Skip to main content

Advertisement

SpringerLink
Log in

Growth Determinants of Micro and Small Enterprises (MSEs): Evidence from Entrepreneurs in the Eastern Region of Ethiopia

  • Published:
Journal of the Knowledge Economy Aims and scope Submit manuscript

Abstract

For developing countries like Ethiopia, MSEs are engines of economic growth and places where employment opportunity is created. Albeit their economic and social significance, the growth determinants of these enterprises are not yet studied in Eastern Ethiopia. This study, therefore, was mainly aimed at studying the growth determinants of MSEs in Eastern Ethiopia, using capital accumulation as a proxy measure of growth. The study will help the government in general, and the enterprises development agency; in particular, improve the working environment for the growth of MSEs. A total of 354 questionnaires were collected using a cross-sectional survey. Both descriptive and econometric analyses were employed, with a linear regression model estimated using the OLS technique. To get the parameters to be estimated with higher precision and unbiasedness, we conducted standard tests of homoscedasticity, multicollinearity, normality, autocorrelation, and overall model significance. The researcher found out that initial capital, the export of products, the existence of formal accounting records, MSEs loan from the government, and the provision of training for MSEs are positive and statistically significant. On the contrary, prior experience, type of customer, and tax incentive by the government are negative and statistically significant.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Availability of Data and Materials

The data employed in the study is primary data collected by the researcher through a questionnaire. The primary data were collected from sample respondents of the entrepreneurs engaged in MSEs using a structured questionnaire. The questions included in the questionnaire are both open-ended and close-ended. The study was done by taking a total of 354 entrepreneurs engaged in Micro and Small Businesses; taking 127 from Harar, 211 from Dire Dawa, and 16 from Haramaya. Moreover, the data supporting the findings of the article is available in both Excel and SPSS files, that I can send to you when requested.

References

  • Abdulmelike, A. (2018). Challenges and opportunities of MSEs in Ethiopia: A review paper. Journal of Economics and Sustainable Development, 9, 68–74.

    Google Scholar 

  • Abdul-Rahamon, O. A., & Adejare, A. T. (2014). The analysis of the impact of accounting records keeping on the performance of the small-scale enterprises. International Journal of Academic Research in Business and Social Sciences, 4(1), 1–17.

    Google Scholar 

  • Abera, A. (2012). Factors affecting the performance of micro and small enterprises in Arada and Lideta Sub-Cities, Addis Ababa. MBA Thesis unpublished, School of Graduate Studies, Addis Ababa University, Ethiopia.

  • Akoten, J. E., Sawada, Y., & Otsuka, K. (2006). The determinants of credit access and its impacts on micro and small enterprises: The case of garment producers in Kenya. Economic Development and Cultural Change, 54(4), 927–944.

    Article  Google Scholar 

  • Alabi, J., Alabi, G., & Ahiawodzi, A. (2007). Effects of susu-a traditional micro-finance mechanism on organized and unorganized micro and small enterprises (MSEs) in Ghana. African Journal of Business Management, 1(8).

  • Alemayehu, D., & Gecho, Y. (2016). Determinants of micro and small enterprises growth: The case of Durame Town, Kembata Tembaro Zone, southern nations and nationalities and peoples region, Ethiopia, 2016. International Journal of Business and Economics Research, 5(5), 161.

    Article  Google Scholar 

  • Alemu, K. S., & Dame, D. B. (2016). Determinants of micro and small enterprises success: The case of Ambo, Town, Ethiopia. Account and Financial Management Journal, 1, 1–10.

    Google Scholar 

  • Araya, S. T. (2018). Growth determinants of micro and small enterprises: Empirical evidence from Eastern Zone, Tigray Regional State of Ethiopia.

  • Belay, K., Asmera, T., & Tekalign, M. (2015). Factors affecting developments of micro and small enterprises. International Journal of Scientific and Research Publications, 5(1), 1–10.

    Google Scholar 

  • Cherkos, T., Zegeye, M., Tilahun, S., & Avvari, M. (2018). Examining significant factors in micro and small enterprises performance: Case study in Amhara region. Ethiopia. Journal of Industrial Engineering International, 14(2), 227–239.

    Article  Google Scholar 

  • Das, K. R., & Imon, A. H. M. R. (2016). A brief review of tests for normality. American Journal of Theoretical and Applied Statistics, 5(1), 5–12.

    Article  Google Scholar 

  • Donor Committee for Enterprise Development (DCED). (2018). Current Debates on Small Enterprise Development; Private Sector Development Synthesis Note, November 2018.

  • Drbie, M., & Kassahun, T. (2013). Deterrents to the success of micro and small enterprises in Akaki-Kality Sub-City. Journal of Business and Administrative Studies, 5(2), 1–33.

    Google Scholar 

  • Federal Micro and Small Enterprises Development Agency. (2014). A report submitted to the Federal MSE development council, Federal Democratic Republic of Ethiopia (FDRE) Addis Abeba

  • Firasew, M. Y. (2011). The livelihoods reality of micro and small enterprise operators: Evidences from Woreda One of Lideta Sub-city, Addis Ababa. Unpublished Master’s Thesis.

  • Fufa, F. G. (2015). Determinants of micro and small enterprises growth in Ethiopia: The case of Nekemte Town of Oromia Region, Ethiopia.

  • Gampala, P. (2018). Credit impact on performance of micro and small enterprises in Telangana. Academy of Entrepreneurship Journal, 24(2), 1–30.

    Google Scholar 

  • Gebreeyesus, M. (2007). Growth of micro-enterprises: Empirical evidence from Ethiopia. Ethiopian Development Research Institute (EDRI), 1–21.

  • Gebrehiwot, A., & Wolday, A. (2006). Micro and small enterprises (MSE) development in Ethiopia: Strategy, regulatory changes and remaining constraints. Ethiopian journal of economics, 10(683–2016–46843), 1–32.

  • Geleta, D. S. (2013). Socio-economic contributions of micro and small enterprises: The case of Jimma City. Science, Technology and Arts Research Journal, 2(2), 123–134.

    Article  Google Scholar 

  • Gujarati, D. N. (2003). Basic Econometrics. Forth Edition. Singapura: McGraw-Hill.

  • Habitat, U. N. (2008). Dire Dawa Urban Profile, United Nations Human Settlements Programme (Un-Habitat). ETHIOPIA: Technical Cooperation Division.

  • Haftu, B., Tseahye, T., Teklu, K., & Tassew, W. H. (2009). Financial needs of micro and small enterprise (MSE) operators in Ethiopia. Occasional paper, (24).

  • Harari National Regional State, Bureau of Finance and Economic Development BoFED. (2006), Federal Democratic Republic of Ethiopia (FDRE), Harar, Ethiopia

  • Kassa, E. T. (2021). Socioeconomic determinants of micro and small enterprise growth in North Wollo and Waghimira Zone selected towns. Journal of Innovation and Entrepreneurship, 10(1), 1–14.

    Article  Google Scholar 

  • Kilonzo Jennifer, M., & Dennis, O. (2015). Financial management practices on growth of small and medium enterprises: A case of manufacturing enterprises in Nairobi County, Kenya.

  • Liedholm, C.E., & Mead, D.C. (1999). Small enterprises and economic development: The dynamics of micro and small enterprises (1st ed.). Routledge. https://doi.org/10.4324/9780203354735

  • Mano, Y., Iddrisu, A., Yoshino, Y., & Sonobe, T. (2012). How can micro and small enterprises in Sub-Saharan Africa become more productive? The impacts of experimental basic managerial training. World Development, 40(3), 458–468.

    Article  Google Scholar 

  • McPherson, M. A. (1996). Growth of micro and small enterprises in southern Africa. Journal of Development Economics, 48(2), 253–277.

    Article  Google Scholar 

  • Mead, D. C., & Liedholm, C. (1998). The dynamics of micro and small enterprises in developing countries. World Development, 26(1), 61–74.

    Article  Google Scholar 

  • Mengesha, B. T. (2018). Determinants of micro and small business enterprises growth: The case of three selected Woreda, Gurage Zone, Ethiopia.

  • Ministry of Urban Development and Housing (MoUDH). (2016). Micro and Small Enterprise Development Policy & Strategy.

  • Munizu, M. (2016). Study on determinant factors of micro and small enterprises development in South Sulawesi of Indonesia. Mediterranean Journal of Social Sciences, 7(6), 121–121.

    Google Scholar 

  • Mwangi, N. (2014). The Relationship between access to credit and financial growth of small and medium enterprises in Nairobi County (Doctoral dissertation, University of Nairobi).

  • Nichter, S., & Goldmark, L. (2005). Understanding micro and small enterprise growth. Micro Report, 36.

  • Osotimehin, K. O., Jegede, C. A., Akinlabi, B. H., & Olajide, O. T. (2012). An evaluation of the challenges and prospects of micro and small scale enterprises development in Nigeria. American International Journal of Contemporary Research, 2(4), 174–185.

    Google Scholar 

  • Osoro, K., & Areba, A. M. D. N. J. (2013). Constraints facing women entrepreneurs in Kenya: A case study of micro and small enterprises in Kisii County. Journal of Humanities and Social Science, 16(6), 116–124.

    Google Scholar 

  • Samuel B. (2019). Determinants of youth based micro and small enterprises growth in Dawro Zone A Case of Mareka Wereda, International Journal of Research in Business Studies and Management, 6(12), 27- 37.

  • Seyoum, A., Aragie, M., & Tadesse, D. (2016). Growth of micro and small enterprises in Addis Ababa city administration: A study on selected micro and small enterprise in Bole Sub City. College of Business and Economics, Jimma University, Jimma Ethiopia, United Nation, Addis Ababa Office, p–581.

  • Shibia, A. G., & Barako, D. G. (2017). Determinants of micro and small enterprises growth in Kenya. Journal of Small Business and Enterprise Development.

  • Shishaye, H. A., & Nagari, A. (2016). Hydrogeochemical analysis and evaluation of the groundwater in the Haramaya Well Field, Eastern Hararghe Zone, Ethiopia. Journal of Hydroscience and Hydraulic Engineering, 5: 4. of, 10, 2.

  • Tarfasa, S., Ferede, T., Kebede, S., & Behailu, D. (2016). Determinants of growth of micro and small enterprises (MSEs), Empirical evidence from Ethiopia. R4D Working Paper 3.

  • Weldeslassie, H. A., Vermaack, C., Kristos, K., Minwuyelet, L., Tsegay, M., Tekola, N. H., & Gidey, Y. (2019). Contributions of micro, small and medium enterprises (MSMEs) to income generation, employment and GDP: Case study Ethiopia. Journal of Sustainable Development, 12(3), p46.

  • White, S. (2018). Creating better business environments for micro and small enterprises (p. 55). Technical Report, Donor Committee for Enterprise Development.

    Google Scholar 

  • Yadergal, A., Lingerew, A., & Getenet, A. (2019). Determinants of micro and small enterprises transformation in to medium level industry in Addis Ababa, Ethiopia. Asian Journal of Economics, Business and Accounting, 1–22.

  • Zemenu, A., & Mohammed, M. (2014). Determinant of growth of micro and small enterprises in Ethiopia (a case of MSEs in Mekelle City, Tigray). International Journal of Advance Research in Computer Science and Management Studies, 2(6), 149–157.

    Google Scholar 

Download references

Funding

Haramaya University. Haramaya University,001,Wondmagegn Biru Mamo

Author information

Authors and Affiliations

  1. College of Business and Economics, Haramaya University, Haramaya, Ethiopia

    Wondmagegn Biru Mamo

Authors
  1. Wondmagegn Biru Mamo
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

I hereby declare that the paper sent for publication in the Journal of the Knowledge Economy entitled “Growth Determinants of Micro and Small Enterprises (MSEs): Evidence from Entrepreneurs in the Eastern region of Ethiopia” is my work including the concept of the paper, assumptions, and methods, statistical calculations, and text editing. Moreover, I declare that there is no conflict of interest in the study.

Corresponding author

Correspondence to Wondmagegn Biru Mamo.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

This article is part of the Topical Collection on AI in the Knowledge Economy and Society: Implications for Theory, Policy and Practice

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Mamo, W.B. Growth Determinants of Micro and Small Enterprises (MSEs): Evidence from Entrepreneurs in the Eastern Region of Ethiopia. J Knowl Econ 14, 138–160 (2023). https://doi.org/10.1007/s13132-021-00859-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s13132-021-00859-x

Keywords

Search

Navigation