Factors Affecting Business Performance of Small and Medium Size Enterprise (SMEs) in Addis Ababa: (In Case of Nifas Silk-Lafeto Sub-City)

Abstract

This study was intended to explain the influential business factors that affect the business performance of small and medium enterprises (SMEs) in Addis Ababa Nifas Silk Lafeto Sub City. The study mainly deployed explanatory/causal research design and used quantitative research approach. It used mixed: stratification, population proportionate and simple random sampling techniques and structured Likert scale data collection instrument. Both descriptive and inferential statistical data analysis methods were applied. The regression results showed that the eight hypothesized factors: financial, management, marketing, entrepreneurial, technology, politico-legal, infrastructural and working premises factors were found significantly affecting the business performance of SMEs operating in the sub city (tcal > tcritical, P < 0.05). A significant regression model was formulated at F ((8, 230) = 167.657, p < 0.000), the coefficient of determination (RSquared) value of the model was 0.854 and its adjusted R2 was 0.849. The comparative influential intensity (effect) of the eight hypnotized factors on the business performance of SMEs were determined by using their standardized coefficient (beta), and it was found that the financial factors were the most influencing predictor variable for SMEs business performance followed by infrastructure and politico-legal factors. Working premises were at the fourth position in terms of its strength in influencing business performance followed by management and marketing factors. In the seventh and eighth ranks were technological and entrepreneurial factors respectively. The validity of the regression model was evaluated using residual plots and coefficient of determination and found that it was consistent with the multiple regression assumptions indicated that the model was valid and useful to predict the business performance of SMEs.