An analysis of pre-crisis Madagascar firm performance: Firm growth and productivity

  • This paper uses firm-level data to examine the performance of developing country firms, focusing in particular on Madagascar during its pre-crisis period from 2004 to 2007. We use three different analyses: i) a cross-country comparison of firm performance across a selection of comparator countries; ii) a panel analysis of Malagasy firms using two years of survey data; and iii) an analysis of Malagasy micro and informal firms, using data from two additional surveys on micro-enterprises. These are intended to highlight structural factors thought relevant to understanding developing country firm performance, and particularly Malagasy firm performance. The three analyses lead to the following findings. Most firm employment growth is by medium and large firms and not micro and small firms as developed country studies would predict. Higher firm growth rates are positively associated with single proprietorships and firms that import inputs while, counter-intuitively, having a university-educated manager and a high share of skilled employees are associated with lower growth rates. In terms of labor productivity there is an apparent inverted-U relationship between firm performance and firm size: productivity increases up to a certain large size before stagnating or declining. As such, high productivity and firm growth relates to medium and large firms. Notable, productivity stagnates at a smaller firm size than growth rates, implying continuing growth without productivity growth. Our micro and informal sector firm analysis also suggests the presence of an inverted–U relation between size and productivity but at a vastly smaller scale. The evidence also suggests that informal firms have higher productivity than their formal counterparts. The results suggest two key policy messages. First, there is a need to tackle distortions and barriers to firm growth that hinder more productive firms from growing faster and unleashing their potential. Second, improvements in the business environment, in particular for micro and small firms will be fundamental to encouraging firms to operate in the formal sector and provide a basis for further firm expansion.

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Metadaten
Document Type:Working Paper
Language:German
Author(s):Leonardo Iacovone, Bruce Byiers
Publication year:2011
Publishing Institution:Hertie School
Release Date:2019/05/28
Licence of document (German):Metadaten / metadata
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