If you missed the 2016 IGC Growth Week Conference, held at the London School of Economics, get caught up through our blog recaps looking at research highlights and policy insights. This post forms part of our blog recap series, looking particularly at ideas on firm productivity and trade-led development. See here for other recaps from growth week

Jinhage, Amanda

Kaul, Upaasna

LSE Research Online

20/06/2017 Risky business: Firms, trade and development - IGChttp://www.theigc.org/blog/risky-business-firms-trade-and-development/ 1/3Authors Upaasna KaulManaging Editor andEconomistEvaluation andCommunications, IGCLondon Hub Amanda JinhagePolicy EconomistIGC London Hub,Research Programme,ResearcherPublished on: 14 Jun 2016Countries: InternationalResearch themes: Firms Risky business: Firms, trade anddevelopmentIf you missed the 2016 IGC Growth Week Conference, heldat the London School of Economics, get caught up throughour blog recaps looking at research highlights and policyinsights. This post forms part of our blog recap series,looking particularly at ideas on ﬁrm productivity and trade-led development. See here for other recaps from growthweek.Starting with the premise that all countries have the talent andpotential to cultivate a vibrant and productive private sector,the question that naturally arises is what is holding back the riseof more productive firms in Africa and Asia? Recently,increasing focus has been given to constraints arising fromlimited management practices and difficulties in incentivisingtalent. Both constraints are the result of difficulties inidentifying and allocating talented individuals to the right roles,as well as cultivating further learning and improvements tomanagerial practices. The path forward will require innovationsin measurement and monitoring of management outcomes toseparate and understand the equally important roles of innateability and management practices.Innovation, according to Professor Eric Verhoogen remainsthe biggest barrier facing firms in developing countries. Firmsmust find new ways to share knowledge and skills.Barriers to growth: Eric VerhoogenOther researchers and policymakers pointed to the importanceof private investment, financial inclusion, and traderelationships as the key barriers to overcome to promote morewide-spread growth in developing countries.Following the framework session, researchers presented on20/06/2017 Risky business: Firms, trade and development - IGChttp://www.theigc.org/blog/risky-business-firms-trade-and-development/ 2/3Following the framework session, researchers presented onemerging ideas and projects on managerial practices.Establishing networks between managers across individual firmsmay improve firm productivity (Jing Cai). According to newresearch on Chinese firms, monthly intra-sectorial meetings maystrengthen firm performance and productivity; in addition toexpanding managerial networks, regular meetings encourage peertraining, resource and information sharing, and improvedrelationships and trust among mangers.Inter-firm skill transmission among Kenyan microenterprises mayincrease revenues (Brooks, Donovan, & Johnson). Researchersfound that matching young firm owners with older, moresuccessful firms owners through mentorship programmes couldraise profits of microenterprises by as much as 20%, althoughthe effect fades over time.Aligning incentives in entrepreneurial targeting requires carefulconsideration (Ben Roth). Targeting programmes and resourcesto raise entrepreneurship skills requires programmes to correctlyidentify high-productivity entrepreneurs. Researchers often relyon neighbourhood surveys or self-reported data, despite the factwhen misrepresenting the truth could benefit an individual, theirfamily, or their friends, they are incentivised to lie, a factor thatshould be accounted for when designing targeting mechanismsfor public service programmes.Framework talk: Firms – TradePoor management practises and lack of support to high-achieving entrepreneurs may be one piece of the puzzle of whyfirms in developing countries are less productive than those indeveloped countries. Another reason may be that firms fromdeveloping countries are less integrated into high value globalchains. They export fewer goods into global markets, andprovide a higher share of low value-added goods. Addressingthis constraint, Professor’s John Sutton (LSE) and RoccoMacchiavello (University of Warwick) led a framework sessionemphasising the importance of developing stronger domesticgovernmental institutions to promote trade and developmentmore robustly. Examples from Ethiopia and Myanmarhighlighted the potential for gains from greater foreigninvestment.The two central government bodies that can shape trade andforeign direct investment (FDI) are Investment agencies and localcontent units. Together, these institutions can address constraintsto foreign direct investment, such as poor infrastructure andlogistics as well as weak institutions – the biggest barriers toattracting foreign firms in developing economies. Businessassociations can likewise play a complementary role inpromoting FDI and increasing the quality of logistics fordomestic firms.Evidence from the experience of reforming Ethiopia’s InvestmentCommission shows that the main challenge in improvinginvestment agencies is achieving organisational change. Itrequires strong leadership, patience and slow introduction to newprocesses and procedures.In Myanmar, a joint project with the garment sector business20/06/2017 Risky business: Firms, trade and development - IGChttp://www.theigc.org/blog/risky-business-firms-trade-and-development/ 3/3association digitised import licencing, likewise attempted toimplement small changes that would improve the investmentopportunities. This project showed that success can be achievedthrough careful relationship building, starting small andimplementing new procedures to trigger broader systemicchanges.

Risky business: firms, trade and development

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