Growth Drivers of Informal Manufacturing Enterprises: A Study of Assam in Northeast India

Abstract

The growth of small informal enterprises is of utmost importance, as they are widely recognised as a crucial source of employment and income in many developing countries. This article examines the factors driving firm growth in the informal manufacturing sector, based on data from a survey of 205 enterprises in Assam, Northeast India. Using a multinomial logit regression model, the study reveals that several factors related to both the entrepreneur and the enterprise significantly influence growth. Entrepreneurs with formal education are more likely to experience business growth, highlighting the importance of education in enhancing entrepreneurial skills. The research also finds a positive link between female ownership and firm growth, indicating that women-led businesses are more likely to grow. In terms of enterprise characteristics, the research shows that larger firms tend to experience higher growth compared to smaller ones. Similarly, businesses that maintain proper financial records are more likely to achieve growth, emphasising the importance of financial management. The study also identifies low product demand as a significant constraint on growth, limiting expansion opportunities for these enterprises.

Keywords: Growth, Informal, Enterprise, Manufacturing, Entrepreneur

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