Determinants of Enterprise Growth: The Case of Small Manufacturing Enterprises In Bahir Dar Town
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Date
2005-06
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Addis Ababauniversity
Abstract
The dynamic role of small enterprises in developing countries as engines through which the growth
objectives of these countries can be achieved has long been recognized. In the face of a rapidly growing
labour force where public sector hiring slowed and the growth of the large modern pri vate sector has
relati ve ly stagnated, the role of the small as well as micro enterprises in employment creation is
indi spensable. Despite the fact that Smal l Enterprises have been recognized as a major contemporary
source of employment and income in a growing number of developing countries, yet relati vely little is
known about the characteristics and patterns of change in these enterprises.
Most past research in this area, however, have been static in their orientation, providing a picture of how
things look "today" or as of the time of the study. This argument holds true to our case that studies on
dynamic aspects of small enterprises are almost non-existent.
The aim of the study is to examine and identify factors affecting growth of employment in small
enterprises. This study used cross-sectional data collected through a fie ld survey in Bahir Dar town of the
Amhara Region. The method employed is a multiple linear regress ion analysis that makes an
econometric estimati on on 76 small manufacturing enterprises to determine the explanatory factors of
the ir employment growth. The explanatOlY variables considered in the study represent firm and ownermanager
characteristics and business practices. The results at must do not reveal any surpri ses compared
to other similar previous empirical researches conducted elsewhere. Factors found to innuence
significantly small manufacturing enterprise growth in Bahir Dar are market size, young age of the
entrepreneur, age of the enterprise and reliance on external sources of finance i.e. Bank loan. However,
sex of the owner, size of the firm, post-h igh school level of education and experience of the entrepreneur
ha ve no significant effects on the growth performances of small enterprises as far as the study area is
concerned.
The findings give ri se to several policy implications that are crucial for the improvement of the sector's
performance. These include policy makers have a role in di spelling the myth, particularly among finance
or credit providers (mainly banks), that small enterprises in general and women owners in particular are
high-ri sk borrowers of capital. The fi ndings call for public policies such as the youth employment
strategy, which among others encourages the young entrepreneurship. Blanket policy approaches to
small ent erpri se growth may not be effective. Poli cies targeted at small enterprises that are wi lling to
take ri sk and able to grow are preferable. The findings also call for introduction of guarantee schemes to
support small-sized enteqJrises that can not meet bank and finan cial collatera l requirements
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Small Manufacturing Enterprises In Bahir Dar Town Endesha w Mulatu