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While previous studies have reported the causes of failure of small firms, little empirical research has examined the factors contributing to their success or growth. We attempt to shed some light on this aspect through a study of a sample of small manufacturing firms operating in the Kobe region of Japan. The purpose of this study is to examine a set of firm and industry-specific variables that may have an impact on the growth of firms. The results of the study suggest that the firm size has a significant impact on the growth of firms, with relatively bigger firms in the small-scale sector performing better than smaller ones. Similarly, firms with more skilled labour seem to have a superior performance record. The results also indicate that the growth of firms is heavily influenced by the type of industry.