With Small and Medium Size Enterprises (SMEs) amounting to a high percentage of the total enterprises, these significantly contribute towards the economic development of countries by being a driver of innovation.\u00a0 However, SMEs are facing increased competition from new markets and in order to survive these have to improve their competitiveness, mainly by enhancing productivity.Over the years empirical literature has investigated the linkages between productivity and the different contributors to productivity.\u00a0 In this regard, literature splits these determinants into two groups.\u00a0 The first group constitutes determinants on which the firm has control.\u00a0 According to literature, a firm can increase productivity through restructuring and adopting best practices, and investing in training and information technology.\u00a0 The second group constitutes determinants which are beyond the firm’s control and these factors relate to the environment in which the firm operates, including competition and regulation.An analysis of productivity across the comparator countries shows that the productivity of SMEs in Palestine is low.\u00a0 Egypt like most MENA countries has low levels of productivity which has been attributed to the adverse investment climate.\u00a0 Different studies conducted in Morocco suggest that, training programs contribute positively towards labor productivity in subsequent years (Sekkat, 2011) sectoral level policies (such as the upgrading of technology within the manufacturing industry) are more effective at enhancing productivity (Chemingui, 2005); increasing market demand attracts firms to the market and that in periods of economic downturn the surviving firms experience enhanced productivity (Achy and Sekkat, 2010).\u00a0 In Belgium the main contributor towards increased productivity was capital deepening (Biatour and Kegels, 2008).Using a Cobb-Douglas production function, labor productivity and Total Factor Productivity (TFP) according to manufacturing activity and firm size were computed.\u00a0 The analysis shows that Belgium has the highest productivity levels in almost all the activities considered.\u00a0 However, when focusing on TFP, the MENA countries exhibit larger figures.\u00a0 The average TFP is highest in the case of Egypt.\u00a0 The productivity of larger firms compared to that of smaller firms is higher in the case of Morocco and Egypt.An econometric analysis was carried out which showed that there are difference between the labor productivity of SMEs and larger firms.\u00a0 It is also evident that labor productivity differences between smaller and larger firms depend on the industry.\u00a0 Indeed, whenever such differences exist, SMEs tend to be less productive than larger firms within the same industry.\u00a0 Furthermore, it also seems that differences in productivity also depend on the country’s characteristics.\u00a0 Further analysis showed that productivity differences depend on both the industry and the country.\u00a0 It is evident that SMEs in the South tend to exhibit lower levels of productivity irrespective of the industry, whereas in the North discrepancies in productivity can be either positive or negative depending on the industry.\u00a0 From the analysis carried out, it seems that the main determinants of productivity are:\u00a0 the age of the firm (morocco only), the share of exports in a firm’s output, the intensity of competition within an industry and the technological intensity within an industry.From the above results, a number of recommendations can be put forward in order to enhance SMEs productivity.\u00a0 Firstly, due to the contribution of competition towards productivity, competition policy should be enforced.\u00a0 Secondly, reforms should be implemented to make it easier for SMEs to access capital.\u00a0 Thirdly, effective export strategies should be implemented.<\/p>\n","protected":false},"excerpt":{"rendered":"
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