Abstract
This paper examines the underlying factors that might shape firm’s growth in the farming sector. In par-ticular, we investigate the effects of human capital and managerial capabilities on growth of Portuguese farming firms during 2003-2007. Relying on econometric models that control for survivorship bias, the results indicate that younger and top-educated employees are likely to foster farming firm’s growth. On the other hand, the effect of managerial capabilities appears to be somewhat weak on firms without separation between ownership and management. The flexibility to hire specialised and multidisciplinary management teams with managerial capabilities appears to yield economic payoffs on the farming sector.
Highlights
In Portugal, as well as in other developed countries such as the members of European Union (EU), the importance of agriculture in the economy has substantially decreased over time
Following Chesher (1979), farming firm growth-size relationship was analysed through the estimation of autoregressive models on the firm size time series augmented by a vector of firm, employees- and owner-specific characteristics in order to assess the impact of those factors on the farming growth rate
The results show that farming firm growth dynamics depend on firm size
Summary
In Portugal, as well as in other developed countries such as the members of European Union (EU), the importance of agriculture in the economy has substantially decreased over time. The application of scientific research and new knowledge to agricultural and managerial practices can be impacted by farmers’ investment in education and human capital in order to increase farming firm’s absorptive capacity and ability to recognise and exploit profit opportunities All those changes create new management issues, but, at the same time, new opportunities for farming firms with adequate and high management capabilities. As we will discuss, there are compelling theoretical reasons to expect the relationship between firm size and growth to be driven by owner’s specific characteristics and decisions, especially in terms of human resource management and organizational structure If so, those factors may have the potential to contribute significantly to structural change based on farming firms’ growth. We present and discusses the empirical estimates on the determinants of farming firms’ growth in the light of the key contributions, while section 5 provides the main conclusions and some policy implications
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