MANAGEMENT PRACTICES, INNOVATION, AND SCALING PERFORMANCE IN ENTREPRENEURIAL FIRMS: THE ROLE OF MANAGERIAL PROFESSIONALIZATION AND INSTITUTIONAL QUALITY.

Abstract

This study looks at how small, growing businesses can scale up successfully in developing countries. Many startups struggle to grow because their daily operations are messy or they lack new ideas. Using data from 1,420 firms, this paper shows that businesses perform much better when they use structured management rules (like tracking targets and rewarding good workers) alongside new product innovations. However, just having these tools is not enough. Businesses need to hire professional, outside managers to run these systems and guide the team. Finally, the study finds that the local business environment matters a lot. In areas with high corruption or political problems, even good managers struggle to expand the business. But when local courts are fair and regulations are clear, professional managers can easily help the firm grow. Governments must therefore lower corruption and improve laws to help these businesses succeed.