Industry Switching in Developing Countries

Carol  Newman; John Rand; Finn Tarp

Industry Switching in Developing Countries

Abstract

Firm turnover (i.e. firm entry and exit) is a well-recognized source of sectorlevel productivity growth across developing and developed countries. In contrast, the role and importance of firms switching activities from one sector to another is little understood.
Firm switchers are likely to be unique both from newly established entrants and exiting firms that close down. We build an empirical model that examines switching behaviour based on data from Vietnamese manufacturing firms during the period 2001–08. Our
diagnostic shows that switching firms have different characteristics and behaviour as compared to entry and exit firms. They tend, inter alia, to be labour-intensive and seek out competitive opportunities in labour-intensive sectors in response to changes in the
market environment. We also show that resource reallocations resulting from switching form an important component of productivity growth.

Original language	English
Place of Publication	Helsinki
Publisher	UNU-WIDER
Number of pages	32
ISBN (Print)	978-92-9230-416-4
Publication status	Published - Sept 2011

Keywords

Faculty of Social Sciences

Access to Document

http://www.wider.unu.edu/publications/working-papers/2011/en_GB/wp2011-049/

Cite this

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abstract = "Firm turnover (i.e. firm entry and exit) is a well-recognized source of sectorlevel productivity growth across developing and developed countries. In contrast, the role and importance of firms switching activities from one sector to another is little understood.Firm switchers are likely to be unique both from newly established entrants and exiting firms that close down. We build an empirical model that examines switching behaviour based on data from Vietnamese manufacturing firms during the period 2001–08. Ourdiagnostic shows that switching firms have different characteristics and behaviour as compared to entry and exit firms. They tend, inter alia, to be labour-intensive and seek out competitive opportunities in labour-intensive sectors in response to changes in themarket environment. We also show that resource reallocations resulting from switching form an important component of productivity growth.",

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N2 - Firm turnover (i.e. firm entry and exit) is a well-recognized source of sectorlevel productivity growth across developing and developed countries. In contrast, the role and importance of firms switching activities from one sector to another is little understood.Firm switchers are likely to be unique both from newly established entrants and exiting firms that close down. We build an empirical model that examines switching behaviour based on data from Vietnamese manufacturing firms during the period 2001–08. Ourdiagnostic shows that switching firms have different characteristics and behaviour as compared to entry and exit firms. They tend, inter alia, to be labour-intensive and seek out competitive opportunities in labour-intensive sectors in response to changes in themarket environment. We also show that resource reallocations resulting from switching form an important component of productivity growth.

AB - Firm turnover (i.e. firm entry and exit) is a well-recognized source of sectorlevel productivity growth across developing and developed countries. In contrast, the role and importance of firms switching activities from one sector to another is little understood.Firm switchers are likely to be unique both from newly established entrants and exiting firms that close down. We build an empirical model that examines switching behaviour based on data from Vietnamese manufacturing firms during the period 2001–08. Ourdiagnostic shows that switching firms have different characteristics and behaviour as compared to entry and exit firms. They tend, inter alia, to be labour-intensive and seek out competitive opportunities in labour-intensive sectors in response to changes in themarket environment. We also show that resource reallocations resulting from switching form an important component of productivity growth.

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