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

Abstract Management practices are seen as key explaining factors of the productivity differences across firms but generally considered as unobserved and assimilated to firms' individual fixed effects. Using survey data collected in Burkina Faso over 800 Small and Medium-sized Enterprises (SMEs), this study examines the relationship between management and the performances. Observed factors categorized in thee components that are monitoring, target settings, and incentive schemes are used to compute a management practices score. Considering the management skills as technology that can be adopted, the empirical results show a positive and significant association between management practices and firms' performances measured by the sale value, profit and value added. The relationship is particularly strong between the incentive component of management and performances. The estimation by firms' size also finds that the link between management score and performances' indicators is stronger for larger firms. We draw recommendations to inform policies that aim at promoting SMEs governance and growth in developing countries.