Emmanuel Mutambara, 2018. "The Impact of Training and Support Interventions on Small Businesses in the Expanded Public Works Programme—Pretoria Region," Social Sciences, MDPI, Open Access Journal, vol. 7(12), pages 1-15, November.
    21. Dhaniel Ilyas, 2017. "Preliminary Finding of Small and Micro Firms Resilience in Indonesia," LPEM FEBUI Working Papers 201715, LPEM, Faculty of Economics and Business, University of Indonesia, revised Dec 2017.

    More about this item

    Keywords

    E-Business; Business Environment; Competitiveness and Competition Policy; Emerging Markets; Business in Development;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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