LAP Lambert Academic Publishing The determinants of firm growth for Ethiopian manufacturing industries: A dynamic Study

In this study, large and medium scale manufacturing firms’ growth determinants is analyzed from 2000 to 2008. Estimations are done for the whole firms, and at cohorts of size and age. In all estimations, Gibrat’s law is rejected. Growth persistence is significant for all specifications except for medium and young firms. Negative size effect is found for all cases except for adult and mature firms. Labor quality is found to positively affect growth for the whole firms while the effect is negative for Capital intensity. For the size cohort, Productivity has a positive impact for the medium firms and it confirms the Jovanovic’s (1982) hypothesis while the effect is negative for smaller firms. Labor quality is positive but significant only for smaller firms, whereas, capital intensity is negative but significantly affects growth only under medium firm cohort. Under age cohort, age, quality, capital intensity and asset are found to be significant variables in different cases. From policy perspective, government should give attention for the development of human power with industry-driven skills. Further, privileged treatment should be given for smaller and younger firms.