The Determinants of Firm Growth for Ethiopian Large and Medium Scale Manufacturing Industries: A Dynamic Panel Study
No Thumbnail Available
Date
2011-07
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
In this dynamic panel study, the determinants of growth of Ethiopian large and medium scale surviving manufacturing firms’ growth is analyzed from year 1992 to 2000 (E.C) using System GMM estimation. Estimations are done for the whole surviving firms, and at cohorts of size and age. Incorporating lag of growth, size and other firm attributes as explanatory variables in all estimations, Gibrat’s stochastic growth theory is rejected. The persistence of growth is significant for all specifications except for medium and young firms. In cases persistence is significant; lag of growth affects current growth negatively except for smaller firms. Similarly, negative-significant size effect of growth is found for all cases except for adult and mature firms. With regard to other firm attributes, labor quality, asset, productivity, and leverage are found to positively affect growth but insignificant except labor quality for the whole surviving firms. Negative and significant relationship is found between capital intensity and growth for the whole surviving sample. For the size cohort, variables with significant effect includes productivity, labor quality and capital intensity. Productivity is significant for smaller and medium firms’ growth. It has positive impact on growth for the medium firms and it confirms the Jovanovic’s (1982) hypothesis while the effect is negative for smaller firms. Labor quality is positive but significant only for smaller firms, whereas, capital intensity is negative but significantly affects growth only under medium firm cohort. Similarly, under age cohort, age, quality, capital intensity and asset are found to be significant variables in different cases. From policy perspective, the government should give attention for the development of human power with industry-driven skills. Further, privileged treatment should be given for smaller and younger firms which are key labor employers.
Key words: Ethiopian manufacturing firms, growth determinant, dynamic panel study, and SystemGMM.
Description
Keywords
Ethiopian manufacturing firms, growth determinant, dynamic panel study, and SystemGMM.