190
AFRICA
’
S SILK ROAD
:
CHINA
AND INDIA’
S NEW ECONOMIC FRONTIER
SizeThere is a large volume of literature explaining how size is a determinant of firm performance.
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This is true for firms around the world. Consistent
with this literature, both labor productivity and export intensity increase with size among the surveyed firms in Africa (figure 4.3). It is likely to be the case that larger firms are more productive or more efficient in production due to economies of scale as well as economies of scope. This is in turn reflected in their export intensity. Because exporting requires certain fixed costs, larger firms can expand their overseas marketing networks more easily. As discussed in detail in chapter 6, scale is also relevant for the geographical
orientation of exports, particularly in terms of exports to the global market vis-à-vis intraregional exports.
The figure also shows that,
unlike labor productivity, capital productivity declines with size. Among surveyed firms, larger firms tend to have more capital per worker than do smaller firms. It maybe the case that larger firms are already facing diminishing returns to capital while still enjoying increasing returns to labor.
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