The IGC Firm Capabilities Research Programme pulls economists with a
common interest in firm capabilities together to focus on three core
questions: (i) what are the key proximate determinants of firm
productivity? (ii) Where does the productive capacity of firms
originate? (iii) What are the barriers that prevent resources from
moving from unproductive firms and sectors to areas of higher
productivity? In addition to the focus on larger firms within the
manufacturing and service sector, small firms (and farms) are also
examined to reflect the fact that the majority of citizens in developing
countries are not employed by large firms.
This evidence paper on firm capabilities is structured as follows.
Section 2 discusses available data sets on firms in developing
countries. This serves to emphasize how little we know about this sector
and in this section ideas are presented on how to expand and improve our
evidence base in this area. Section 3 presents stylised facts about
firms in developing countries. Section 4 therefore examines the
determinants of low labour productivity. It not only looks at what
factors are associated with low labour productivity but also asks where
differences in productive capacity across firms come from. This, in
turn, greatly constrains our ability to design effective policies to
encourage industrial development. Section 5 takes on the broader
question of resource allocation and examine what prevents resources to
move from unproductive sectors and firms to more productive areas.
Bloom, N.; Fischer, G.; Rasul, I.; Rodriguez-Clare, A.; Suri, T.; Udry, C.; Verhoogen, E.; Woodruff, C.; Zane, G. Evidence paper: Firm capabilities and economic growth. International Growth Centre, UK (2014) 54 pp.