Business Practices in Small Firms in Developing Countries

David McKenzie and Christopher Woodruff

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

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? We develop 26 questions that measure business practices in marketing, stock-keeping, recordkeeping, and financial planning. These questions have been administered in surveys in Bangladesh, Chile, Ghana, Kenya, Mexico, Nigeria and Sri Lanka. We show that variation in business practices explains as much of the variation in outcomes – sales, profits and labor productivity and TFP – 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 association of business practices with firm outcomes is robust to including numerous measures of the owner’s human capital. We find that owners with higher human capital, children of entrepreneurs, and firms with employees employ better business practices.

Keywords: business practices; small enterprises; productivity; management (search for similar items in EconPapers)
JEL-codes: L26 M20 M53 O12 O17 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-bec, nep-cse, nep-ent and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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https://warwick.ac.uk/fac/soc/economics/research/w ... rp_1112_woodruff.pdf

Related works:
Journal Article: Business Practices in Small Firms in Developing Countries (2017)
Working Paper: Business Practices in Small Firms in Developing Countries (2016)
Working Paper: Business Practices in Small Firms in Developing Countries (2016)
Working Paper: Business Practices in Small Firms in Developing Countries (2015)
Working Paper: Business practices in small firms in developing countries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1112

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