Essays On Firms Growth And Their Survival In Ethiopia The Role Of Firm Experience

Firms’ growth, survival, and distribution has been a key research subject in many countries andrnmore so in developing countries because of the limited number of firms and scant evidence onrntheir performance and where they are located in these countries. The nexus between ageing,rnperformance, and survival is important for sustaining the promising and fast-growing Ethiopianrneconomy. This thesis addresses the link between firms’ experience, growth, survival, andrndistribution using medium and large-scale manufacturing firms in the country.rnThe major data source is the Central Statistical Agency (CSA) of Ethiopia. Data for Chapter 4rncomes from the World Bank’s Enterprise Survey database (World Bank, 2015). The thesis appliesrnmultiple estimation techniques including system GMM, quantile regression, complementary loglogrnregression, the Kaplan-Meier survival analysis plots, probit estimation, Heckman selectionrnmodel, and the fixed effects models. The results of the pooled OLS estimation are reported for arncomparison.rnThe studies included in the thesis have some key findings. The findings of the first essay (Chapterrn2) on firms’ experience and performance show that experience is positively associated with laborrnproductivity both in the short and in the long run. Firm experience was measured using a compositernindex developed for this purpose. The sensitivity analysis, however, shows that the positive effectrnof experience disappears when we estimate the relationship using true panel data. From thernelements used in the development of the index, only cohort age and wage rate have a significantrnpositive effect on a firm’s performance.rnFirms in Ethiopia rely heavily on imported inputs and how this relates to their performance isrninvestigated in the second essay (Chapter 3). Using import intensity as a proxy for firm experience,rnwe found a statistically significant negative effect of import intensity on the risk of exit using arnprobit estimation. Imported input-intensive firms show a better likelihood of survival using therncomplementary log-log estimation. Overall, the results from the Kaplan-Meier plots, therncomplementary log-log, and probit estimations show that importing inputs from abroad isrnassociated with lower risks of a firm’s exiting.rnIn the third essay (Chapter 4), the focus of the analysis shifts to the distribution and determinantsrnof high-growth firms (HGFs). Firm growth distribution and HGFs’ special features is anotherrnimportant aspect of this thesis. The over population of high growth firms in Addis Ababa andrnOromia and their unique business challenges are discussed in the third essay.rnThe fourth essay (Chapter 5) examines how ageing is related to a firm’s performance. Itrncomplements the first paper which uses pseudo panel data. In Essay 4, we use a true panel of firmsrnand use age as an indicator as opposed to an index in the first essay. After controlling for samplernselection using Heckman’s selection model, we observe that there is a no relationship betweenrngrowth and a firm’s age but there is a convex relationship between size and a firm’s growth rate.rnSmall firms tend to grow faster but there is no significant difference in labor productivity valuesrnamong firms based on age and size

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