Growth of micro and small scale enterprises and its driving factors: empirical evidence from entrepreneurs in emerging region of Ethiopia

Abstract

Purpose The purpose of this study was to examine micro and small scale enterprises’ growth determinants operating in Benishangul-Gumuz Regional State of Ethiopia as emerging region. Design/methodology/approach The study adopted an explanatory research design with arrangement of primary data collection via a cross-sectional survey questionnaire followed by mixed research approach. The sample of this study was 220 enterprises determined by Yamane’s formula and selected using proportional stratified random sampling technique. Findings The result of regression analysis revealed that initial investment, access to land, access to finance, location, sectoral engagement, market linkage, and business experience are significant in explaining growth in one hand. On the other side, however, gender, education, ownership, formal recording, and financial management practice are found to be insignificant variables in determining enterprises’ growth. Research limitations/implications More evidence is needed on micro and small scale enterprises’ growth determinants before any generalization of the results can be made. In addition, the empirical tests were conducted only on 220 entrepreneurs since 2018. Therefore, the results of the study cannot be assumed to extend beyond this group of entrepreneurs to different study periods. Practical implications The study might help the entrepreneurs in addressing the factors affecting growth to take actions toward developing their performance and in turn contribute to employment, export participation, poverty alleviation, and women empowerment. Originality/value This paper adds to the literature on the determinants of micro- and small-scale enterprises’ growth. In particular, it tests the impact of initial investment, access to land, access to finance, location, sectoral engagement, market linkage, business experience, education, ownership structure, and financial management practice on growth of enterprises.

Determinants that influence the performance of women entrepreneurs in micro and small enterprises in Ethiopia

“…Evidently, business operating in premises allotted by government agencies had better chance of success compared to those set up in privately rented premises (Meressa, 2020). Moreover, a research conducted by Doris (2016) indicated that availability of land is very important for the success and sustainable growth of entrepreneurs because it creates access to resource and the necessary markets.…”

“…Firms can have forward linkage with customers or other sellers and backward linkage with their raw material suppliers to get the needed materials to produce goods or services (Meressa, 2020). This is to mean that the absence or low supply of raw materials may increase the cost of production and bring other drawbacks like stagnation, low quality of products, and poor performance among others (Nasri & Muhammad, 2018).…”

“…Extensive evidence shows that the performance of women-owned micro and small enterprises (here after called as MSEs) played pivotal roles for the development of a nation (Shakeel, Yaokuang, & Gohar, 2020) and the well-being of societies by creating jobs, wealth, and innovations (Mozumdar, Van Der Velde, & Omta, 2020). In Ethiopia, the importance of enterprises owned by women entrepreneurs is noticed on different documents like industrial policy, MSE development strategy, and the growth and transformation plans I and II to accelerate growth and reduce poverty (Meressa, 2020). Despite this, both the growth and performance of women-owned MSEs remain a concern, although women entrepreneurship has gained popularity in the country with a growing number of women to start and run their own business (Awoke, 2019).…”

Theoretical background of innovation in services in small and medium-sized enterprises: literature mapping

“…Authors such as Mbugua et al (2013) and Meressa (2020) highlight that the growth of micro and small companies is directly linked to the sustainable development of underdeveloped economies. As stated by Meressa (2020), many researches sought to identify the variables that are widely used as determining factors in the growth process of companies.…”

Determinants that Influence the Performance of Women Entrepreneurs’ in Micro and Small Enterprises in Ethiopia

“…Extensive evidence shows that the performance of women-owned micro and small enterprises (here after called as MSEs) are played pivotal roles for the development of a nation (Shakeel, Yaokuang, & Gohar, 2020)and the well-being of societies by creating jobs, wealth, and innovations (Mozumdar, Velde, & Omta, 2020). In Ethiopia, the importance of enterprises owned by women entrepreneur is noticed on different documents like industrial policy, MSEs development strategy, and the growth and transformation plans I and II to accelerate growth and reduce poverty (Meressa, 2020). Despite this, both the growth and performance of women owned MSEs remain a concern, although women entrepreneurship has gained popularity in the country with a growing number of women to start and run their own business (Awoke, 2019).…”