How Important Are Management Practices for the Productivity of Small and Medium Enterprises?

Abstract

Is the lack of ‘managerial capital’, alongside human and financial capital, a constraint on the growth of firms in developing countries? The evidence on this is still mixed, especially among small and medium enterprises. This chapter uses a panel of Vietnamese enterprises to investigate this question. We build a multidimensional measure of managerial capital, combining both practices and attitudes, and link it with consistent estimates of firm-level productivity and mark-up. We show that there is a positive and significant association between managerial capital and productivity: changes in management practices allow firms to be more efficient. Furthermore, we compare this association by firm size, and show that managerial capital is arguably as important for micro and small firms as it is for medium ones. Finally, it appears that the indicators related to ‘entrepreneurial attitudes’ play a more important role than elementary business skills.

Certifiable management standards, labor productivity, and worker wages: Evidence from the food sector in Vietnam

“…Labor productivity is measured as real value added per full‐time regular employee, expressed in 2010 VND. Following Demenet and Hoang (2020), value added is measured as revenue from sales minus total costs that include expenses on intermediate goods and raw materials and indirect costs. Table 1 shows that the average real value added per employee has increased from around 20 million VND in 2010 to 61 million VND in 2014, achieving an annual growth rate of 25%.…”