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The private sector is the engine of economic growth, stimulating entrepreneurship and innovation and promoting competition and productivity. While many countries in Africa have developed private sector-driven growth strategies, private investment as a proportion of gross domestic product (GDP) is only 13 percent in Africa, significantly lower than in other regions, such as South Asia, with many low-income countries. The public sector still occupies the lion's share of economic activity in Africa. This study addresses how industrial clusters could be a springboard for the development of Africa's micro and small enterprise sector, which constitutes the bulk of the region's indigenous private sector. The successful development of industrial clusters in Asia illustrates how small enterprises can help to drive growth led by market expansion at home and abroad.

PurposeThis study examines the survival probability of the firms during the COVID-19 pandemic and identifies the effects of pandemic-era business strategies on firm survival across sectors and sizes.Design/methodology/approachThis study combines World Bank Enterprise Survey data with three consecutive follow-up COVID-19 survey data. The COVID-19 surveys are the follow-up surveys of WBES, and they are done at different points of time during the pandemic. Both WBES and COVID-19 surveys follow the same sampling methods, and the data are merged based on the unique id number of the firms. The data covers 12,551 firms from 21 countries in different regions such as Africa, Latin America, Central Asia and the Middle East. The study applies Kaplan–Meier estimate to analyze the survival probability of the firms across sectors and sizes. The study then uses Cox non-parametric regression model to identify the effect of business strategies on the survival of the firms during the pandemic. The robustness of the Cox model is checked using the multilevel parametric regression model.FindingsThe study's findings suggest that a firm's survival probability decreases during the pandemic era. Manufacturing firms have a higher survival probability than service firms, whereas SMEs have a higher survival probability than large firms. During the pandemic period, business strategies significantly boost the probability of firm survival, and their impacts differ among firm sectors and sizes. Several firm-specific factors affect firm survival in different magnitudes and signs. Except in a few cases, the findings also indicate that one strategy positively moderates the influence of another strategy on firm survival during a pandemic.Originality/valueCOVID-19 pandemic has drastically affected the business across the globe. Firms adopted new business processes and strategies to face the challenges created by the pandemic. The critical research question is whether these pandemic-era business strategies ensure firms' survival. This study attempts to identify the effects of these business strategies on firms' survival, focusing on a comprehensive firm-level data set that includes firms from different sectors and sizes of countries from various regions.

This book sheds light on the characteristics of formal and informal manufacturing firms in Africa by comparing these firms with firms in other regions. Drawing on two data sources, the authors find that there is a very low share of manufacturing in GDP in Africa and in African exports. Most African manufacturing firms are informal. These firms are also smaller than firms in other regions and few export. Labor productivity is low in Africa relative to other regions, but this may be because of the more challenging environment - with the lack of physical infrastructure, the heavy burden of business regulation, and other issues. However, after accounting for these differences, the authors find that firms in Sub-Saharan Africa appear more, not less, productive than firms elsewhere. This analysis suggests that improving the business environment might allow firms to enhance their performance. However, given the pervasive distortions in the business environment and the limited resources at the disposal of most African countries, Africa cannot and should not wait until the business environment becomes healthier before growing a more viable manufacturing sector. The book shows that binding constraints vary by country, by sector, and by firm size. Therefore, countries should identify the constraints in the most promising sectors and adopt policies designed specifically to remove these constraints. The evidence in this book overwhelmingly dispels the false notion of Africa's inability to compete globally in manufacturing goods.

Purpose Whilst substantial evidence from low-corruption, developed market environments supports the view that more productive firms are more likely to export, there has been little research into analysing the link between productivity and exports in high corruption, developing market environments. The purpose of this paper is twofold. First, to test the premise of self-selection theory whether the association between productivity and export is maintained in high-corruption environments, and second to identify other variables explaining export activity in high-corruption contexts, including cluster networks and firms’ competences. Design/methodology/approach The authors draw on the World Bank Enterprise survey to undertake a cross-section analysis including 1,233 small- and medium-sized enterprises (SMEs) located in nine African countries. The advantage of this database is that it contains information about the level of perceived corruption at firm level. Logistic regressions are performed for the full sample and for subsamples of firms in high- and low-corruption environments. Findings The findings demonstrate that the self-selection theory only applies to low-corruption environments, whereas in high-corruption environments, alternative factors such as cluster networks and outward-looking competences (OLC) exert a stronger influence on the exporting activity of African SMEs. Research limitations/implications This research contributes to the theory as it provides evidence that contradicts the validity of self-selection theory in high-corruption environments. The findings would benefit from further longitudinal investigation. Practical implications African SMEs need to consider cluster networks and OLC as important strategic factors that might enhance their international competitiveness. Originality/value The criticism of the self-selection theory is distinctive in the literature and has important implications for future research. The authors show that the contextualisation of existing theories matters and this opens a research avenue for further more sensitive contextualisation of existing theories in developing economies.

Entrepreneurs worldwide often face obstacles in financing their businesses, hindering their ability to grow. Government procurement offers an opportunity to access lucrative contracts and benefit from a procurement auditing process that could enhance access to finance. Likewise, externally audited financial statements can enhance credibility and lessen financing hurdles. We examine whether government procurement contracts and external audit certifications jointly influence financing access and whether ownership, size, and firm age matter. We find that access to finance is more likely to be an obstacle to the operations of small- and medium-sized enterprises (SMEs) with government procurement contracts than those without such contracts, regardless of whether they seek external audit certification. Additionally, the effect of external audit certification on the likelihood of access to finance being an obstacle to SME operations reduces sharply with foreign ownership, size, and age for SMEs involved in government procurement. We also find that the impact of government procurement contracts reverses for SMEs in low- and lower-middle-income countries. Our findings have policy implications, especially with the growing implementation of affirmative action programs to promote the involvement of SMEs in government procurement. Plain English Summary Obstacles to financing inhibit the growth of small- and medium-sized enterprises globally. SMEs must weigh the cost and benefits of seeking government procurement contracts to improve their cash flows and engaging external auditors to certify their financial statements. Our results show that SMEs with access to government procurement contracts are less likely to cite access to finance as an obstacle to their operations, but only in low- and lower-middle-income countries. External audit certification does not influence access to financing for SMEs. The principal implication of this study is that the opportunity for SMEs to access the public procurement system in developing countries reduces financing obstacles and thereby helps to facilitate growth.

A strong case for looking at management quality as a source of productivity has been assembled in recent years by studies showing that variations in management quality account for a big part of the productivity gap across firms and countries. In this paper, we investigate the determinants of management quality among Pakistani manufacturing firms, using a new World Bank Enterprise Survey that provides firm-level information on the use of modern management practices. Our findings suggest that the adoption of good management practices is influenced by such characteristics as firm size, product market competition, ownership type, and the information available to staff and managers. We also find that such considerations are more relevant for medium and large firms than for small firms. Finally, we find that the link between management practices and productivity is not uniform and varies from practice to practice.

Organizational learning begins with experience. However, it remains an open question whether firms learn from a particular type of experience: exporting. This study aims to speak into this debate by examining when learning by exporting occurs. Our core thesis is that the timing of learning by exporting depends on a firm’s home market economic development. Drawing on classic theories of organizational learning, we posit that firms in more developed home markets will enjoy greater opportunities for learning before exporting whereas firms in less developed home markets will enjoy greater opportunities for learning after exporting. The former will be observed as a divergence in productivity among firms from different home markets, whereas the latter will be observed as convergence over time. The proposed hypotheses were tested and supported using longitudinal data from the World Bank Enterprise Survey. A range of theoretical and practical contributions are discussed. Plain English Summary When do firms learn by exporting? Analysis of data from the World Bank suggests that the answer depends on a firm’s home market. Firms from more developed economies seem to learn before exporting whereas firms from less developed economies seem to learn after exporting. We argue that these differences in learning rates occur because firms in more developed countries are able to access more advanced knowledge and technology domestically in preparation for entering foreign markets whereas firms in less developed countries are only able to access such knowledge by serving foreign markets. The analysis conducted on longitudinal data from the World Bank corroborates our arguments and has important implications for firms and society in general. Importantly, it suggests that exporting may be one avenue through which firms are able to level the playing field in the global competitive landscape.

This report is part of a broader effort by the World Bank Group to understand the motives and challenges of small entrepreneurs in fragile and conflict-affected situations (FCS). The report's key finding is that, compared to entrepreneurs elsewhere, entrepreneurs in FCS have different characteristics, face significantly different challenges, and thus may be subject to different incentives and have different motives. Therefore, it is recommended that both the current analytical approach and the operational strategy of the World Bank be informed by the findings that follow. The report summarizes findings of recent World Bank Enterprise Surveys (ES) conducted across Sub-Saharan Africa (SSA), Asia, and the Eastern Europe and Central Asia (ECA) Region as well as Doing Business indicators and additional World Bank Group studies and field observations. The report finds that the majority of entrepreneurs in FCS countries are small, informal, and concentrated in the trade/services sectors. According to the ES, and after controlling for the level of development (that is, GDP per capita): 1) the average FCS firm in SSA and the ECA Region produces less output than non-FCS firms; 2) the average FCS firm in ECA is by 20 percent less likely to innovate (that is, to introduce/upgrade new products and services) than its non-FCS counterpart; and 3) FCS firms start smaller and grow significantly more slowly, or even shrink (in the number of employees) over time, compared to non-FCS firms in the Regions analyzed. The report also highlights the differences in sector and business environment characteristics between FCS and non-FCS business environments.

PurposeThis paper empirically explored the influence of external and internal factors on technological and non-technological innovation of 5747 Indian firms. The study also explored novel insights about manufacturing firms by segregating them into high-technology and low-technology industries.Design/methodology/approachThe study employed hierarchical regression analysis to analyse a cross-sectional dataset gathered from the World Bank enterprise survey. The firms are segregated into high-technology and low-technology industries based on the technology-intensity classification of the manufacturing industry given by the Organisation for Economic Co-operation and Development.FindingsThe main results highlight that technological and non-technological innovation was primarily driven by internal resources and capabilities rather than external factors. The authors found the highest effect of research and development spending on both forms of innovation. In both high-tech and low-tech industries, technology transfer is positively associated with technological innovation and negatively associated with non-technological innovation. Furthermore, external business support has substantially influenced non-technological innovation in low-tech industries.Originality/valueThis study used two-step hierarchical regression to explore the influence of external and internal factors on technological and non-technological innovation separately. Exploring determinants of innovation in high-technology and low-technology industries also brings the distinct prerequisites of enhancing innovation to the attention of policymakers and industry experts.

Prior research suggests that firm productivity and export activity are mutually reinforcing. Highly productive firms are more likely to enter the export market (i.e., self-selection), and upon doing so, achieve greater productivity levels over time (i.e., learning-by-exporting). We consider how a critical yet unexamined, factor impacts this relationship: the economic development of a firm’s home market. Drawing on institution-based theories, we hypothesize that self-selection effects will be strongest among firms in more developed economies. Drawing on knowledge-based theories, we hypothesize that learning-by-exporting effects will be strongest among firms in less developed economies. Taken together, we posit that firm productivity and export activity indeed reinforce one another; however, the strength of each direction of the relationship will be amplified, at least in part, by the presence of the opposite home-market economic conditions. Analysis of longitudinal data from the World Bank Enterprise Surveys composed of responses from 3431 manufacturing firms across 63 countries from 2006 to 2017 supports the proposed hypotheses.