Author(s)

Abel Dula Wodajo¹, Endalkachew Kabtamu Mekonen², Solomon Fiseha Abera²

¹Department of Management, Wolkite University, Wolkite, Ethiopia.
²Department of Economics, Wolkite University, Wolkite, Ethiopia.

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.

Employee Growth, Sales Growth, Human Capital, Social Capital, Micro and Small Enterprise, Structural Equation Model, Gurage Zone

Wodajo, A. , Mekonen, E. and Abera, S. (2020) Growth Determinants of Micro and Small Enterprises in Ethiopia: Evidence from Selected Woredas of Gurage Zone. Open Journal of Business and Management, 8, 1339-1360. doi: 10.4236/ojbm.2020.83086.