Assessing the factors affecting growth of Small Firms in Pakistan

Musarat Abbas, Muhammad Zahir Faridi, Saeed ur Rahman

Abstract


This study attempts to explore the nature and impact of different factors which determined the growth of small firms in Pakistan. Main focus of the study is on innovation and Government-business relationship. The empirical analysis is based on a comprehensive response of small manufacturing firms working in Pakistan taken from World Bank enterprise survey 2013. Firms’ growth is measured in terms of their increase in number of employees during last three years. The interesting result of the cross-sectional analysis is that the innovation and government-business relationship are found to be equally important factors for firm growth like the other traditional factors. The main findings of the study are that the Small firms in Pakistan are allocate very little amount for research and development. Firms have low access to formal finance. Government official’s visits to firm’s premises are proved to be an obstacle in the way of firm growth as official’s demand gift for contract renewal. These consequential factors are required to be improved on urgent basis for development of small sector in the economy and employment growth.

Keywords: Small Firms, Growth, Determinants, World Bank Enterprise Survey


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