Firm heterogeneity and capital accumulation in a fragile economy: evidence from Mali

This paper examines enterprise-level performance dynamics in a fragile, low-income economy, focusing on structural constraints and firm heterogeneity in Mali. Using firm-level data on 1,867 non-agricultural micro, small and medium-sized enterprises (MSMEs), including 1,798 micro-enterprises and 69 small and medium-sized enterprises (SMEs), the analysis estimates log-log turnover elasticities with respect to capital stock, investment, employment, and production value while accounting for regional exposure to fragility. The results reveal heterogeneous performance dynamics, with enterprises responding differently to productive inputs. Micro-enterprises display high marginal responsiveness to investment at low capital levels but remain constrained by limited reinvestment capacity and weak organizational scaling. SMEs exhibit stronger employment-related scale effects and more balanced factor elasticities, indicating greater potential for sustained performance expansion. Regional fragility does not significantly alter the core relationships between productive inputs and turnover once firm-level characteristics are controlled for but increases dispersion in enterprise performance. These findings suggest that fragility primarily amplifies risk and heterogeneity rather than suppressing average enterprise performance. The paper contributes firm-level evidence from a fragile economy and demonstrates that firm heterogeneity has important implications for differentiated MSME development policies.