NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Business Practices in Small Firms in Developing Countries

David McKenzie, Christopher Woodruff

NBER Working Paper No. 21505
Issued in August 2015
NBER Program(s):   DEV   PR

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, record-keeping, 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 effect of business practices 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. Competition has less robust effects.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21505

Published: David McKenzie & Christopher Woodruff, 2017. "Business Practices in Small Firms in Developing Countries," Management Science, vol 63(9), pages 2967-2981.

Users who downloaded this paper also downloaded* these:
Brune, Giné, Goldberg, and Yang w20946 Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi
Ravallion w20791 Are the World’s Poorest Being Left Behind?
Buera, Kaboski, and Shin w21107 Entrepreneurship and Financial Frictions: A Macro-Development Perspective
Heller, Shah, Guryan, Ludwig, Mullainathan, and Pollack w21178 Thinking, Fast and Slow? Some Field Experiments to Reduce Crime and Dropout in Chicago
Caselli, Koren, Lisicky, and Tenreyro w21498 Diversification through Trade
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us