Management practices and small firms’ productivity in emerging countries

The purpose of this study is to explore the potential for increasing the productivity of small firms from emerging countries by enhancing their management practices.

The link between four types of management practices and labor productivity at the firm level is tested through a sample of 13,566 small firms from 15 emerging countries. Subsequently, the policy options available to upgrade management practices in such firms are analyzed through a systematic review of recent experiences in 12 emerging countries.

The econometric results confirm that the adoption of good management practices has a significant effect on labor productivity, especially when several management practices are combined. This effect is context-dependent, with a higher intensity in lower-middle income countries and in manufacturing firms. The paper also outlines the different components of successful policy programs to support the adoption of good management practices.

On the one hand, the challenge of isolating the causal relationship between management practices and firm productivity affects the econometric part of this study. On the other hand, the analysis of policy experiences is purely explorative and does not attempt to evaluate impacts but rather to offer a general overview of policy options.

The paper provides practical guidance for policymakers from emerging countries in their efforts to support the adoption of good management practices by small firms.

Improving management practices of small firms can contribute to a more inclusive development agenda by narrowing wage differentials between leading and laggard firms, while transforming informal businesses into formal ones.

The multi-method approach used in this study provides rich insights into the relationship between management practices and productivity of small firms in emerging countries.