Determinants of Firm Growth: An Empirical Analysis from Morocco

Harabi, Najib (2005): Determinants of Firm Growth: An Empirical Analysis from Morocco.

Abstract

This paper views the economic growth experience in Morocco from the perspective of private firms. Using models of optimal firm size as a theoretical framework, the paper analyzes empirically the factors affecting the growth process of Moroccan private firms. The analysis is based on a field survey of 370 firms carried out under the auspices of the World Bank in 1998. The sample includes firms of different sizes, from more than 100 workers to 5 workers or fewer. It also covers all major economic sectors: manufacturing, construction, services, and commerce. The principal factors promoting firm growth are business strategies that are focused on product diversification and market share expansion; location in large urban centers; legal status as a limited liability company; the presence of price competition; presence in markets with high demand; and certain government policies such as labor regulations, anti-trust and environmental policy. The principal factors impeding firm growth are lack of access to qualified workers and managers; location in smaller population centers; and certain other government policies such as regulation of foreign trade and policies that promote domestic price volatility.

• Item Type: MPRA Paper
• Institution: University of Applied Sciences, Northwestern Switzerland
• Language: English
• Keywords: Microeconomics of growth; firm growth; Morocco
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope

References

Alavi, H., 1993, “International Competitiveness of the Private Industry and the Constraints to Its Development. The Case of Morocco.” Middle East and North Almus, M., 2000, “What Characterizes a Fast Growing Firm?” Discussion Paper No.-00-64, ZEW. Mannheim. Almus, M., 2001, “Das Wachstum Junger Unternehmen – Eine Bestandesaufnahme 10 Jahre nach der Wiedervereinigung. Discussion Paper No.-00-40, ZEW. Mannheim. American Chamber of Commerce in Morocco, 2001, “AMCHAM 2001 Survey. A Survey of Executive Perceptions About Business and Investing in Morocco” (Casablanca: American Chamber of Commerce in Morocco). Audretsch, D., 1995, Innovation and Industry Evolution (Cambridge, Massachusetts: MIT Press). Banarji, R., 1987, “Average Size of Plants in Manufacturing and Capital Intensity: A Cross-Country Analysis by Industry”, Journal of Development Economics, Vol. 5, pp.155-66. Bates, T., 1990, “Entrepreneur, Human Capital Inputs and Small Business Longevity,” Review of Economics and Statistics, Vol. 72, pp. 551-59. Baumol, W., 1959, Business Behavior, Value and Growth (New York: MacMillan). Becker, G., 1993, Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, 3rd ed. (Chicago: University of Chicago Press). Belghazi, S., 1998, “Atouts et Obstacles au Developpement du Secteur Privé. Enquete Realisée aupres de 360 Entreprises” (Rabat, Morocco: Cahier de Rechereche du CERAB). Bonne, et al., 1996, “CEO Locus of Control and Small Firm Performance: An Integrative Framework and Empirical Test,” Journal of Management Studies, Vol. 33, pp. 667-69. Brixy, U. and S. Kohaut, 1999, “Employment Growth Determinants in New Firms in Eastern Germany”, Small Business Economics, Vol. 13, pp. 155-70. Brüderl, J., 1996, “Survival and Growth of Newly Founded Firms,” unpublished paper (Munich: Institut für Soziologie). Brüderl, J., Preisendörfer, P. and R. Ziegler, 1998, Der Erfolg neugegründeter Betriebe: Eine Empirische Studie zu den Chancen and Risiken von Unternhemsgründungen, Berlin. Brunetti, A., G. Kisunko, and B. Weder, 1998, “How Businesses See Government. Responses from Private Sector Surveys in 69 Countries.” IFC Discussion Paper No. 33 (Washington, D.C.: International Finance Corporation). Caves, R.E., 1998, “Industrial Organisation and New Finding on the Turnover and Mobility of Firms,” Journal of Economic Literature, Vol. 34, pp. 1947-82. Chandler, 1990, Scale and Scope (Cambridge, Massachusetts: Belknap Press). Clerides, S., S. Lach, and J. Tybout, 1998, “Is Learning by Exporting Important? Micro Dynamic Evidence from Columbia, Mexico and Morocco,” Quarterly Journal of Economics, Vol. 106, No. 2, pp. 445-502. Cohen, W.M., 1995, “Empirical Studies of Innovative Activity,” in Handbook of the Economics of Innovation and Technological Change, edited by P. Stoneman (Oxford, England: Blackwell). Cyert, R.M., and J.G. March, 1963, A Behavioral Theory of the Firm (Englewood Cliffs, New Jersey: Prentice Hall) (1992) edition (Oxford, England: Blackwell). Das, S., 1995, “Size, Age, and Firm Growth in an Infant Industry: the Computer Hardware Industry in India”, International Journal of Industrial Organisation, Vol. 13, pp. 111-26. Dunne, et al, 1989a, “Patterns of Firm Entry and Exit in U.S. Manufacturing Plants,” Rand Journal of Economics, Vol. 19, pp. 495-515. Dunne, et al, 1989b, “The Growth and Failure of U.S. Manufacturing Plants,” Quarterly Journal of Economics, Vol. 104, pp. 671-98. Dunne, P. and A. Hughes, 1994, “ Age, Size, Growth and Survival: UK Companies in the 1980’s”, Journal of Industrial Economics, Vol. 42, pp.115-40. Dunne, T., Roberts, M. and L. Samuelson, 1989, “The Growth and Failure of U.S. Manufacturing Plants”, Quarterly Journal of Economics, Vol. 104, pp. 671-698. Ericson, R. and A. Pakes, 1995, Markov-perfect Industry Dynamics: a Framework for Empirical Work”, Review of Economic Studies, Vol. 62, pp. 53-82. Evans, D., 1987a, “The Relationship between Firm Growth, Size and Age: Estimates for 100 Manufacturing Industries,” Journal of Industrial Economics, Vol. 35, pp. 567-81. Evans, D., 1987b, “Tests of Alternative Theories of Firm Growth,” Journal of Political Economy, Vol. 95, pp. 657-74. Fafchamps, M., S. El Hamine, and A. Zeufack, 2002, “Learning to Export: Evidence from Moroccan Manufacturing,” working paper. Farinas, J.C. and L. Moreno, 2000, “Firm’s Growth, Size and Age: A Nonparametric Approach”, Review of Industrial Organisation, Vol. 17, pp 249-65. Finkelstein, S., and D.C. Hambrick, 1990, “Top Management Team Tenure and Organizational Outcomes: The Moderating Role of Managerial Discretion,” Administrative Science Quarterly, Vol. 35, pp. 484-503. Frank, H., and C. Korunka, 1996, “Zum Informations- und Entscheidungsverhalten von Unternehmensgründern,” Zeitschrift für Betriebswirtschaft, Vol. 66, pp. 947-63. Geroski, P.A., 1995a, “What Do We Know About Entry?” International Journal of Industrial Organisation, Vol. 13, pp. 421-40. Geroski, P.A., 1995b, “The Growth of Firms in Theory and in Practice,” Working Paper No. 2092 (London: Centre for Economic Policy Research). Geroski, P.A., 1998, “An Applied Econometrician’s View of Large Company Performance”, Review of Industrial Organisation, Vol. 13, pp. 271-293. Geroski, P.A., and K.P. Gugler, 2001, “Corporate Growth Convergence in Europe,” Working Paper No. 2838 (London: Centre for Economic Policy Research). Greene, W.H., 2000, Econometric Analysis, 4th ed. (Upper Saddle River, New Jersey: Prentice Hall). Haddad, M., and A. Harrison, 1993, “Are There Positive Spillovers from Direct Foreign Investment? Evidence from Panel Data for Morocco,” Journal of Development Economics, Vol. 42, pp. 51-74. Hall, B., 1987, “The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector,” Journal of Industrial Economics, Vol. 35, pp. 583-606. Harabi, N. ,2002, “Growth of Newly Founded Firms: An Empirical Analysis”, Working Paper, University of Applied Sciences Solothurn, Olten/Switzerland. Harhoff, D., et al., 1998, “Legal Form, Growth and Exit of West German Firms—Empirical Results for Manufacturing Sector, Construction, Trade and Service Industries,” Journal of Industrial Economics Hart, P.E., 2000, “Theories of Firms' Growth and the Generation of Jobs,” Review of Industrial Organization, Vol. 106, pp. 1242-52. Hart, P.E., and E. Oulton, 1996, “Growth and Size of Firms”, Economic Journal. Vol. 106, pp. 1242-1252. Hart, P.E., and E. Oulton, 1998, “Job Creation and Destruction in the Corporate Sector: The Relative Importance of Births, Deaths and Survivors”, National Institute of Economic and Social Research Discussion Paper No. 134. Hart, P.E., and E. Oulton, 1999, “ Gibrat, Galton and Job Creation”, International Journal of the Economics of Business. Heckman, J.J., 1976, “The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models,” Annals of Economic and Social Measurement, Vol. 5, pp. 475-92. Heckman, J.J., 1979, “Sample Selection Bias as a Specification Error,” Econometrica, Vol. 47, pp. 153-61. Henderson, S.V., 1994, “Where Does an Industry Locate?” Journal of Urban Economics, Vol. 35, pp. 83-104. Ijiri, Yuji and H. Simon (1974), “Interpretations of Departures From the Pareto Curve Firm-Size Distributions”, Journal of Political Economy, Vol. 82, pp. 315-31. Johnson, J., et al., 1997, Successful Entrants: Creating the Capacity for Survival and Growth (Ottawa: Statistics Canada, Ministry of Industry). Jovanovic, B.,1982, “Selection and the Evolution of Industry”, Econometrica, Vol. 50, pp. 649-70. Kleinknecht, A., ed., 1996, Determinants of Innovation: The Message from New Indicators (London: Macmillan). Leidholm, C. and D. Mead, 1987, Small-Scale Industries in Developing Countries: Empirical Evidence and Policy Implications. International Development Paper 9, Agricultural Economics Department, Michigan State University. Little, I., D. Mazumdar, and J. M. Page, Jr. 1987, Small Manufacturing Enterprises: A Comparative Analysis of India and Other Economies. N.Y.: Oxford University Press.

Liu, Jin-Tan, Meng-Weng Tsou, and J. K. Hammit, 1999, “Do Small Plants Grow Faster? Evidence From the Taiwan Electronics Industry” Economics Letters, Vol. 65, pp. 121-129. Mueller, D.C., 1972, “ A Life Cycle Theory of the Firm”, Journal of Industrial Economics, Vol. 20, pp.199-219. Mueller, D.C., 1992, “The Corporation and the Economist,” International Journal of Industrial Organisation, Vol. 10, pp. 147-70. Nelson, R.R., Winter, S., 1982, An Evolutionary Theory of Economic Change. Cambridge: Harvard University Press. North, D., and D., Smallbone 1995, “Employment Generation and Small Business Growth in Different Geographical Environments”, in F. Chittenden, M. Robertson and I. Marshall (ed.), Small Firms: Partnership for Growth. London. Pp.100-115. Penrose, E., 1959, The Theory of the Growth of the Firm (Oxford, England: Basil Blackwell). Royaume du Maroc, Ministere de l’Industrie, du Commerce, de l’Energie et des Mines du Maroc, and World Bank, 2002, Le Secteur Manufacturier Marocain à l’Aube du 21ême Siécle. Resultats de L’Enquête pour l’Analyse et la Competitivité des Entreprises (FACS-Maroc). Sargant, Florance P., 1943, “The Problem of Management and the Size of Firm: A Reply,” Economic Journal, Vol. 44, pp. 723-29. Scherer, F.M., and D. Ross, 1990, Industrial Market Structure and Economic Performance, 3rd ed. (New York: Houghton Mifflin). Simon, H., 1959, “Theories of Decision Making in Economics and Behavioral Science,” American Economic Review, Vol. 49, pp. 253-83. Steel, W., 1993, Small Enterprises in Indonesia: Role, Growth, and Strategic Issues, DSP Working Paper 194. Jakarta Development Studies Project II. Steil, F. and E. Wolf, 1999, Determinanten der Beschäftigungsdynamik ostdeutscher Unternehmen – Eine mikroökonometrische Analyse für das ostdeutsche verarbeitende Gewerbe, Zeitschrift für wirtshcafts- und Sozialwissenschaften, Vol 119, pp. 265-291. Stiglitz, J.E. and A.,Weiss, 1981, “ Credit Rationing in Markets with Imperfect Information”, The American Economic Review, Vol. 71, pp. 393-410. Storey, , 1994, Understanding the Small Business Sector (London: {??}). Sutton, J., 1997, “Gibrat´s Legacy,” Journal of Economic Literature, Vol. 35, pp. 40-59. Trau, F., 1996, "Why Do Firms Grow?" ESRC Centre for Business Research, University of Cambridge Working Paper No. 26 (Cambridge, England: University of Cambridge). Tybout, J., 2000, “Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?” Journal of Economic Literature, Vol. 38, pp. 11-44. Variyan, J. N. and D.S. Kraybill, 1992, “Empirical Evidence on Determinants of Firm Growth”, Economic Letters, Vol. 38, pp.31-36. Wagner, J., 1994, “The Post-entry Performance of New Small Firms in German Manufacturing Industries”, Journal of Industrial Economics, Vol. 42, pp. 141-54. World Bank, 1999, “Kingdom of Morocco, Private Sector Assessment Update: Fulfilling The Promise of Private Sector-Led Growth,” Report No. 19975-MOR (Washington, D.C.: World Bank). World Bank, 2001b, “Private Sector Development Strategy—Issues and Options. A Discussion Document” (Washington, D.C.: World Bank, June 1). Wright, T.P., 1936, “Factors Affecting the Cost of Airplanes,” Journal of Aerospace, Vol. 3, pp. 122-28. You, Jong-Ip, 1995, “Small Firms in Economic Theory,” Cambridge Journal of Economics, Vol. 19, pp. 441-62.