Factors that influence the expansion of the microenterprise sector: results from three national surveys in Zimbabwe

Using panel data from three nationwide surveys in Zimbabwe, an error components model is estimated to explore the factors that drive the small‐enterprise sector. Among labour‐intensive industries in urban areas, entry of new enterprises appears to be driven by surplus labour. This is supported by low barriers to entry and the negative relationship between economic growth and entry rates. In contrast, entry in capital‐intensive industries is unrelated to economic growth and it is characterized by significant barriers to entry, including capital, working capital, and proprietor experience. With the exception of labour‐intensive industries in rural areas, entry in all other small‐enterprise industries is positively correlated with agricultural income.