The study evaluates the performance of SMEs in Laos in light of entrepreneurs’ capacity, government facilitation, and characteristics of firms and customers using firm-level data. Reflecting ability and experiences of owner/manager, her age and practical education and the use of modern equipment (personal computers) are among the most important factors contributing to firm performance. Knowledge on legal framework related to business and membership in business associations are also found to be helpful in SMEs’ performance. Domestic firms are inferior to foreign-owned enterprises, while limited enterprises are leading others. Firms in various locations show comparable performance. On the other hand, government facilitation and customer characteristics do not appear to have any impact on firm performance.
The findings imply the need for effective SME promotion policies and related policies, such as enhancing the effectiveness of education, both formal education and vocational/technical training; improving the dissemination and enforcement of laws and regulations related to business; and attracting more FDI and efficient foreign enterprises.