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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Factors that affect the long-term survival of micro, small and medium enterprises in Ethiopia
Authors:Bekele, EshetuISNI
Worku, Zeleke
Periodical:South African Journal of Economics
Geographic term:Ethiopia
Subjects:small enterprises
informal savings and credit associations
social networks
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2008.00207.x/pdf
Abstract:There is an increasing recognition of the potential importance of micro, small and medium enterprises (MSMEs) for employment, income and poverty reduction in Ethiopia. Although the MSME sector contributes significantly to the national economy, the high failure rate among well established small businesses and enterprises is a matter of major concern. A random sample of 500 small businesses and enterprises selected from five major cities in Ethiopia were followed up for 6 years (1996-2001) in order to assess the impact of influential factors that affect the long-term survival and viability of small enterprises. Hazard ratios estimated from the Cox Proportional Hazards Model were used to quantify the impact of key predictors of survival. Businesses that ceased operation were characterized by inadequate finance (61 percent), low level of education (55 percent), poor managerial skills (54 percent), shortage of technical skills (49 percent), and inability to convert part of their profit to investment (46 percent). The study shows that participation in social capital and networking ('iqqub' schemes: indigenous saving and credit associations) was critically helpful for long-term survival. Businesses that did not participate in 'iqqub' schemes regularly were found to be 3.25 times more likely to fail in comparison with businesses that did. Results of the study have implications that could be used for developing policy initiatives that are aimed at fostering long-term growth in small businesses and enterprises. Bibliogr., notes, sum. [Journal abstract]