Determinants of manufacturing micro firms' productivity in Ecuador. Do industry and canton where they operate matter?

Abstract

This study aims to identify the productivity determinants of manufacturing micro firms, emphasizing on regional and industrial factors. A cross-classified multilevel model is employed using the Economic Census of 2010 from Ecuador. Results show (90.1%) that the heterogeneity of the total factor productivity of micro formal firms of the manufacturing sector is mainly due to differences across firms. The remaining variation of the TFP is explained to a larger extent by the industrial context (5.8%) than the geographical context (4.1%). Among firm characteristics, information and communication technologies, credit and training are important drivers of productivity. Despite this, very few micro firms use the Internet, have credit access or engage in training in Ecuador. Moreover, micro firms benefit from agglomeration economies derived from specialization, diversity and density that they themselves generate.

Productivity determinants in the service industry: differences between high and low knowledge intensive sectors

“…To prove this evidence, we perform a formal test ( F test) to assess the equality of these three coefficients, and the results, shown at the bottom of Table 2, indicate that the null hypothesis that the three coefficients are equal is rejected for the three models. In Ecuador, the manufacturing sector is also labor-intensive (Guevara-Rosero, 2021). In addition, the results show that input elasticity is slightly different across the knowledge intensity classification that suggests a nonsignificant heterogeneity among industries.…”

“…De Fuentes et al (2019) point out that smaller firms are more productive compared to larger firms, due to their prompt adaptation to changes required by the market. Guevara-Rosero (2021), in a study about microenterprises, also shows evidence of higher productivity for unipersonal businesses, compared to firms with more than two employees and up to nine employees. For Tocco (2015), the lack of preparation to run a company that is too large or complex can result in increased unit costs of production.…”

“…By contrast, Martins et al (2018) point out that older companies acquire technology that eventually becomes obsolete resulting in a decrease in productivity levels. Guevara-Rosero (2021) show a nonlinear effect, indicating that productivity increases with age but the marginal productivity starts to decrease after a certain threshold.…”

“…Nickell (1996) shows that greater competition causes firms to make more effort and be motivated to increase their efficiency. According to Guevara-Rosero (2021) and De Jorge and Suárez (2014), competition constitutes a factor that makes the transmission of information possible and this, in turn, causes an increase in the level of efficiency of companies through innovation. Competition increases productivity, due to the externalities that can arise from knowledge spillovers and emergence of linkages.…”

Food companies' productivity dynamics: Exploring the role of intangible assets

“…Prior works have identified that several factors, such as technical progress, ICT, credit, and firm age, are crucial determinants of the productivity dynamics of food manufacturing companies (Blažková et al, 2020; Chang et al, 2019; Guevara‐Rosero, 2021; Náglová & Pechrová, 2021). However, the existing literature is incomplete or deficient in the sense that it does not reflect the recent development of digitalization in the agrifood sector.…”