Determinants of Enterprise Growth: The Case of Small Manufacturing Enterprises In Bahir Dar Town

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Addis Ababauniversity


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



Small Manufacturing Enterprises In Bahir Dar Town Endesha w Mulatu