Determinants of Capacity Utilization of Firms: A Comparative Analysis of Developing and Developed Countries

Abstract

This paper employs data from more than 100 World Bank Enterprise Surveys of different developed and developing countries to analyze the determinants of capacity utilization in firms between 2007-2023. Appling Tobit model, the results show that while developed countries have more access to capital, technology, reliable electricity, better management, and sound infrastructure with fewer challenges, In developing countries problems such as energy constraints, informal competition limit capacity utilization of firms. Whereas the ownership concentration has mixed effects. The analysis also highlights the importance availability to finance, digital readiness, innovation, and choice of destination market. Results also highlight that access to finance and inadequate supply of workers are the biggest challenges the firms face in the wake of capacity utilization.