TITLE:
Growth Determinants of Micro and Small Enterprises in Ethiopia: Evidence from Selected Woredas of Gurage Zone
AUTHORS:
Abel Dula Wodajo, Endalkachew Kabtamu Mekonen, Solomon Fiseha Abera
KEYWORDS:
Employee Growth, Sales Growth, Human Capital, Social Capital, Micro and Small Enterprise, Structural Equation Model, Gurage Zone
JOURNAL NAME:
Open Journal of Business and Management,
Vol.8 No.3,
May
29,
2020
ABSTRACT: The study attempts to provide two integrated growth
models, sales and employee growth model to assess the factors that determine Micro
and Small Enterprises (MSE’s) growth. Cluster sampling techniques was employed
and a total of 348 samples were selected. The data were collected through
questionnaires, key-informant interviews and focus group discussions. Both
descriptive and empirical analysis methods were employed and the descriptive
part was analyzed using central tendency measures, dispersion, while the
empirical analysis applied confirmatory factor analysis, first order structural
analysis and second order structural analysis. The study elucidates the
inter-relationship among the four determinants of growth. According to the path
analysis results, internal capabilities and business structure is key dimension
that directly affects MSE’s growth (through innovation and imitations and
number of products with employee incentives), and followed by human capital,
social capital and access to external resources. A number of variables
influence MSE’s growth. These may affect the growth directly, indirectly, or
both. Human capital of owner-managers had direct and indirect effect on MSEs’
growth. In particular, training with work experience in same field has
substantial positive effect on MSE’s growth. In addition to the direct effect,
it has indirect positive effect via variables in social capital (such as
organizational network with network maintenance and resources sharing with
enterprise) and internal capabilities and business structure. The results with
respect to access to external resources reveal both direct and indirect effects on MSEs’ growth. Especially, access to inputs
(labor, raw material and finance) has substantial significant positive
effect on growth. In the case of internal capabilities and business structure,
the result suggests that it has direct positive effect on MSEs’ growth through
innovations and imitations and number of products with employee incentives.
Following the result, it is recommended that to best promote the growth of
MSE’s in the study area, concerned body should take the following measures: 1)
enhance human capital through training and technical assistance programs; 2)
promote different form of innovations and imitations such as product, process,
work practice, marketing and supply relations by increasing contacts with
organizational networks and enhancing; 3) support collaboration with business
support institutions and other organizations can serve to acquire the expertise
and services that currently are lacking in the industry.