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Firm growth in developing countries: Driven by external shocks or internal characteristics?

Author

Listed:
  • Florian Léon

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

Abstract
The purpose of this paper is to assess the importance of external shocks relative to internal characteristics in explaining variation of firm growth in developing countries. To do so, we compile firm-level panel data covering 12,562 firms operating in 72 low-income and middle-income countries. Our statistical analysis reveals that, on average, firm characteristics account for a half of difference in growth rate across firms. However, the importance of internal factors is halved when we exclude firms in the tails of the distribution (top performers and worst performers). On the other hand, external shocks account for less than one tenth of variance. The role of external shocks is, however, stronger for young firms and for firms operating in unstable environments. Finally, our findings suggest that the external context is more crucial for exit than for growth.

Suggested Citation

  • Florian Léon, 2020. "Firm growth in developing countries: Driven by external shocks or internal characteristics?," Working Papers hal-03004383, HAL.
    • Handle: RePEc:hal:wpaper:hal-03004383
    Note: View the original document on HAL open archive server: https://hal.science/hal-03004383
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    References listed on IDEAS

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    Keywords

    Firm growth; Developing countries; Firm characteristics; External shocks;
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