Title: What determines the performance of small enterprises in developing countries? Evidence from the handloom industry in Bangladesh

Authors: Khondoker Abdul Mottaleb; Tetsushi Sonobe

Addresses: Social Sciences Division (SSD), International Rice Research Institute (IRRI), Los Banos, Philippines ' The National Graduate Institute for Policy Studies (GRIPS), Roppongi 7-22-1, Minato-ku, Tokyo, Japan

Abstract: Family-based traditional microenterprises are abundant in developing countries, and in many cases they are a major source of income and employment for both urban and rural poor. With a few exceptions, however, most of these family-based traditional microenterprises in the rural areas of developing countries seldom grow in terms of enterprises' size and product quality. Thus, they tend to perform poorly relative to their growth potentials. The development of these family-based microenterprises would be instrumental to employment generation, poverty alleviation and sustainable economic growth in developing countries. Using primary data collected from the traditional handloom industry in Bangladesh, this paper inquires into the development process of family-based traditional microenterprises in developing countries. The paper empirically demonstrates that entrepreneurs' general human capital acquired by formal education is critically important for the introduction of new and high value-added fashionable products, and, thus, performance of the enterprise.

Keywords: family businesses; handloom industry; human capital; Bangladesh; families; developing countries; small and medium-sized enterprises; SMEs; micro-enterprises; micro-businesses; micro-firms; micro-companies; traditional industries; rural areas; product quality; employment generation; poverty alleviation; sustainable growth; economic growth; development processes; entrepreneurs; formal education; new products; high value products; fashionable products; value-added products; clothing; business performance; globalisation.

DOI: 10.1504/IJBG.2013.051802

International Journal of Business and Globalisation, 2013 Vol.10 No.1, pp.39 - 55

Available online: 31 Jan 2013 *

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