Special economic zone dynamics and firm performance: Evidence from an emerging economy

Abstract

AbstractThe empirical literature on Special economic zones (SEZs) has shown that SEZs have become critical policy tools for advancing economic and firm performance, especially in developing economies where financial capital, human capital, technology and technical know‐how to drive these performances are in limited supply. While the importance and effects of SEZs cannot be overemphasised and are well documented, particularly in Asia, SEZs' operationalisation, structure and policy practice appear to vary, especially in Ghana and hence a need to examine SEZ effects on firm performance in Ghana. Thus, following the difference in the structure and practice of SEZs and its limited empirical evidence in African emerging economies, this present study employs analysis of variance, treatment estimation and regression models covering 328 firms between 2018 and 2021 to shed insights on how SEZ dynamics/features affect firm performance (measured with total factor productivity, labour productivity, profitability, revenue generation and value added) in Ghana. Our results suggest firms operating under SEZ dynamics have varying significant effects on firm performance. Thus, while firms registered as SEZ firms and operating in SEZ enclaves and firms registered as SEZ firms and operating outside SEZ enclaves have significant positive effects on the performance indicators of firms, firms that are not registered as SEZ firms and operating outside SEZ enclaves detracted firm performance. Clearly, firms that possess SEZ dynamics/features tend to promote performance of firms as denoted in the empirical literature and theoretical approaches to SEZ. Arguably, the tax holidays, cheaper tariffs and infrastructural benefits derived by SEZ registered firms boost their productivity, revenue and profit performance higher than non‐SEZ registered firms. These results suggest policymakers/government should reduce administrative bottlenecks of registering as SEZ firms and operating in SEZ enclaves to increase the number of SEZ firm operations to induce performance and create room for fiscal revenue.