ABSTRACT
How does productivity vary across firms? Are large firms more productive than small firms? What other attributes affect firm growth? In this chapter, we attempt to answer these questions using the enterprises survey data on India. These are important questions for a country like India, planning aggressively to boost manufacturing growth. Understanding the relationship between productivity and size is of special interest for India, given the fact that most firms are small and enjoy several exemptions and subsidies. Our findings indicate that firm size is an important determinant of its productivity performance. Large firms are robustly found to have 9–11 percent more productivity than other firms. At the same time, small firms are significantly lower in terms of productivity performance in comparison to other firms. The rate of return of inputs is also found to be higher among large firms. Finally, the chapter reviews the policy recommendations of various productivity studies in the backdrop of which the policy implications of the present study are highlighted. While the large firms can be encouraged more to pursue innovation and other productivity enhancing strategies, the factors which constrain small firms to undertake such initiatives need to be thoroughly understood.
