The efficiency determinants of manufacturing firms in developing countries have received increasing attention over the past few decades. This study examines the role of top managers' human capital and other exogenous determinants of the efficiency of manufacturing firms in Bangladesh by using heteroscedastic single‐step stochastic frontier analysis. We find that general human capital represented by educational qualification and specific human capital formed by work specific experience show different ways of impact on firm performance. Specifically, education has both a direct impact on firm outputs and an indirect impact as an efficiency determinant, whereas experience affects only technical efficiency.

The manufacturing sectors of developing countries under industrialization are dominated by informal firms. This study investigates the issues of formalization in the manufacturing sector of Bangladesh. A typical classification of formality is a binary one (formal or not). However, formalization can also be continuous, ranging from very formal to less formal. Thus, this study defines the continuous formalization of firms based on principal component analysis in addition to the usual binary classification of formality. Specifically, we find that more formal firms are correlated with higher productivity using the continuous classification of formality. Furthermore, this study shows that formalization is significantly affected by factors such as the owner's human capital (experience and education), the age of the firm, and labor force size.