FACTORS AFFECTING THE GROWTH OF MICRO AND SMALL ENTERPRISES: EVIDENCES FROM MICRO AND SMALL ENTERPRISES IN KIRKOS SUB CITY, ADDIS ABABA

Abstract

Micro and Small-sized Enterprises (MSEs) are considered the engines of growth in developing countries. In developed countries, MSEs have historically played a vital role in creating jobs, spurring innovations, and creating new products, and thus contributed to economic vitality and growth. This study aimed to investigate the key factors affecting the growth of MSEs in Kirkos sub city in Addis Ababa. In this study, mixed research methods were used followed by concurrent triangulation strategy. It also used descriptive study and explanatory research. A total of 242 micro and small sized enterprises owners and managers were sampled from the study sub city Stratified simple random sampling was used to select proportional number of samples from the study area. This comprised of manufacturing, trade, service, agri-business and others. Both primary and secondary source of data were used. To obtain the primary data, questionnaires (based on Likert Scales) were distributed to access the growth status of sampled respondents and also to examine factors affecting their growth. A pilot study was undertaken with MSEs owners to test the reliability of the questionnaire. Using multiple regressions, this study found that entrepreneur characteristics, management and marketing skills, technology, and access to external financing and human resources capacities have a statistically significant contribution to MSEs growth. However, legal and regulatory frameworks have a statistically insignificant and negative contribution to MSEs growth. Thus, MSEs need finance technology, management and marketing skills, human resource, and entrepreneurial characteristics to enhance their business growth. However, this study concluded that many MSEs have been fed up with complicated and extensive legal procedures. Thus, this study suggests Micro and small institutions, government and other non-governmental organizations need to take note of access financing will enhance MSEs business growth. Thus, stakeholders may provide funds to adopt current technologies, access for finance, and training on management and marketing skills, human resource, and entrepreneurial characteristics. The Government on the other hand should come up with easy procedures in registration process and licensing of the MSEs.