Determinants of Firm Growth: An Empirical Examination of SMEs in Gujranwala, Gujarat and Sialkot Districts

Abstract

The objective of the present study is to investigate the importance of SMEs being an important source of providing employment opportunities. Primary data collected from a survey of 826 small industrial units is being utilized to empirically test the important determinants of firm growth. Binomial Logit is employed to find out the role of firm-specific factors along with owner/manager characteristics, organizational and commercial capabilities as important determinants of employment generation. Different problems and obstacles encountered by SMEs in generating employment activities are also been undertaken in the present analysis. Firm age, education of owner, boss attitude, family business, networks, new process, major improvements, market share, on job training and unique know how are found to be significantly and positively increases the probability of firm growth. Age of owner, foreign trade regulations, taxes, other regulations, political instability, inflation and lacking of skilled labor adversely reduces the probability of firm growth in terms of employment opportunities. Government should device such policy measures that can help small units to grow and provide employment opportunities.

Keywords: Firm growth, employment, Logit Model, Owner/manager

JEL Classification: D21