What Determines Micro - Enterprises Competitiveness? Firm Level Evidence

Abstract

The micro enterprises sector is characterized by highly diversified activities which can create job opportunities for a substantial segment of the population in both developed and developing economies.  Similarly, the sector comprises the largest share of enterprises and employment in the non-agricultural sector in Ethiopia. Despite the notable growth trends in the numeric figures of these enterprises recorded over the last decade, the sector essentially remains weak. Hence, an effective government policy to promote capital formation in the country should stimulate competitive enterprises and expand new businesses. To this effect, policy formulation process requires measuring and identifying the determinants of competitiveness of these enterprises. In this respect, this study intends to show what really determines the competitive power of small firms in Adama city taking owner, firm and inter-firm factors in to account. To achieve objectives of the study both qualitative and quantitative data type from both primary and secondary sources were used and analyzed using OLS multiple linear regression with the help of STATA 12 software. The output of this research would provide pertinent information to policy makers and development planners working on the promotion and creation of favorable environment for micro level firms to help them to be a competitive enterprise than their current stand.

Keywords: Ethiopia; Firm Factors; Inter-firm Factors; Multiple Linear Regression; Owner Factors