Measuring Micro and Small Enterprises (MSEs) Market Performance in Zambia

Abstract

Given the role of Micro and Small Enterprises (MSEs) in developing economies in terms of job creation, poverty reduction, production and distribution of goods and services,  and foreign exchange earning, it is important to understand the determinants of firm performance. Business firm performance is usually measured by revenue, profitability, employment, stock price, production efficiency. This paper considers profitability as a major indicator of firm market performance. By conducting an empirical study using 187 micro and small sized firms from Lusaka and Central  provinces of Zambia, the paper analyzed the determinants of firm performance by considering profitability as a proxy variable. This study seeks to look at the role of firm-specific factors in profitability of MSEs by employing a quantitative method from qualitative responses collected on the performance of enterprises. The analysis is done by using both Descriptive statistics and a Ordered Probit Regression Model. Explanatory variables, to explain changes in profit across time by a business firm, included are sales/revenue, cost, market coverage, competition, training, and owning more than one business. The Ordered Probit Regression result showed that increase in sales and expansion in market coverage over time are the significant variables that explain variations in firm’s profitability.

Keywords: Firm Performance, Profitability, Ordered Probit Model, Zambia.