Towards a Better Understanding of the Specific Determinants of the Growth of African Manufacturing Small and Medium Enterprises (SMES)

Abstract

ABSTRACT:Lack of knowledge of the new emerging determinants of African markets hinders the adaptive capacities of manufacturing SMEs operating there. The objective of this research is therefore to identify, conceptualize, and analyze these new determinants that are often overlooked in studies on the growth of manufacturing SMEs in Africa. Factors assessed include corporate growth (net income after taxes), corporate social responsibility (donations and sponsorships), investment in research and development, use of external expertise, direct and indirect taxation of companies by the government, and businesses' access to energy. A total of 1,025 small and medium enterprises in the Republic of Benin were assessed over the period 2008-2013. The information was taken from the companies' annual financial reports. Using the random effects panel regression method, this study shows the importance of the factors studied and proposes a contextualized model of analysis. The random effects model shows that variables such as sponsorship, use of external expertise, infrastructure investment (II), and indirect taxes and duties (ITD) are statistically significant across all sectors. In other words, these factors have significant impacts on business growth rates across all sectors. The study also shows the importance of factors such as the use of external expertise, investment in research and development and corporate social responsibility, particularly for medium-sized enterprises. In terms of policy implications, several behavioral and technical skills are connected to the factors identified in the study. For the development of behavioral skills, we can link donations and patronage. ITDs are linked to difficult regulatory environment. Finally, factors such as external expertise by business (UEE), II and investment in research and development (IRD), which are technical capacities on which companies invest heavily to boost their growth, could be connected.