Influences on small firm growth rates in Ghana. Factors which influence small firm growth rates and which are important in distinguishing rapid-growth small firms from slow-growth small firms.

Abstract

Although the development of small businesses is generally considered important for income generation and job creation, there has been relatively little research in developing countries such as Ghana on understanding why some small firms succeed and grow rapidly while others do not in. This thesis investigates the influences on small firm growth rates in Ghana using data from a random sample of 252 manufacturing and services firms from the database of the Association of Ghana Industries. The general hypothesis is that, growth is a function of the characteristics of the entrepreneur; characteristics of the firm; strategic factors; environmental factors; and cultural factors. Consequently, the research tests 36 hypotheses drawn from the five main categories of variables using the turnover and the employment growth measures. It also uses logistic regression analysis to isolate significant factors differentiating rapid-growth firms from slow-growth firms. Overall, the research finds strong evidence which suggests that, perception of a market opportunity; university education; multiple founders; entrepreneurs with marketing skills; workforce training; new product development; presence of a clear vision and mission statement; majority non-family members in management and membership of professional or business associations were associated with rapid-growth firms. iv Factors which were significant in discriminating between rapid-growth and slow-growth firms but were more likely to be associated with slow-growth firms included threat of unemployment or actual unemployment as a motivation for starting a business; production skills; legal form (limited liability companies); access to external equity (post-formation); exporting; access to public or external aid; unionization and frequent management meetings.