assessment of factors affecting performance of …

20 | P a g e : Reviewed Journal International of Business Management. www.reviewedjournals.com | [email protected]

Vol. 1, Iss. 1 (2019), pp 20 - 41, January 5, 2019. www.reviewedjournals.com, ©Reviewed Journals

ASSESSMENT OF FACTORS AFFECTING PERFORMANCE OF MICRO AND SMALL SCALE

ENTERPRISES: A CASE STUDY OF ASSOSA TOWN

Dereje, M. L.,1*

Amsalu, B.,2 Adugna, H.,

3 & Abebe, S.

4

1* MBA Scholar, Wollega University [WU], College of Business and Economics, Nekemte, Ethiopia

2 Ph.D, Wollega University [WU], College of Business and Economics, Nekemte, Ethiopia

3,4 MBA,

Wollega University [WU], College of Business and Economics, Nekemte, Ethiopia

Accepted: January 1, 2019

Abstract This study was conducted with the objective of assessing factors affecting performance of micro and small

enterprises in Assosa town. The study identified that the external and internal factors affected performance of

MSEs and their existence could improve the normal operation of micro and small enterprises performance.

Correlation coefficients revealed a significant positive relationship between performances of MSEs. Variables

such as political, legal, financial, marketing, working premises, infrastructural, opportunity seeking, persistence,

commitment to the work, demand for efficiency and quality, goal setting, risk taking, information seeking, and

self-confidence positively influence performance of MSEs (profit) and significantly affect performance of MSEs.

Similarly, for capital, variables such as political, legal, financial, marketing, working premises, technological,

opportunity seeking, persistence, commitment to the work, demand for efficiency and quality, risk taking,

information seeking, and self-confidence positively influence performance of MSEs (capital) and significantly

affect performance of MSEs. In addition, for number of employees; variables such as political, financial,

marketing, working premises, opportunity seeking, persistence, commitment to the work, demand for efficiency

and quality, information seeking, and goal setting positively influence performance of MSEs and significantly

affect performance of MSEs in terms of number of employees. Improving those variables increase performance of

MSEs (profit, capital and number of employees). The study recommended that MSEs office could be transparent

at the time of allocating the working place to the MSEs, better to design close supervisor of MSEs and linking the

MSEs with other private contractors working around Assosa town, support the establishment and strength of

business development services. Similarly, the MSEs office could increase the capacity and skill of the operators

through continuous trainings, and create linkage with entrepreneurship development center to fill entrepreneurial

skill gaps of MSEs of owners/ mangers. Moreover, in order to reduce the influence of external and internal

factors on performance of MSEs, policy makers and the service provider institutions need to consider and revise

the extent, intensity, and quality of support and their linkages.

Key words: Micro and small enterprises, Performance, Assosa town.


INTRODUCTION

Micro and Small Enterprises (MSEs) have become engines of poverty reduction, employment creation and

business development among others in various countries worldwide (Chittithaworn et al., 2011). In the current

global economy, micro and small enterprises progressively being regarded as powerful engines for economic

performance and development of most economies (Muzenda, 2014). Industrial development policy authorities in

most developing countries globally have realized the substantial contribution made by MSEs towards attainment

of sustainable local economic development and poverty reduction through creation of job opportunities (Swerczek

& Ha, 2003).

Performance of MSEs sector is closely associated with the performance of the nation and their contribution in

each nation economy (ILO, 2009). The importance and emphasis of MSEs has been draw attention to the mind of

policy maker, planer and industry because of a society is not through the large scale but through individual and

small initiatives by visionary from MSEs, and they are base for shift form agrarian to industrial knowledge base

(Haily, 2007).

In Africa the MSE sector provides certain benefits to the economy, key among them is the recognized potential of

the MSE sector to generate incomes and provide jobs to a large number of peoples (Fjose, Grunfeld, and Green,

2010).

Similarly, in Ethiopia Micro and small enterprises (MSEs) play crucial role for socio-economic development and

serves as vehicles for employment opportunities and ways of enhancing wealth creation by support the economic

growth (GFDRE, 2011). They have become significant employment contributors and can function successfully in

many areas of Ethiopia. However, their effectiveness depends on the nature, performance, and productivity level

of employment and available resource. Limited access to financial services, lack of partnership and networking,

absence of technical and business skills among other are major obstacles in the sector.

In line with the country strategy government of Benishangul Gumuz Regional, state (BGRS) promotes the

development of Micro and small enterprises in order to generate income and provide job opportunity for

unemployment. According to Benishangul Gumuz Regional state Bureau of Urban Development and

Construction (BoUDC) annual report, Micro and small scale enterprises created employment opportunities for

6,429 peoples in sectors such as Manufacturing, construction, trade, urban agriculture and service (BGRS

BoUDC, 2014).

In Assosa town Micro and Small Enterprises Development Office (AMSEDO) established in 2010, with

responsibility to promote and facilitate the growth of MSEs in order to enable them to play their role in the

economy (AMSEDO, 2015). Micro and small enterprises in Assosa town plays essential function in solving

unemployment and provide job opportunities to those graduated from university and TVET. However, the

performance of micro and small enterprises in Assosa town was not significant as expected.

Statement of the Problem

Micro and small enterprise account for the vast majority of enterprise and contributed major share to employment

and economy growth in the European countries, Japan and US (Muller et al., 2014). Similarly, many of the

countries in Sub-Saharan Africa reported to have high number of MSEs in the economy (Tvedten, Wende,

Hansen, Jeppesen, 2014).


In Ethiopia, Micro small and enterprises (MSEs) have a tremendous potential to generate employment for the

majority of the urban labor force (GFDRE 2011). The government-revised strategy strives to create an enabling

environment for MSEs through putting in place a national strategy framework and coordinated programmes at

Federal, Regional, and Local levels. Currently, MSEs obtains direct support from the Ethiopian government. The

government is also committed to facilitate cooperative ventures and development of MSEs clusters, as well as to

promote subcontracting and business linkages between smaller and larger companies (GFDRE, 2011).

Several studies have been identifying factors affecting performance of Micro and small enterprises in other region

of Ethiopia such as Addis Ababa, Hawassa, Mekele and Bahirdar (Weldegbriel, 2012; MUDC survey, 2013 ;

Berihu, Abebaw & Biruk, 2014). For instance, study conducted by Admasu (2012), utilized multiple regression

analysis and the finding indicated, external factors and internal factors affect performance of micro and small

enterprises (MSEs). He mentioned external factor includes finance factors, marketing factors, workings premises

factors, infrastructure factors and internal factors such as management and entrepreneurial factors. His study only

focused on manufacturing sectors particularly in textile and garment, food processing and wood and metal work

and recommended for further study factors affecting the performance of micro and small enterprises including

other sectors such as construction, urban agriculture and trade sectors.

So far, significant number of micro and small enterprises in Assosa town does not show necessary performance

level and some of the enterprises ceased from market in their infant age. According to the data from Assosa town

Micro and small enterprises office (2014), from total 256 MSEs, 80 MSEs are failed to continue their operations

at the end of the year (Assosa MSEDO, 2014). This motivated the researcher to undertake the study.

Study conducted by Birhanu (2012) in Assosa town on Challenges and opportunities of micro and small scale

enterprises using descriptive analysis, result showed that, factors such as environmental, financial, human

resource and managerial as well as market related factors constraining the growth of MSEs. His research question

focused on internal and external factors hindering the growth and survival of MSEs, however, the study does not

clearly indicated those of internal factors. In addition, his study has not indicated clearly measurement of growth

and survival of MSEs.

Therefore, the major focus of this research was internal and external factors affecting the performance of Micro

and small enterprises of all sectors such as construction, manufacturing, urban agriculture, trade and service.

Objectives of the Study

The general objective of the study was to identify factors affecting the performance of micro and small enterprises

in Assosa town. Specific objectives were to:

Identify the external factors affecting performance of MSEs in Assosa Town.

Analyze internal factors affecting the performance of MSEs in Assosa Town.

Examine the extent to which external factors affect the performance of MSEs.

Examine the extent to which internal factors affect the performance of MSEs.

LITERATURE REVIEW

The Definition of Micro and Small Enterprises (MSEs)

The definition of micro and small enterprises around the globe vary from country to country and depend on the

phase of economic development as well as their prevailing social conditions. The definition uses number of full

time employee, total asset, net asset and paid capital, and annual turnover as criteria independently or in

combination (Haily, 2007). According to European Commission’s the recommended official definition of micro


and small enterprises base on criteria of the number of employees and one of the two financial criteria, such as

either the total turnover or total balance sheet. Based on this definition small enterprises has number of

employees less than 50 and micro enterprise has less than 10 employees (EFILWC, 2001).

Measurement of Performance of MSEs

Performance definition is not common for all scholars. Global Entrepreneurship Monitor (GEM, 2004) defined

performance as the act of performing; of doing something successfully; using knowledge as distinguished from

merely possessing it. However, performance seems to be conceptualized, operationalzed and measured in

different ways thus making cross-comparison difficult.

The measure of performance of MSEs are performance indicators which are commonly used to help an

organization define and evaluate how successfully in terms of making progress towards its long term

organizational objectives (Gibbson 1990). Therefore, quantifiable measurements agreed to beforehand, that reflect

the critical success factors of an organization. Measurement of actual performance must, be done in the same

terms in which standards have been laid down so that comparisons are easier and meaningful.

Contribution of Micro and Small Enterprises (MSEs)

Micro and small enterprise contribute to the economic growth of a country by providing new jobs, introduction of

innovation, simulate competition, aid big business and produce goods and service efficiently (Haily, 2007). In

many countries, there is now a wide recognition of the contribution of micro- and small enterprises (MSEs) to

economic growth. In a cross-section of both developed and emerging economies, the contribution of the MSEs

sector to total employment, entrepreneurship and innovation cannot be underestimated. For example, this sector

generates about 59 percent of the aggregate employment in the United States, 88 percent in China, about 56

percent in Malaysia, 62 percent in Singapore and about 70 percent in Canada (ACCA, 2010).

Across the European Union countries at the end of 2013, 21.6 million SMEs in the nonfinancial business sector

employed 88.8 million people and generated euro 3,666 trillion in value added. Expressed another way, 99 out of

every 100 businesses are SMEs, as are 2 in every 3 employees and 58 cents in every euro of value

added(Muller,et al.,2014).

Theoretical Background on Micro and Small Enterprises

A theory represents the coherent set of hypothetical, conceptual, and pragmatic principles forming the general

frame for reference for the field of enquiry. These are some of the theories that have been, advanced for micro and

small Enterprises, which are part of entrepreneurship. Entrepreneurship considered as an approach to

management, defined as a process by which individuals either on their own or inside organizations pursue

opportunities without regard to the resources they currently control in an innovative, risk-taking and proactive

manner (Todorovic, 2006)

From the above definitions, entrepreneurship covers an individual’s motivation and capacity independently or

within an organization to identify an opportunity and to pursue it in order to produce new value or economic

success. Entrepreneurs pursue opportunities to grow a business by changing, revolutionizing, transforming or

introducing new products or services (Hansen, 2011). The three important themes in this definition are (1) the

pursuit of opportunities, (2) innovation, and (3) growth link entrepreneurship to industrialization process.

According to Kruger (2004), the relationship between entrepreneurial process and performance is an important

empirical question and prevents the assumption that first movers or firms that incur the greatest business and

financial, risk spending the most on innovation always rewarded in the market place. MSEs are managed by their


own owners and are family businesses, and therefore their success depends primarily on the entrepreneurial and

managerial capabilities of the owners.

Behavioral theory argues that the managerial skills such as ability to search business related information, identify

opportunities, deal with risk, establish relationships and networks, make decisions under pressure and learn from

experience are crucial for the success of an enterprises (Veciana, 2007). According to trait theory, entrepreneurs

have different psychological profile than the rest of the population, and successful entrepreneurs have a

psychological profile distinct from the less successful ones (Veciana, 2007). According to Kuratko and Hodgetts

(2007), persistence considered as one of the most important attributes of successful entrepreneurs and the decision

to start a business a single time but they must make the decision to persist with the venture many times. Often

individuals make the decision to persist, almost automatically, with little thought for alternative actions.

Persistence is one of the essential characteristics for success entrepreneurship (e.g. Kuratko and Hodgetts, 2007).

As an entrepreneur considers whether to persist with an existing venture or to pursue a new opportunity, a higher

value of persisting will have a more substantial impact on the decision when expectancy is low than when

expectancy is high. Hence, conditions that prompted a more serious evaluation will likely influence the way that

expectancy and value used in the decision policy (Grilli, 2011). Even more, the persistence decision is

fundamentally different than the start-up decision in that the entrepreneur is choosing whether to continue with a

decision that has been previously made. This simple difference may introduce potential biases into the decision-

making process, such as self-justification or normative pressure to persist ( DeTienne , Shepherd and De Castro ,

2008)

Entrepreneurs utilize the contacts in their social networks to found firms, because individuals’ contact networks

concentrate in the region in which they work and live, and because established firms produce many of the

resources consumed in new venture creation new firms in an industry tend to arise in the same locations as

existing ones (Sorenson and Audia,2000). The concentration of a prospective entrepreneur’s network contacts in

space, together with the multifaceted influence of networks on the entrepreneurial process, implies that those

individuals most able to enter an industry reside in the regions that have concentrations of those businesses

already (Sorenson and Audia ,2000) .

Empirical Study on Factors Affecting Performance of MSEs

Based on the reviewed of past studies conducted on micro and small enterprise the internal (Personal

entrepreneurial characteristics) and external business environments affect performance of MSEs. Accordingly,

some of empirical studies discussed as follows;

Adegbite et al.(2006) evaluated the impact of entrepreneurial characteristics on the performance of small-scale

manufacturing industries in Nigeria using descriptive and inferential statistics to examine 10 Personal

Entrepreneurial Characteristics (PECs). The study concluded majority (7) of the 10 Personal Entrepreneurial

Characteristics (PECs) such as: persistence, commitment to work Contact, opportunity seeking and initiative, risk

taking, goal setting, networking and persuasion and independence and self-confidence of the respondents made

negative contribution on the sales revenue. The other PECs demand for efficiency and product quality,

information seeking; and systematic planning and monitoring had positive impact.

Ajay (2008) have revealed many facts concerning the socioeconomic and motivational factors affecting street

entrepreneurship. It found that among many socio-economic and motivational factors, size of initial investment,

number of workers, family business and promising demand of product/ services were some of the major

determinants of street entrepreneurial success.

Hailay, Aregawi, and Assmamaw(2014) analyzed the factors affecting the growth of MSEs in Feresmay town

using descriptive statistics and econometric model based on a sample of 274 MSEs. The study concluded that


growth of MSEs measured in terms of employment change affected by factors including owners/operators age,

education level, prior experience, family size, MSE’s age, MSE’s distance from raw materials, access to credit,

infrastructure and market. The study recommended that government, non-government organizations and MSEs

development agencies should motivate, help and advise the owners of MSEs on their overall business activities;

give training on business issues, arrange forum and exhibitions for experience sharing; and solve the credit,

infrastructure, supply and market access problems in collaboration with MFI, banks, Ethiopian Electric Power

Corporation, suppliers and other organizations.

Conceptual Framework

Independent variables Dependent variable

Figure 1: Conceptual framework (Adopted from Admasu, 2012 and CDC)

Infrastructure factors

Legal factors

Commitment to the

work

Opportunity seeking

Technology factors

Marketing factors

Financial Factors

Persistence

Systematic planning

and monitoring

Work premise factors

Performance of MSEs (profit,

capital, number of employees)

Political factors

Risk Taking

Persuasion and

networking

Self-Confidence

Demand for efficiency

and quality

Goal setting

Information seeking

Internal

External

Affects


METHODOLOGY

The study area, Assosa town is the capital of Benishangul Gumuz regional state with 4 urban kebeles, total area

approximately 14.58 square kilometer and located at a distance of 687 km in West of Addis Ababa (BoFED,

2012). The types of research used under this study were both descriptive and explanatory research. Primary data

was collected from Micro and Small enterprise owners/representative or mangers. Secondary data was collected

from Micro and small enterprises office, research paper, journal and article related to the problem. Population

were comprised of all the MSEs in Assosa town. There were 252-registered MSEs as of January 2015 as per the

data of Assosa city Micro and small enterprise development office.

RESULTS AND DISCUSSIONS

Factors Affecting Performance of MSEs

The factors for the activity of business asked positively using likert scale through which respondent shown their

level of agreement. The identified factors expected that their existence could improve the normal operation of

micro and small enterprises performance. The respondent were asked to indicated their level of agreement with

the factors on the following measurements scale such as 1=Strongly disagree, 2= Disagree, 3=Neutral, 4= Agree,

and 5= strongly agree. Their responses organized in the following manner.

External Factors Affecting Performance of MSEs

The external factors affecting the performance of MSEs for this study were those factors outside control of MSEs.

The analysis-included factor such as political, legal, technological, infrastructure, marketing, work premises, and

financial issues affects the performance of MSEs. The detail analysis of each factors presented as below.

(Source: own survey, 2016)

The finding revealed that for majority of MSEs in study area the detail political factor situation was not

challenging for doing their business.

The focus group discussion (FGD) result showed that government support micron and small enterprises in

different ways. The respondents suggested they need more improvement in government support towards their

business.

Table 2: Legal factors

Frequency Percent Valid Percent Cumulative Percent

Table 1: Political Factors


Existence of

good political

situation for

my business

Disagree 38 25 25 25.0

Undecided 11 7.2 7.2 32.2

Agree 103 67.8 67.8 100

Existence of

government

support for my

business

Disagree 28 18,4 18.4 18.4

Undecided 8 5.3 5.3 23.7

Agree 116 76.3 76.3 100.0

Total 152 100.0 100.0


The tax levied on my

business is reasonable

Disagree 41 27 27.0 27.0

Undecided 6 3.9 3.9 30.9

Agree 105 69.1 69.1 100.0

Presence of easy

registration and

licensing for my

business

Disagree 31 20.4 20.4 20.4

Undecided 5 3.3 3.3 23.7

Agree 116 76.3 76.3 100.

I have access to

information on

government

regulations that are

relevant to my

business

Disagree 30 19.7 19.7 19.7

Undecided 9 6 6 25.7

Agree 113 74.3 74.3 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area the detail legal factor situation was not challenge for

doing their business.

The focus group discussion (FGD) result indicated that get registration and licensing not challenge for doing their

business.

Table 3: Technological factors


Availability of

appropriate

machinery and

equipment for my

business

Disagree 83 54.6 54.6 54.6

Undecided 6 3.9 3.9 58.6

Agree 63 41.4 41.4 100.0

I have skills to handle

new technology for

my business

Disagree 78 51.3 51.3 51.3

Undecided 11 7.2 7.2 58.6

Agree 63 41.4 41.4 100.0

I have money to

acquire new

technology for my

business

Disagree 78 51.3 51.3 51.3

Undecided 8 5.3 5.3 56.6

Agree 66 43.4 43.4 100.0

Selecting proper

technology to my

business is easy

Disagree 88 57.9 57.9 57.9

Undecided 5 3.3 3.3 61.2

Agree 59 38.8 38.8 100.0

Total 152 100.0 100.0


The focus group discussion indicated that, money to acquire new technology; skills to handle new technology and

availability of appropriate machinery and equipment for their business were mentioned as challenge for MSEs

business performance.

The finding revealed that for majority of MSEs in study area the detail technological factor was challenge for


Table 4: Infrastructure factors



Availability uninterrupted

power supply for my

business

Disagree 99 65.1 65.1 65.1

Undecided 5 3.3 3.3 68.4

Agree 48 31.5 19.7 100.0

Availability of sufficient

and uninterrupted water

supply for my business

Disagree 107 70.4 70.4 70.4

Undecided 7 4.6 4.6 75.0

Agree 38 25.0 25.0 100.0

Existence of Business

development services for

my business

Disagree 112 73.7 73.7 73.7

Undecided 9 5.9 5.9 79.6

Agree 31 20.4 20.4 100.0

Sufficient and quick

transportation service for

my business

Disagree 98 64.5 64.5 64.5

Undecided 13 8.5 8.5 73.0

Agree 41 27.0 27.0 100.0

Availability of appropriate

dry waste and sewerage

system for my business

Disagree 113 74.3 74.3 74.3

Undecided 7 4.6 4.6 78.9

Agree 32 21.1 21.1 93.4

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area the detail infrastructure factor was challenge for


During the focus group discussion (FGD) the respondents mentioned power interruption, insufficient and

interrupted water and lack of business development service as challenge for MSEs performance.

Table 5: Marketing factors


Market potential of

my products are

promising

Disagree 47 30.9 30.9 30.9

Undecided 11 7.2 7.2 38.2

Agree 94 61.8 61.8 100.0

Searching for new

market for my

products are easy

Disagree 110 72.4 72.4 72.4

Undecided 9 5.9 5.9 78.3

Agree 33 21.7 21.7 100.0

Use of demand

forecasting for my

business

Disagree 98 64.5 64.5 64.5

Undecided 12 7.9 7.9 72.4

Agree 42 27.6 27.6 100.0

I have access to

information on

market/consumer of

my products

Disagree 107 70.4 70.4 70.4

Undecided 4 2.6 2.6 73.0

Agree 41 26.9 27 100.0

Presence of

relationship with an

organization that

conduct marketing

research

Disagree 104 68.4 68.4 68.4

Undecided 10 6.6 6.6 75.0

Agree 38 25 25 100.0

Existence of

promotion to attract

potential users of my

business

Disagree 101 66.4 66.4 66.4

Undecided 14 9.2 9.2 75.6

Agree 37 24.4 24.4 100.0


Presence of customer

relationship and

handling for my

business

Disagree 110 72.4 72.4 72.4

Undecided 6 3.9 3.9 76.3

Agree 36 23.7 23.7 100.0

Total 152 100.0 100.0


The finding implies that for majority of MSEs in study area the detail-marketing factor was challenge for doing

their business.

Concerning the marketing factors, the focus group discussion result (FGD) indicated that marketing linkages

(getting priority) on government development works affects the business performance of MSEs. Even though

there is regulations and procedures that support the marketing linkages the implementation was weak.

Table 6: Work premise factors


Existence of own

premises for my

business

Disagree 109 71.7 71.7 71.7

Undecided 7 4.6 4.6 76.3

Agree 36 23.7 23.7 100.0

Current working

place is convenient

to my business

Disagree 103 67.8 67.8 67.8

Undecided 8 5.3 5.3 73.1

Agree 41 26.9 26.9 100.0

The rent of house

is reasonable for

my business

Disagree 111 73.0 73.0 73.0

Undecided 4 2.6 2.6 75.7

Agree 37 24.3 24.3 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area the work premise factor was challenge for doing

their business.

During the focus group discussion (FGD) working and selling premises were mentioned as challenging factor for

MSEs. In addition, the MSEs owners/managers raised issues such as shade build for MSEs purpose is not

transparently distributed to them and some of MSEs transferring premises to third party.

Table 7: Financial Factors


Existence of adequacy of

credit institutions for my

business

Disagree 106 69.7 69.7 69.7

Undecided 6 3.9 3.9 73.7

Agree 40 26.3 26.3 100.0

I have cash management

skills for my business

Disagree 47 30.9 30.9 30.9

Undecided 16 10.5 10.5 41.4

Agree 89 58.6 58.6 100.0

Availability of working

capital for my business

Disagree 99 65.1 65.1 65.1

Undecided 4 2.6 2.6 67.8

Agree 49 32.2 32.2 100.0

collateral requirement

from banks and other

lending institutions are

Disagree 121 79.6 79.6 79.6

Undecided 4 2.6 2.6 82.2

Agree 27 17.8 17.8 100.0



The finding revealed that for majority of MSEs in study area financial factor was challenge for doing their

business.

Moreover the focus group discussion(FGD) result show that finance factors included; credit, working capital,

cash management skill, saving behavior, collateral requirement from banks and other lending institutions, and

loan application procedures of banks and MFIs are the major micro and small enterprises manager's listed as

challenge for their business activity.

Internal Factors Affecting Performance of MSEs

The internal factors affecting the performance of MSEs for this study were those factors inside control of MSEs.

The analysis included personal characteristics of entrepreneurs factors such as opportunity seeking, persistence,

commitment to the work, demand for efficiency and quality, risk taking, goal setting, systematic planning and

monitoring, information seeking, persuasion and networking and self-confidence. The detail analyses of internal

factors were presented below.

Table 8: Opportunity seeking factors

Frequency Percent Valid

Percent

Cumulative

Percent

Have ability see and acts on

new business opportunities

Disagree 92 60.5 60.5 60.5

Undecided 9 5.9 5.9 66.4

Agree 51 33.6 33.6 100.0

Ability Seizes unusual

opportunities to obtain

financing, equipment, land,

workspace or assistance for my

business

Disagree 91 59.9 59.9 59.9

Undecided 8 5.3 5.3 65.1

Agree 53 34.9 34.9 100.0

Ability to identify and exploit a

business opportunity

Disagree 84 55.3 55.3 55.3

Undecided 9 5.9 5.9 61.2

Agree 59 38.8 38.8 100.0

notice opportunities to do new

things

Disagree 62 40.8 40.8 40.8

Undecided 8 5.3 5.3 46.1

Agree 82 53.9 53.9 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details opportunity seeking factor was challenge for


reasonable for my business

Interest rate charged by

banks and other lending

institutions are reasonable

for my business

Disagree 116 76.3 76.3 76.3

Undecided 6 3.9 3.9 80.2

Agree 30 19.8 19.8 100.0

Loan application

procedures of banks and

other lending institutions

are easy

Disagree 100 65.8 65.8 65.8

Undecided 14 9.2 9.2 75.0

Agree 38 25 25 100.0

Total 152 100.0 100.0


Table 9: Persistence factors


Take repeated actions to

overcome an obstacle for my

business

Disagree 100 65.8 65.8 65.8

Undecided 8 5.3 5.3 71.1

Agree 44 28.9 28.9 100.0

Able to switches to an

alternative strategy to reach a

goal my business

Disagree 100 65.8 65.8 65.8

Undecided 14 9.2 9.2 75.0

Agree 38 25.0 25.0 100.0

try several times to get

people to do what would like

Disagree 65 42.8 42.8 42.8

Undecided 25 16.4 16.4 59.2

Agree 62 40.8 40.8 100.0

when business gets in the

way of what trying to do,

keep on trying to accomplish

what want

Disagree 57 37.5 37.5 37.5

Undecided 20 13.2 13.2 50.7

Agree 75 49.3 49.3 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details persistence factor was challenge for doing

their business.

Table 10: Commitment to the work factors

Frequency Percent Valid Percent Cumulative

Percent

Places the highest

priority on getting a job

complete for my

business

Disagree 45 29.6 29.6 29.6

Undecided 12 7.9 7.9 37.5

Agree 95 62.5 62.5 100.0

Accepts full

responsibility for

problems in completing

my business

Disagree 25 16.4 16.4 16.4

Undecided 22 14.5 14.5 30.9

Agree 105 69.1 69.1 100.0

Makes a personal

sacrifice to complete

my business

Disagree 33 21.7 21.7 21.7

Undecided 13 8.6 8.6 30.3

Agree 106 69.8 69.7 100.0

do not let my business

work interfere with my

family or personal life

Disagree 45 29.6 29.6 29.6

Undecided 15 9.9 9.9 39.5

Agree 92 60.5 60.5 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details commitment to the work factor was not

challenge for doing their business.

Table 11: Demand for efficiency and quality factors


Finds ways to do my

business better,

faster or cheaper

Disagree 45 29.6 296 29.6

Undecided 19 12.5 12.5 42.1

Agree 88 57.9 57.9 100.0


Acts to do business

that meet standards

of excellence

Disagree 41 27.0 27.0 27.0

Undecided 20 13.2 13.2 40.1

Agree 91 59.9 59.9 100.0

It bothers me when

my business time is

wasted

Disagree 24 15.8 15.8 15.8

Undecided 18 11.8 11.8 27.6

Agree 110 72.4 72.4 100.0

It bothers me when

my business is not

done very well

Disagree 20 13.2 13.2 13.2

Undecided 21 13.8 13.8 27.0

Agree 111 73.0 73.0 100.0

My business work is

better than that of

others

Disagree 70 46.1 46.1 46.1

Undecided 22 14.5 14.5 60.5

Agree 60 39.5 39.5 100.0

I want the enterprise

I own to be the best

of its type

Disagree 14 9.2 9.2 9.2

Undecided 18 11.8 11.8 21.0

Agree 120 79.0 79.0 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details demand for efficiency and quality factor was

not challenge for doing their business.

Table 12: Risk taking factors


states a preference for

situations involving

moderate risk for my

business

Disagree 53 34.9 34.9 34.9

Undecided 16 10.5 10.5 45.4

Agree 83 54.6 54.6 100.0

Deliberately calculates

risks for my business

Disagree 22 14.5 14.5 14.5

Undecided 26 17.1 17.1 31.6

Agree 104 68.4 68.4 100.0

Takes action to reduce

risks for my business

Disagree 32 21.1 21.1 21.1

Undecided 22 14.5 14.5 35.5

Agree 98 64.5 64.5 100.0

Total 152 100.0 100.0

(Source: own computation, 2016)

The finding revealed that for majority of MSEs in study area details risk taking factor was not challenge for doing

their business.

Table 13: Goal setting factors

Frequency Percent Valid Percent Cumulative

Percent

articulates long range

vision and goals for my

business

Disagree 62 40.8 40.8 40.8

Undecided 10 6.6 6.6 47.4

Agree 80 52.6 52.6 100.0

continuously set and

revise short-range

objectives for my

business

Disagree 34 22.4 22.4 22.4

Undecided 23 15.1 15.1 37.5

Agree 95 62.5 62.5 100.0

Orientation to clear

goals for my business

Disagree 29 19.1 19.1 19.1

Undecided 17 11.2 11.2 30.3


Agree 106 69.7 50.0 80.3

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details goal setting factor was not challenge for


Table 14: Systematic planning and monitoring factors


Develops and uses

logical, step-by-step

plans to reach goals for

my business

Disagree 87 57.2 57.2 57.2

Undecided 11 7.2 7.2 64.5

Agree 54 35.6 35.5 100.0

Plans by breaking a

large task down into

sub-tasks for my

business

Disagree 81 53.3 53.3 53.3

Undecided 15 9.9 9.9 63.2

Agree 56 36.8 36.8 100.0

Keeps financial records

and uses them to make

my business decisions

Disagree 77 50.7 50.7 50.7

Undecided 22 14.5 14.5 65.2

Agree 53 34.8 34.8 100.0

think about the

advantages and

disadvantages of

different ways of

accomplishing my

business

Disagree 61 40.1 40.1 40.1

Undecided 21 13.8 13.8 53.9

Agree 70 46.1 46.1 100.0

try to think alone of

problems I may

encounter and plan

what to do if each

problem occur for my

business

Disagree 68 44.7 44.7 44.7

Undecided 30 19.7 19.7 64.5

Agree 54 35.5 35.5 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details systematic planning and monitoring factor

was challenge for doing their business.

Table 15: Information seeking factors


Takes action on own

to get information to

help achieve

objectives for my

business

Disagree 50 32.9 32.9 32.9

Undecided 22 14.5 14.5 47.4

Agree 80 52.6 52.6 100.0

Personally seek

information about

clients, suppliers,

competitors for my

business

Disagree 25 16.4 16.4 16.4

Undecided 17 11.2 11.2 27.6

Agree 110 72.3 72.3 100.0

Uses personal and

business contacts to

obtain useful

Disagree 37 24.3 24.3 24.3

Undecided 26 17.1 17.1 41.4

Agree 89 58.6 58.6 100.0


information for my

business

Total 152 100.0 100.0

(Source: own computation, 2016)

The finding revealed that for majority of MSEs in study area details information seeking factor was not challenge

for doing their business.

Table 16: Persuasion and networking factors


uses deliberate

strategies to influence

or persuade others for

my business

Disagree 81 53.3 53.3 53.3

Undecided 19 12.5 12.5 65.8

Agree 52 34.2 34.2 100.0

uses business and

personal contacts to

accomplish objectives

for my business

Disagree 30 19.9 19.7 19.7

Undecided 18 11.8 11.8 31.6

Agree 104 68.4 68.4 100.0

acts to develop

business contacts for

my business

Disagree 38 25.0 25.0 25.0

Undecided 21 13.8 13.8 38.8

Agree 93 61.2 61.2 100.0

get others to see how

able to accomplish

what set out to do for

my business

Disagree 83 54.6 54.6 54.6

Undecided 16 10.5 10.5 65.1

Agree 53 34.9 34.9 100.0

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details persuasion and networking factor was not

challenge for doing their business.

Table 17: Self-confidence factors

Frequency Percent Valid

Percent

Cumulative

Percent

have strong belief in

own abilities for my

business

Disagree 90 59.2 59.2 59.2

Undecided 16 10.5 10.5 69.7

Agree 46 30.3 30.3 100.0

expresses confidence in

own ability to complete a

difficult task for my

business

Disagree 88 57.9 57.9 57.9

Undecided 18 11.8 11.8 69.7

Agree 46 30.3 30.3 100.0

asserts strong confidence

in own enterprise’s’

products or services

Disagree 41 27.0 27.0 27.0

Undecided 21 13.8 13.8 40.8

Agree 90 59.2 59.2 100.0

do things that are risky

for my business

Disagree 77 50.7 50.7 50.7

Undecided 15 9.9 9.9 60.6

Agree 60 39.4 39.4 84.9

Total 152 100.0 100.0


The finding revealed that for majority of MSEs in study area details self-confidence factor was not challenge for



In addition to the above with regards to internal factors the focus group discussion results (FGD) shows that

opportunity seeking, commitment of members, inter-conflict among the members, planning and fear to taking

risk were mentioned as factors affecting their business performance.

CONCLUSIONS

This research was conducted in Assosa town with the intent of critically assessing the factors affecting

performance of MSEs. Based on the analysis made in chapter four the following conclusions made on factors

affecting performance of MSEs;

The results of the study illustrated that majority of the MSEs owner and manager age ranged 21-30 years and it

was concluded that they are active work force and ready to act where there is comfortable situation is prepared for

them because of they are in adult age and have many responsibilities in the future. From the finding majority of

the respondent education level were TVET graduate and it was concluded from result that the TVET graduate

created their own job opportunities based on the skill gained from education.

Addressing critical factors affecting the performance of micro and small enterprise will improve the current

situation of micro and small enterprises, since it will create favorable condition for them. It can be, concluded

from study result the external factors affecting the performance of Micro and small enterprises identified were;

political, legal, financial, marketing, work premises technological, infrastructure, and their existence could

improve the normal operation of micro and small enterprises performance.

The results of the study illustrated that 10 personal entrepreneur's characteristic as internal factors affect the

performance of micro and small enterprises. It can be conclude from the study finding opportunity seeking,

persistence, commitment to the work, demand for efficiency and quality, risk taking, goal setting, systematic

planning & monitoring, information seeking, persuasion and networking and self-confidence were factors

identified.

The extent of external and internal factors affected performance of MSEs were assessed with liker scale

questionnaires and asked the owners/mangers to rate no extent(1), small extent(2), moderate extent(3), great

extent(4) and very great extent(5) with in which those external and internal factors affecting the business

performance. It was concluded from the find of the study the extent of external and internal factors affects

performance of MSEs range from very great extent to small extent. Hence working toward improving those

factors are crucial for performance of micro and small enterprises.

This study examined the Pearson test used to determine correlations between performance of MSEs (annual

profit, capital, and number of employees) and the independent variables. The variables such as political, legal,

financial, marketing, working premises, infrastructural, opportunity seeking, persistence, commitment to the

work, demand for efficiency and quality, goal setting, risk taking, information seeking, and self-confidence are

positively influence to performance of MSEs (profit) and significantly affect performance of MSEs in terms of

profit. It was concluded that improving those variables increase performance of MSEs interims of profit.

Similarly for capital, variables such as political, legal, financial, marketing, working premises, technological,

opportunity seeking, persistence, commitment to the work, demand for efficiency and quality, risk taking,

information seeking, and self-confidence are positively influence to performance of MSEs (capital) and

significantly affect performance of MSEs in terms of capital and improving those variables increase performance

of MSEs interims of capital. For number of employees; variables such as political, financial, marketing, working

premises, opportunity seeking, persistence, commitment to the work, demand for efficiency and quality,

information seeking, and goal setting are positively influence to performance of MSEs and significantly affect

performance of MSEs in terms of number of employees. Hence improving those variables increase performance

of MSEs interims of number of employees.


In the regression model the overall independent variable were observed to explain 78.4 % of the variance in the

dependent variable as annual profit (R square = 0. 784). The remaining 21.6 % of the variance is explained by

other variables not included in this study. Similarly, the overall independent variable were observed to explain

69.4% of the variance in the dependent variable as capital (R square =0.694). The remaining 30.6% of the

variance explained by other variables not included in this study. Moreover the overall independent variable were

observed to explain 73% of the variance in the dependent variable as number of employees (R square =0.730).

The remaining 27% of the variance explained by other variables not included in this study. Therefore, it can be

concluded that any improvement in these variables can improve performance of MSEs (profit capital and number

of employees).

Recommendations

Based on the findings, discussion and conclusion drawn in the study, researcher recommended as follows;

Finance is always a challenge to MSEs as the formal banking sector is hardly supporting them. Therefore, Assosa

city government bodies could strengthen the loan capacity of MFIs, in order to provide finance for MSEs. To

improve the cash management skills, Assosa town Micro and small enterprise offices should provide training for

MSEs owners/managers. Close collaboration of financial service providers and Micro and small enterprise office

is extremely necessary for the MSEs to curb their working capital problems and improve their business

performance.

The MSEs office could undertake detailed study on the site to be given, the people to be organized, and the talent

of the people and their capability of doing the intended business before giving the working place and licenses. The

MSEs office could be transparent at the time of allocating the working place to the MSEs. At the same time, close

supervisor of the MSEs could be design in order to cheek whether the right owners working in the palace or third

party rent the working place.

Marketing factors frequently indicated as the explanatory factor for most problems faced by the studied MSEs.

Therefore, it is necessary to solve this deep-rooted problem. Some of the ways of doing so can be; providing

selling & display places in areas close to working area, linking the MSEs with other private contractors working

within or around Assosa town in order to secure market opportunity for owners/managers, and changing the

perception of the general public through extensive awareness creation mechanisms, since private individuals are

envisaged to be the main buyers of the products and services produced by MSEs.

Moreover, improved provision of necessary infrastructure and enabling the environment for business operations is

generally an imperative. Therefore, the MSEs offices could support the establishment and strength of business

development services.

To overcome internal factors and make MSEs competitive and profitable, increasing the capacity and skill of the

operators through continuous trainings, experience sharing from successful enterprises, and provision of advice

and consultancy are crucial. Therefore, the MSEs office could crate linkage with entrepreneurship development

center to fill entrepreneurial skill gaps of MSEs owners/ mangers.

Finally, in order to reduce the influence of external and internal factors on performance of MSEs, policy makers

and the service provider institutions need to consider and revise the extent, intensity, and quality of support and

their linkages.

Areas for further research

Because of the limited time and resource, this study had been conduct in one urban area, Assosa town. However,

this may not represent the situation of MSEs across different areas and it is difficult to generalize at the regional

level or country level. Besides, the study was used a sample MSEs selected from the town. Hence, an interesting


finding may come up by conducting studies at different towns. In the study 17 factors, 10 personal entrepreneurial

characteristics related factors and 7 external factors were included to examine their effect on the performance of

MSEs (profit, capital, and number of employees) of MSEs in the area. However, there are other variables that may

affect MSEs performance.

Thus, researcher suggested conducting a study by incorporating other factors such as social- cultural factors and

other inter-firm related factors. Moreover, the study was employed profit, capital, and employment size to

measure the performance of MSEs. Therefore, an interesting finding may come up by applying other

measurement methods such production per units and sales growth.

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