Several streams of literature have examined the greater productivity dispersion that exists in developing countries, determinants of competitiveness, and interventions to improve productivity. This project contributes to these streams and to the general understanding of productivity dispersion by developing a market-specific measure of the competitive pressure to innovate and exit, and also a comprehensive measure of productivity dispersion in the retail tyre market in West Africa.
In this particular retail market, the research team will carry out an experiment that replicates the market impact of cost-reducing innovation as well as the competitive pressure placed on low-productivity firms by offering randomly selected firms a per-unit subsidy. The experiment results in a general measure of competitiveness, which is validated through testing whether it predicts differences in productivity across markets. This measure can also be used for ex-ante predictions on the impact of interventions to encourage productivity, such as management training.
The market chosen for study allows for generalizations on barriers to competitive conditions for small and medium enterprises quite broadly, thus giving the project wider applicability. The measure of market competitiveness developed from the research will predict where policy interventions designed to make industries more productive can be expected to be most effective, a valuable tool for policy makers in developing countries aiming to stimulate innovation and efficiency within different industries.
