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This paper investigates the sources of inefficiency of firms in Cote d'Ivoire and exam ines to what extent these effects translate into poor performance. A large majority of firms is technically inefficient, producing far below the maximum attainable output level. Major cost savings can also be realised through enlarging the scale of activities of firms. Efficiency gains and scale advantages translate into a better competitive position and via their impact on market share into higher profitability. However, severe growth barriers and imperfect markets keep firms from realising these gains and prevent firms from catching up in technology with respect to their larger, older and often foreign owned competitors.