Managerial Practices and Performance of Small and Medium-sized Enterprises: Evidence from Burkina Faso

Abstract

Despite the growing interest in private enterprises’ contribution to income growth and employment, Small and Medium-sized Enterprises (SMEs) in developing countries are still experiencing a low performance. The aim of this study is therefore to examine the importance of management practices in explaining the performance of SMEs based on survey data collected over 850 SMEs in Burkina Faso. Three components of management practices such as the monitoring, the setting of targets, and incentive schemes are used to compute a management practice score for each enterprise. The estimation of a Cobb-Douglas production function shows a positive and significant effect of the management practice score on the level of firms’ sales and profits. Thus, the quality of managerial practices improves the level of performance of firms. This suggests that there is a need for policymakers to support the improvement of managerial skills of entrepreneurs in order to increase the private sector’s contribution to economic growth and employment, particularly in African Economies. This work is part of the Private Enterprise Development in Low Income Countries (PEDL) programme