PERFORMANCE OF SMALL SCALE ENTERPRISES IN DIRE

DAWA CITY ADMINISTRATION AND ITS IMPLICATION FOR

PROMOTION TO MEDIUM SCALE ENTERPRISES

MBA THESIS

MELKAMU ZEWDU

MARCH 2018
HARAMAYA UNIVERSITY, HARAMAYA
 Performance of Small Scale Enterprises in Dire Dawa City
Administration and Its Implication for Promotion to Medium Scale
Enterprises

A Thesis Submitted to the Department of Management,

Directorate for Postgraduate Program
HARAMAYA UNIVERSITY

In Partial Fulfillment of the Requirements for the Degree of

MASTER OF BUSINESS ADMINISTRATION

Melkamu Zewdu

March 2018
Haramaya University, Haramay
 ii

HARAMAYA UNIVERSITY
DIRECTORATE FOR POSTGRADUATE PROGRAM
I hereby certify that I have read and evaluated this Thesis entitled ‘’Performance of
Small Scale Enterprises in Dire Dawa City Administration and Its Implication
for Promotion to Medium Scale Enterprises’’ prepared under my guidance by
Melkamu Zewdu W/Giorgis. I recommend that it be submitted as fulfilling the
thesis requirement.

ROBSON MEKONNIN ------------------------- ------------------------

Advisor Signature Date

As a member of the Board of Examiners of the MSc Thesis Open Defense

Examination, I certify that I have read and evaluated the Thesis prepared by
Melkamu Zewdu and examined the candidate. I recommend that the thesis be
accepted as fulfilling the Thesis requirements for the degree of Master of Science in
Masters of Business Administrative.

-------------------------------- -------------------------- ---------------------------

Chairperson Signature Date

-------------------------------- --------------------------- ----------------------------

Internal Examiner Signature Date

------------------------------- ---------------------------- --------------------------

External Examiner Signature Date

Final approval and acceptance of the Thesis is contingent upon the submission of its
final copy to the council of Graduate Studies (CGS) through the candidate’s
department or school graduate committee (DGC or SGC).
 iii

DEDICATION
To My Mother W/ro Birhane Getachew
 iv

STATEMENT OF THE AUTHOR

By my signature below, I declare and affirm that this thesis is my own work; I have
followed all ethical and technical principles of scholarship in the preparation, data
collection, data analysis and compilation of thesis. Any scholarly matter that is
included in the thesis has been given recognition through citation.

This thesis is submitted in partial fulfillment of the requirement for a Masters of

Business Administrative Degree at Haramaya University. The thesis is deposited in the
Haramaya University Library and is made available to borrowers under the rules of the
library. I solemnly declare that this thesis has not been submitted to any other
institution anywhere for the award of any academic degree, diploma or certificate.

Brief quotations from this thesis may be made without special permission provided
that accurate and complete acknowledgement of the source is made. Request for
permission for extended quotation from or reproduction of this thesis in whole or in
part may be granted by the head of the school/department when in his or her judgment
the proposed use of the material is in the interest of scholarship. In all other instance,
however, permission must be obtained from the author of the thesis.

Name: Melkamu Zewdu

Signature: -------------------------------------

Date: -------------------------------------------

Department: College of Business and Economics, Management Department

 v

BIOGRAPHICAL SKETCH

The author of thesis was born on July 14, 1981 in Dire Dawa City. He attained his
primary education at Legehere Elementary and Junior Secondary School, and
secondary education at Dire Dawa Comprehensive Senior Secondary School. The
author graduated from Haramaya University Faculty of Continuing and Distance
Education Diploma in Mathematics on July 2005 and Degree in Managements on July
2008.

The author had been teaching Mathematics until November 2008. From December
2008 to 2014 he taught management course and assigned as a vice dean in Ethio –
Italy Poly Technique College. From August 2014 up to now he has been working as a
public grievance and petition hearing adviser and researcher case team leader in Dire
Dawa Mayor’s Office. In order to get master’s degree in Business Administration, he
joined Business and Economics College of Haramaya University in 2016.
 vi

ACKNOWLEDGMENTS

First of all, I would like to express my gratefully to my advisor Robson Mekonnin

(Assistant professor) for his constructive comment, which has played an important role
in my professional career development, Robson Mekonnin thank you for your
guidance, encouragement and invaluable comments throughout this process. I am so
honoured that you agree to advise me and I am truly appreciative for your positive
words of encouragement.

I would like thank you Dire Dawa Micro and Small Enterprise Development Ageny
Manager Ato Wegayehu Gashaw, Ethio Italy poly Technique and Meles Zenawi
TVET College vice deans and Dire Micro Finance Process Owner for their openness
and positivity during data collection and interviews. Without their information,
insights and comments I could not have written this thesis. I am grateful to my
research assistant who have been working hard in data collection specially the TVET
teachers.

Special thanks to Dr. Adugna Tafesse Deputy Mayor’s Office and Cabine Affairs,
Ato Gebeyehu Tilahun Dire Dawa Cooperative Agency Manager, Ato Abdela Aliye
Dire Dawa Environmental Protection Authority Manager and Ato Harun Abdurhaman
Dire Dawa Public Grievance and Petition Hearing Directorate and also my staff to for
their support and encouragement.

Finally I would like to thank you my mother, brothers and sisters, for who supported
me during my study a huge thanks to my wife Fesesework Kebede and my son Natan
Melkamu and Nahom Melkamu GOD BLESS YOU.
 vii

ACRONYMS AND ABBREVIATIONS

BDS Business Development Service

BoFED Bureau of Finance and Economic Development
CSA Central Statistical Authority
CED Committee for Economic Development
DDMSEDA Dire Dawa Micro and Small Enterprises Development
Agency
EC European Commission
GDP Gross Domestic Product
HASIDA Handicraft and Small Scale Industries Development Agency
MoUDC Ministry of Urban Development Construction
MoTI Ministry of Trade and Industry
MSME Micro, Small and Medium Enterprises
MSEDP Micro and Small Enterprises Development Program
NGO’s None Government Organizations
ReMSEDA Regional Micro and Small Enterprises Development Agency
ILO International Labor Organization
SE Small Enterprises
TVETA Technical and Vocational Education and Training Agency
TVETC Technical and Vocational Education and Training College
UN United Nations
UNIDO United Nations Industrial Development Organizations
 viii

TABLE OF CONTENTS

Contents page
DEDICATION ........................................................................................................................... iii
STATEMENT OF THE AUTHOR ........................................................................................... iv
BIOGRAPHICAL SKETCH ...................................................................................................... v
ACKNOWLEDGMENTS ......................................................................................................... vi
ACRONYMS AND ABBREVIATIONS ................................................................................. vii
LIST OF TABLES IN THE APPENDIXS .............................................................................. xiii
ABSTRACT............................................................................................................................. xiv
CHAPTER 1 ............................................................................................................................... 2
INTRODUCTION ...................................................................................................................... 2
1.1. Background of the Study ................................................................................................. 2
1.2. Statement of the Problem ................................................................................................. 3
1.3. Research Hypothesis ........................................................................................................ 7
1.4. Objective of the Study ..................................................................................................... 7
1.4.1. General objective ...................................................................................................... 7
1.4.2. Specific objectives .................................................................................................... 7
1.5. Scope of the Study ........................................................................................................... 8
1.6. Significance of the Study ................................................................................................. 8
1.7. Limitation of the Study .................................................................................................... 9
CHAPTER 2 ............................................................................................................................. 10
LITRATURE REVIEW ............................................................................................................ 10
2.1. Over view of Small Enterprises ..................................................................................... 10
2.2. Definition of Small Scale Enterprises ............................................................................ 11
2.3. Small Enterprise Development Strategy ........................................................................ 14
2.4. Small Enterprises Contribution ...................................................................................... 15
2.5. Factors affecting promotion of Small Enterprises ......................................................... 16
2.6. Small and Medium Scale (SMES) Strategy for Sustainability ...................................... 21
2.7. Ethiopia’s MSE Promotion Policy ................................................................................. 23
2.8. Some Sub-Saharan Countries Experiences on Factors affecting of SEs from Empirical
Evidences. ............................................................................................................................. 23
 ix

CHAPTER 3 ............................................................................................................................. 26
RESEARCH METHODOLOGY.............................................................................................. 26
3.1. Description of Study Area ............................................................................................. 26
3.2. Research Design............................................................................................................. 28
3.3. Definition of Operational Variables............................................................................... 29
3.4. Description of Population and Sampling Method .......................................................... 32
3.4.1. Target population .................................................................................................... 32
3.4.2. Sampling frame ....................................................................................................... 32
3.4.3. Sampling technique ................................................................................................. 33
3.4.4. Sampling size .......................................................................................................... 33
3.5. Method of Data Collection............................................................................................. 34
3.6. Research Instrument....................................................................................................... 35
3.6.1. Questionnaire design ............................................................................................... 35
3.6.2. Interview ................................................................................................................. 35
3.7. Method of Data Analysis ............................................................................................... 35
3.7.1. Model specification ................................................................................................. 36
3.8. Validity and Reliability of Measurements ..................................................................... 39
3.9. Ethical Consideration ..................................................................................................... 41
CHAPTER 4 ............................................................................................................................. 42
RESULT AND DISCUSSION ................................................................................................. 42
4.1. Demographic Data ......................................................................................................... 42
4.1.1. Characteristics of business owners ......................................................................... 43
4.2. Performance of Small Scale Enterprises in Dire Dawa City Administration and Its
Implication for Promotion to Medium Scale Enterprises ................................................... 46
4.2.1. Inferential statistics results ...................................................................................... 46
4.3. Analyses for Interview ................................................................................................... 53
CHAPTER 5 ............................................................................................................................. 58
CONCLUSIONS AND RECOMMENDATIONS ................................................................... 58
5.1. Conclusions .................................................................................................................... 58
5.2. Recommendations .......................................................................................................... 61
6. REFERENCES ..................................................................................................................... 62
APPENDIX A ........................................................................................................................... 67
APPENDIX B ........................................................................................................................... 73
 x

APPENDIX C ........................................................................................................................... 74
APPENDIX D ........................................................................................................................... 75
APPENDIX E ........................................................................................................................... 76
APPENDIX F ........................................................................................................................... 77
 xi

LIST OF TABLES
No Table Page
1
MSME definitions employed in Ethiopia 13

2 Financial factors 15

3 Managerial factors 16

4 Marketing factors 17

5 Definition of operational variables 26

6 Sample Frame 28

7 Proportional stratified sample frame 30

8 Financial factors that affect the promotion of small enterprises 42

in to medium enterprises

9 Model Summary 44
 xii

LIST OF FIGURES
No Figure Page

1
Conceptual frameworks 22

2 Map of Ethiopia 23

3 Dire Dawa Administrations Division by Kebele 24

4 Sex of respondents 37

5 Age of respondents 38

6 Education level of respondents 39

7 Business type 40

8 Establishment of the business 40

 xiii

LIST OF TABLES IN THE APPENDIXS

No Appendix Table Page

1 Appendix C correlation matrix 72

2 Appendix D Model Summary 73
3 Appendix E Collinearity Statistics 74
4 Appendix F Collinearity Diagnostics 75
 xiv

PERFORMANCE OF SMALL SCALE ENTERPRISES IN DIRE

DAWA CITY ADMINISTRATION AND ITS IMPLICATION FOR
PROMOTION TO MEDIUM SCALE ENTERPRISES

ABSTRACT
This study investigates some key Performance of Small Scale Enterprises in Dire
Dawa City Administration and Its Implication for Promotion to Medium Scale
Enterprises.For the sake of achieving the objectives of this study, based upon
interviews, questionnaires and both sources of data through which are investigated the
problem of small scale enterprises promotion process. The data were analyzed using
statistical analysis such as inferential analysis, SPSS version 20 statistical package
software and the interview questions were analyzed using narration. The filed survey
were arranged from the sample of 171 small enterprises owner and the interviews
purposively selected that 6 representatives of the sectors or organization were
expected to answer the same question, which allowed confronting directly their
opinions. The empirical study elicited major implication of promotion small scale
enterprises of among which are: financial, market, infrastructure, political,
entrepreneurial, technology, raw material and management. The findings further
indicate that, positive significant ranging from substantial to strong relationship
between independent variables affecting the variations in the dependent variable at
1% level of significance. Finally, based on findings possible recommendations were
given. These include that by the government, private sectors, NGO’s and who serves
interested to take the initiatives. Improved provision of necessary infrastructure,
provide financial facility, to provide training, government sector revising plan in order
to update with the new rules and procedures, creating the market linkage to large
industries, build more working area and working together the responsible bodies and
small enterprises, avoid lack of confidence, improving commitment, set vision and
goals, select proper technology and develop saving culture are forwarded.

Key words: - Small enterprises, promotion, factor

 2

CHAPTER 1
INTRODUCTION

1.1. Background of the Study

Internationally, SMEs development can promote national and regional economic
development goals, reduce unemployment by creating new jobs, alleviate poverty by
enabling the poor to make money, facilitate the transition to market economy,
promote equity and balanced development , and promote democracy, and enhance the
development of society( ILO, 2002).The particular interest is the process of promotion
of these enterprises from small scale enterprises in to medium scale enterprises, as it is
when they become medium sized that growth - oriented SMEs make their most
tangible contribution to sustainable economic growth and job creation (Piper, 1997).

Small and medium enterprises (SMEs) comprise a very broad range of initiatives, from
the established, traditional family businesses that employ more than a hundred people
(this usually refers to medium-sized enterprises), to the mere survivalist, self-
employed individual who originates from the poorest of the population, this usually
refers to informal micro enterprises (Berry et al., 2002).

According to Spence (2012), sustainable businesses can adapt superiorly to change

and usually create long-term financial value. A high rate of business failures exists due
to the lack of adequate entrepreneurial culture and education and therefore a definite
need exists to maintain the sustainability of businesses in the long term. According to
Booyens (2011), SMEs need to be creative with the newly introduction of new
products and services to gain business sustainability.

Stainable businesses could be interpreted in many ways and may in turn lead to adding
value to the environment, communities, customers and the bottom line for businesses
of different sizes. Companies recognize that successful business performance is the
result of successful sustainability, as stated by (Rainville, 2012).
 3

The aim of this study is to examine Performance of Small Scale Enterprises in Dire
Dawa City Administration and Its Implication for Promotion to Medium Scale
Enterprises, through examine the challenges that hinder the promotion process include
financial problems, lack of qualified employees, lack of proper financial records,
marketing problems and lack of work premises, etc. Besides, external performance
affects the business which includes social, economic, cultural, political and
technological factors. In addition there are also personal attitudes or internal
performance that affect the performance of Small Enterprises, which are related to the
person’s individual attitude, training and technical know-how (Werotaw, 2010).
According to DDMSEA developed promotional criteria such as; annual profit, saving
and repayment of loan, number of employees, substitute import goods or
implementation of technology transfer also it affecting promotion. Generally, there are
external (contextual) and internal performance which are still affecting implication for
promotion of small enterprises in to medium enterprises.

1.2. Statement of the Problem

Small enterprises are the key for most developing countries’ economy. Due to the fact
that micro and small enterprises play great role in creating employment opportunity and
supporting large manufacturing companies in the economy (Getent and Tamrat, 2012).
Small enterprises is also known as an instrument in bringing about economic transition
by effectively using the skill and talent of the people without requesting high level
trainings, much capital and sophisticated technology (MoTI, 2004). MSE is said to make
a significant contribution to creating new job opportunity. Economic development of
the country through provision of the breeding ground for the medium and large scale
enterprises promoting national and regional economic development goal, facilitating the
transition of economy promoting equitable development and democracy (Abor and
Quartry, 2010).

As far as small scale enterprises understand and implement the strategies are very
important promote in to medium scale enterprises (Henry, 1991). However, studies
conducted in less developed countries show that small enterprises have faced with
different problems which hinder them to promote in to the next level of business classes
 4

(Piper, 1997). According to Sertswold (2007) most micro and small enterprises in
developing countries especially in Ethiopia have many problems for promotion and
growth due to different factors. Evidence that finance access, Management skills, market
access, support MSEs get, accounting and record keeping is positively and significantly
related with average capital growth. The poor infrastructure condition is negatively and
significantly related with average capital growth (Getent and Tamrat, 2012).

Responsibility action for sustainable way of doing business is demanded on basis of

chain responsibility or because of company size and power in society. The
implementation and execution of a sustainable approach primarily for larger companies
and corporations are usually implemented by a sustainability concept. For small and
medium sized enterprises (SMEs) there might not be such high amount of resources and
such a strategic approach towards triple bottom line thinking, even though many SMEs
“integrate social and environmental concerns in their business operation and in their
interaction with their stakeholders” (European Commission, 2007).

According to Growth Transformation Plan, GTP II, the development of enterprises and
growth in overall value added, by providing a concerted and targeted support aimed at
addressing their bottlenecks which takes in to account their level of growth, up to 2%
(62,500) of the enterprises will graduate from micro to small enterprises and 10,000
enterprises will graduate from small to medium industry.

The profile of existing micro and small enterprises in Dire Dawa City Administration
shows that 1,750 operators and 437 cooperatives enterprises have been organized and
started their business under micro and small enterprises development program from the
year 2011 to 2015 (DDMSEDA, 2016). The profile shows that the only small scale
enterprises number increased , but the number of medium enterprise that has been
transferred from small scale enterprises in to medium scale enterprises are 91 in five
years which means very small number between 2011 and 2015 (DDMSEDA, 2016).
These show that there is a problem in implication for promoting or transferring
enterprises from small scale to medium scale enterprises. This implies that the problem
is serious and needs urgent response from officials of the responsible sectors.
 5

The researcher’s literature shows that, for example, Workneh (2007) and Solomon
(2004) stressed that factors that hinder performance of small enterprises and determinant
the factors for the growth of small enterprise studies number of challenges.

The study conducted by Workneh (2007) with the objective of analyzing factors that
hinder the performance of MSEs found that lack of capital, lack of markets, bureaucratic
regulatory requirement, problem of business development services and inappropriate
locations are still major problems of the sector.

Apart from these, the research conducted by Solomon (2004) also tried to analyze
determinants growth of MSEs and found that product diversification is a major
determinant for the growth of small enterprises. The researcher came up with finding
that business experience is associated with new start-ups calls for the promotion of the
culture of apprenticeship and experience sharing for the young as a possible area of
intervention in employment generation schemes to minimize the extent of
unemployment. But the researchers did not see how external and internal performance
affects implication for promotion of small scale enterprises in to medium scale
enterprises.

This study is deemed to fill the gaps by identifying specifically emphasis on

Performance of Small Scale Enterprises in Dire Dawa City Administration and Its
Implication for Promotion to Medium Scale Enterprises. The research conducted on the
performance of small enterprises and its implication for promotion in different ways
topic particularly in Dire Dawa none on this topic.

The above mentioned problems or its implication for promotion of small scale
enterprises and thereby their promotion process to the emerging in to medium sized
enterprises; the incapability of these enterprises promote to medium level enterprises has
created vacuum which is referred to as missing middle (Henry, 1991). The federal micro
and small enterprise development agency confirm that micro and small firms rarely ever
grow into medium scale enterprises. Reflect lack of entrepreneurial and managerial
capability. They often prefer to diversify into new activities rather than to develop and
expand their respective core activity. It analyses the determinants of external and
 6

internal Performance of Small Scale Enterprises and Its Implication for Promotion to
Medium Scale Enterprises. Research has shown that in order to achieve the
contributions made by small enterprise and ensures them to promote; it is required to
overcome series challenges such as: financial, marketing, political, raw materials,
infrastructural, entrepreneurial, managerial and technological, because they are the
common and major factors in making businesses to fail (Okpara, 2011). As Ishengoma
and Kappel (2008) reveals, the factors hindering the potential growth of small
enterprises in sub-Saharan countries are limited access to credit and market, business
services like marketing information, networking and short-term training are some of the
reasons for many small enterprises failing to promote. In Dire Dawa City specifically,
small enterprises have been confronted in the past with many of these problems.
Therefore, this study tries to investigate those Performance of Small Scale Enterprises in
Dire Dawa City Administration and Its Implication for Promotion to Medium Scale
Enterprises.
In view of the problems, the central questions of this study are:

1) What are the external Performance of Small Scale Enterprises and Its Implication
for Promotion to Medium Scale Enterprises?
2) What are the internal Performance of Small Scale Enterprises and Its Implication
for Promotion to Medium Scale Enterprises?
3) How can the influence of these factors be minimized?
 7

1.3. Research Hypothesis

With the help of sufficient and appropriate data on the Performance of Small Scale
Enterprises in Dire Dawa City Administration and Its Implication for Promotion to
Medium Scale Enterprises, this study was used the following hypothesis:
Hypothesis 1 : The business environments of Dire Dawa designed at Small Scale
Enterprises development do affect implication for promotion of small
scale enterprises to medium scale enterprises.
Hypothesis 0 : The business environments of Dire Dawa designed at Small Scale
Enterprises development do not affect implication for promotion of small
scale enterprises to medium scale enterprises.

1.4. Objective of the Study

1.4.1. General objective

The general objective of this study is to examine Performance of Small Scale

Enterprises in Dire Dawa City Administration and Its Implication for Promotion to
Medium Scale Enterprises,

1.4.2. Specific objectives

1) To investigate external performance of small scale enterprises in dire dawa city

administration and its implication for promotion to medium scale enterprises.
2) To examine internal performance of small scale enterprises in dire dawa city
administration and its implication for promotion to medium scale enterprises.
3) Recommend possible solution to alleviate the challenges faced by small
enterprises in the promotion processes.
 8

1.5. Scope of the Study

The scope of this study, as its major objective is to investigate performance of small
scale enterprises in dire dawa city administration and its implication for promotion to
medium scale enterprises, so this study includes the political, raw material,
technological, infrastructural, marketing, financial, management and entrepreneurial
factors. The study includes the business sector of manufacturing, construction, service,
sales trade, and urban agriculture.

1.6. Significance of the Study

It is possible to say that insufficient attention was given to research that focuses on
examining performance of small scale enterprises in dire dawa city administration and
its implication for promotion to medium scale enterprises, which can have advantage on
industrial development if there were attempts on investigating further on such area,
effectiveness of the sector could be improved in the Dire Dawa City Administrative.
Thus, this research: have a good perception on the pattern of development among
different main sector, will provide relevant information to policy makers, to
development planners, to concerned government authorities which are working on the
MSEDP, gives an essential knowledge regarding with the issue of effectiveness of small
enterprise in the economy. Moreover, give an insight about the untouched issues
discussed above. In general, the study would have importance in such way that it helps
as a reference and encourage who have an interest in the related problems that they can
use this study.
 9

1.7. Limitation of the Study

The researcher has paid due attention to ensure the reliability of the data collected and
managed the impact of associated problem. Efforts were made to get as representative of
the total population and reliable data as possible. Despite this, during the process of
undertaking the study some problem were encountered such as, shortage of sufficient
data. This problem is mainly attributed to the fact that most small enterprises don’t pay
attention for documentation of records business aspects. The other limitations were lack
of giving genuine information by the small business owner and shortage of time faced
during the study.
 10

CHAPTER 2
LITRATURE REVIEW

This section of the study focuses on discussing; providing for definition of some terms
and concepts approaches to understand the concept, the importance to development,
contribution to the economy, characteristics of small enterprises, implication for
promoting the sector, small and medium scale strategy for sustainability and conceptual
frame -work are incorporated in order to provide some insight about the study.

2.1. Over view of Small Enterprises

There are different terms and classifications of enterprises, in which they succeed,
irrespective of their nature, come up with irresistible and valued approaches that
contribute to providing solutions to problems, as well as satisfying the desired needs and
wants. The key difference between all types of enterprises lies in the rewards they
provide. Business ventures provide profits as rewards, while non-business ventures
provide other types of rewards which could be either physical or psychological rewards.
Enterprising men and women will therefore engage in enterprises depending on what
kind of rewards they expect from them (Thiongo, 2005).

The boundaries between micro, small, medium and large enterprises are at best
arbitrary, categorizing business enterprises by scale of operation is important for
functional and promotional purposes to achieve the desired goals of development
(Andu-Alem, 1997), (Kaibori, 2001) and (Solomon, 2005). It is for this reason that
different countries adopt different working definitions for different scale levels of
enterprises (Amyx, 2005) and (Amenu, 2005).

Generally, there is no single and universally acceptable definition of a small enterprise

(Kayanula and Quartey, 2000). This is so because the criteria and ways of categorizing
enterprises as micro and small from institution to institution and from country to country
depending essentially on the country’s level of development. Even within the same
country, definitions also change overtime due to changes in price levels, advances in
technology or other considerations (Emma.et al., 2009). Firms differ in their levels of
capitalization, sales and employment.
 11

The World Bank defines SMEs as follows: Small enterprise - up to 50 employees, total
assets and total sales of up to Birr 3 million; Medium enterprise - up to 300 employees,
total assets and total sales of up to Birr 5 million (Ayyagari, et al, 2007). This definition
provides a general context for understanding all SMEs studies.

When applied to one sector could lead to all firms being classified as small, while the
same size definition when applied to a different sector could lead to a different result.
The absence of such uniform definition of MSEs has created a difficulty.

In line with this, Tegene and Meheret (2010) argued that the absence of a single or
globally applicable definition has made the task of counting the number of MSEs and
assessing their impact extremely difficult across countries, thought the rationale for most
government to make such definition and categorization is mainly for functional
promotional purposes to achieve the desired levels of development of the sector.

2.2. Definition of Small Scale Enterprises

United Nations Industrial Development Organizations (UNIDO) Accordingly, it

defines micro enterprises as the business firms with less than 5 employees and small
enterprises as the business firms with 5-19 employees (UNIDO, 2002).

The United States of America

The Small Business Act issued in 1953 stated that, small business is one which is
independently owned and operated and not dominant in its field of operation. The act
also further stated that, number of employees and sales volume as guideline in defining
small business (Major and Radwan, 2010). In the same country, a committee for
economic development (CED) has explained that small business is characterized by at
least two of the key features: management is independent (usually the managers are
owners), capital is supplied and an individual or small group holds ownership and the
area of operation is mainly local (workers and owners are in one home country). An
enterprise is defined as small scale if it satisfies any two of the three criteria, that is, it
has a capital investment of Birr 2,000 - 55,000, employing 5-20 people and with a
turnover of up to Birr 110,000.
 12

The same authors narrated that: Some of the key characteristics of small enterprises are
mobilizing funds which otherwise would have been idle; being a seed-bed for
indigenous entrepreneurship; their labor intensiveness; employing more labor per unit of
capital than large enterprises; promoting indigenous technological know-how; using
mainly local resources; thus have less foreign exchange requirements; catering for the
needs of the poor and adapting easily to customer requirements (flexible specialization).

Definition adopted in Australia

The Australian Bureau of Statistics (ABS) defines an Australian small business as an

actively trading business with 0-19 employees and a medium-sized business as an
actively trading business with 20-199 employees. Thus, the two common ways of
defining an Australian small business is by annual turnover and the number of
employees or a combination of the two, (Australian Bureau of Statistics, 2011). The
specific definition adopted in this study is the one adopted by ABS.

Definition adopted by the Tanzanian government

According to the ministry of industry and trade in Tanzania, small businesses are
collectively defined under the nomenclature SMEs. SMEs nomenclature is used to mean
micro, small and medium enterprises. It is sometimes referred to as micro, small and
medium enterprises (MSMEs). In the Tanzanian context, micro enterprises are those
engaging up to four people in most cases family members or with an investment not
exceeding 5.0 million TSHS – (Tanzanian shillings) the majority of which fall under the
informal sector. Small enterprises are mostly formalized undertakings engaging 5 to 49
employees or with capital investment of TSHS.5.0 million to TSHS.200 million.
Medium enterprises employ about 50 to 99 employees and use capital investment from
about 200 to 800 million TSHS.
 13

Definition in Ethiopian context

The Authority based its definition on size of employment and automation for small,
medium and large-scale enterprises and a combination of criteria for informal sector
operators. However, this definition could possibly incorporate some capital-intensive
establishments, which could fall solely under medium or large-scale categories. Thus, in
order to exclude those capital intensive enterprises which will not be entitled for the
support services and address the real target MSEs, it is advisable to use a definition that
can take this into account. Hence, a definition that is based on capital and which takes
into consideration the level of technical and technological capacities is adopted.

Since there are limited resources available to address all the needy enterprises, it is also
recommended to narrow the definition at this stage and expand it later as resources
permit. Thus the following definition is used to categorize the sector for the purpose of
this strategy at this stage. Micro Enterprises are those small business enterprises with a
paid-up capital of not exceeding birr 20,000, and excluding high tech. consultancy firms
and other high tech. establishments. Small Enterprises are those business enterprises
with a paid-up capital of above 20,000 and not exceeding birr 500,000, and excluding
high tech. consultancy firms and other high tech. establishments. Medium-scale
enterprises typically result from the slow and steady growth that results from a
successful small business. As a company earns more revenue, it sets aside the capital
needed for buildings, equipment and more employees, eventually bridging the gap
between small business and large corporations.

The Central Statistical Authority (CSA) based its definitions on the size of employment
and extent of automation for small, medium and large – scale enterprises and used a
combination of criteria for defining operators. Those enterprises large and medium scale
manufacturing enterprises have been classified as establishments with more than ten
employees using automated machinery. Those small and medium enterprises are
establishments that engage less than ten persons using power driven machinery and
cottage/ handcrafts are household type enterprises located in households or workshops
normally using own or family labor and mostly manual rather than
automated/mechanical machinery.
 14

Table 2.1:- MSME definitions employed in Ethiopia

Types of enterprises paid up capital (fixed asset) No. of workers

Micro – enterprise less than Birr 20,000 under 10
Small enterprise Birr 20,000 – 500,000 11-50
Large and medium enterprise More than Birr 500,000 over 50
Source: - MoTI (1997), Zewde and Associates (2002)

As we can understand from the above definitions, there is no universally acceptable

definition of MSEs. Different scholars define MSEs differently based on the level of
development of the country under review. As shown above, for this research study
concerned the definition of Ethiopia.

2.3. Small Enterprise Development Strategy

Enterprise promotion efforts in Ethiopia have traditionally focused on urban based and
MSEs. In the 1960s and early 1970s, a department within the Ministry of Industry and
Tourism was responsible for coordinating promotion activities which basically consisted
of providing training on business management (United Nations, 2002).

As stated by United Nations report (2002): In 1977,the Handcraft and Small Scale
Industries: Development Agency ( HASIDA) was establish to provide training mainly
in management and technical skills and to serve as coordinating agency for Government
policy on small enterprises. Shortage of funds and unfavorable government policy
toward the private sector in the 1980s made it extremely difficult for HASIDA to have
an impact on the development of local small enterprises. Since mid-1999, the
government has revisited the whole issue of small and medium enterprise promotion in
Ethiopia but with more focus on micro and small enterprises. A major study was
conducted with the support of a donor agency which resulted in the preparation of a
National Micro and Small Enterprises Development Promotion Strategy (NMSEDPS).
 15

The Ethiopian government released the country’s first MSEs development strategy in
November 1997 E.C. The primary objective of the national strategy framework is to
create an enabling environment for MSEs. In addition to this basic objective of the
national MSE strategy framework, the MoTI has developed a specific objective which
includes, facilitating economic growth and bring about equitable development, creating
long-term jobs, strengthening cooperation between MSEs, providing the basis for
medium and large scale enterprises, promoting export, and balancing preferential
treatment between MSEs and bigger enterprises (MoTI, 1997). The strategy outlines the
policy framework and the institutional environment for promoting and fostering the
development of MSEs and stimulating the entrepreneurial drive in the country.

2.4. Small Enterprises Contribution

Small scale enterprises are one of the priority areas of action among the Programs
addressing African development (UN, 2008), and it can be seen as a means of achieving
smooth transition from traditional to modern industrial sector; and has a huge
contribution to the growth and development of the country in terms of employment
generation with a relative low capital cost (Stephen and Wasiu, 2013). In light of this,
GFDRE has recognized the contributions of MSE to the national development efforts
and MSE’s strategy was formulated and has been implemented since 1997 (MSEDS,
2011). During the first MSE’s development strategy (1997 to 2002) more than 1.5
million people were employed.

In addition, according to the Federal Micro and Small Enterprise Agency yearly
statistical bulletin (2013) about 2,681,367 people were employed in MSEs, which is
more than 48% improvement from the expected plan of the GTP (1,800,000). Besides,
the strategic direction of GTP has taken MSE’s as a key for industrial development and
envisaged structural transformation of the national economy (MoFED, 2010). The
annual Report of the Federal Micro and Small Enterprises Agency (2013) has shown
that in the years ranging from 2011 to 2013 many (about 1775) small enterprises were
promoted to medium level; and the sector had also contributed to the development of the
country economy by fetching 14 Billion Birr and 864 million Birr from the local and
foreign markets, respectively.
 16

2.5. Performance of Small Scale Enterprises and Its Implication for

Promotion

Even though MSE’s have important roles in economic development, poverty alleviation,
employment opportunity, they are critically challenged by certain impeding factors to
sustain within the sector. Bowen et al. ( 2009) in Kenya revealed that three out of five
micro and small businesses failed within the first few months of operation due to
competition, managerial inefficiency, insecurity, debt collection, lack of working capital,
power interruptions, political uncertainty, cost of materials and low demand of the
products.

The problem confronting MSE’s appears to be similar in least developed or developing

countries. However, the extent of the problems varies from country to country and
industry to industry; and it depends on firms’ characteristics (Aremu and Adeyemi,
2011). Currently, there are many internal and external challenges face MSE’s in their
operations and hinder their growth in Ethiopia (MoUDC, 2013). A hard look at various
studies has revealed a number of deterrents to the growth and survival of the MSEs.
These are summarized as under.

1) Financial such as inadequate investment capital, insufficient loan, and

inefficient financial market are the major obstacles in doing business, and most
MSE’s are highly risky ventures involving excessive administrative costs and
lack of experience in dealing with financial institutions CLEP (2006). According
to Sacerdoti (2005) in Habtamu et al. (2013), financial institutions such as
microfinance and the banking systems in Africa are not in a position to provide
enough financial support to the expansion of micro and small businesses.
MoUDC (2013) also identified that financing has become a principal challenge
to micro and small scale enterprises in Ethiopia; except city administrations and
regional microfinance institutions, their savings and family supports, banks in
Ethiopia do not provide finance in the form of loan to MSE’s due to collateral
obligations and other requirement.
 17

Table 2.2:- Financial

• Inadequate credit facilities and • Poor receivables and payables
sources management
• Poor cash flow analysis and • High investment in fixed assets during
management start-up
• Failure to analyze financial • Unplanned withdrawal of cash for
statements personal use
• Lack of record keeping and • Misperception of turnover as profit
documentation • Underutilization of company assets
• Poor management of loans and (space, machines etc)
grants • High interest rates on loans
• Poor management of cash • High collateral requirement by lenders
• Mismatching the sources and uses • Lack/inaccessibility of growth financing
of funds sources
Sources: - Gurmeet and Rakesh (2008), Okpara (2011)

2) Lack of managerial skills the problems of MSE’s management arises from the
limited knowledge and ability of the owner or shortage of competent staff to
advice the owner on management policies (Stephen and Wasiu, 2013). Decision-
making skills, sound management and accounting practices are very low for
MSE operators in developing countries (Aremu and Adeyemi, 2011). In addition,
lack of managerial skills leads to problems in production due to lack of
coordination of production process, and inability to troubleshoot failures on
machinery and/or equipment’s and they cannot afford to employ specialists in
the fields of planning, finance and administration (CLEP, 2006).
 18

Table 2.3:- managerial

• High employee turnover procedures • Lack of well trained employees in
• Lack of open communication b/n the market
owner/ manager and employees • Lack of clear division of activities
• Lack of experienced employees in the and duties
market • Lack of experience in running a
• Lack of proper organizational business
structure • Lack of vision and growth
• Centralized one man decision/making orientation
• Low level of standardization of • Lack of evaluating results against
products and services plans on continuous basis
• Inaccessibility /unavailability of • Rigid decision making patterns/
training facilities inflexibility
• Lack of general managerial, • Inability to compete with large
experience skills and training companies
• Lack of strategic business planning

Sources: - John O. Okpara (2011) and Njanja et al (2010).

3) Lack of adequate market, marketing knowledge is important for the promotion,

growth and development of small enterprises. In this regard, the Ethiopian
government has formulated small enterprises strategies to ease marketing
challenges by creating inter-linkage mechanisms with other institutions,
providing training on marketing, developing export support programs and
marketing information center (MoTI, 1997). However, inability to sell the
products and services; lack of adequate marketing channels, and lack of
marketing skills are the problems to the starting of business and further growth
of the sector (MoFED, 2011).
 19

Table 2.4:- Marketing

• Lack of marketing research • Poor location/business site
• Lack of follow up on customers • Poor customer relationship
• Lack of market segmentation • Lack of marketing expertise
• Lack of clear pricing policy and • Money to buy advertising space
Strategy and time misperception of
• Lack of demand forecasting marketing benefits
• Lack of knowledge of low-cost • Lack of knowledge of sources of
marketing strategies marketing information
• Lack of knowledge of market • Poorly trained sales staff
Sources: - MSE Development Strategy, (1997) and John O. Okpara (2011)

4) Inadequacy of infrastructure facilities a research conducted by Daniel (2012)

stated that unfavorable roads, power interruption, shortage of water, and
inaccessible telecommunications are the major challenges and without which
primary, secondary and tertiary production cannot function. Furthermore,
Habtamu et al. (2013) indicated that MSE’s operating with available
infrastructure facilities has higher probability of long lasting existence and
growth as compared to those MSEs that are operating without adequate
infrastructures; and electric power interruption and inadequate water supply in
Ethiopia was highly affected the growth of the business. Therefore, emphasis
should be given since the success or failures of MSE’s business growth and
development depend on the availability and efficiency of infrastructure
utilization.
5) Raw materials erratic supply of raw materials linking MSEs to production input
suppliers, improving suppliers’ capacity and regular supply of quality
information on input supply sources have positive effects on the success of
MSE’s (Siva, 2012). As MoFED (2013) has pointed out one of the major
problems constraining the MSE’s development in Ethiopia was found to be
erratic supply of raw materials. To ameliorate such a problem, an aggressive
strategy needs to be crafted to promote business ventures which supply inputs by
local and international investors.
 20

6) Entrepreneur: wrong attitude of entrepreneur and their workers the attitude of

some entrepreneur to loans and that of their workers to work is
counterproductive. Some entrepreneur when offered credit facilities mismanage
and used in wrong way, since salaries or wages of those in SMEs are smaller
compared to those in large- scale multinationals, some of the workers engage in
eye service and are not productive, (Adelaja, 2010).
7) Technological capacities Drucker (1985) noted that new technologies improve
efficiency, enable greater production, and are a source of profit for SMEs.
According to Morse et al. (2007), technological capabilities benefit SMEs in
several ways: they enhance SME efficiency, reduce costs, and broaden market
share, both locally and globally. As noted by Lee (2001), a small business that
adopts greater levels of technological sophistication can be expected to grow
more rapidly than a similar firm that does not. Romijn (2001) and Yusuf et al.
(2003) point out that low technological capabilities hinder and discourage SMEs
from fully reaching their potential.
8) Political according to Lumpkin and Dess (1996) the growths of SMEs are
affected by its business climate. Clement et al. (2004) noted that an unfavorable
business climate has negative effect on small firm growth. Brown (2007)
identified competition as one of the major hindrances to the growth of small
firm. Davidsson (1989) noted that an unfavorable tax system, complicated rules
and regulations can heavily hamper small firms’ growth. Krasniqi (2007) showed
that corruption is a major source of the rise in unfair competition. He further
emphasized that the cost of complying with regulations and increased tax rates
increases small firms’ expenses while limiting their growth. Likewise, St-Jean et
al. (2008) noted that unfair competition from the informal sector, cumbersome
regulations, and tax rates are the main obstacles on small business growth.
 21

2.6. Small and Medium Scale (SMES) Strategy for Sustainability

Sustainable is recognized as an essential requirement for achieving economic goals

without degrading the environment; major problems arise in implementing the concept
of promotion. At the most basic level, researchers dealing with promotion development
have suggested that the achievement of sustainability requires ecologically sustainable
political and economic systems, organizations, and individuals specifically;
governments, consumers and enterprises contribute and play crucial; roles in reaching
sustainable development (Bansal, 2011). As a result, if goals of sustainability are to be
achieved, small and medium- sized enterprises must be reformed to minimize their
negative ecological and social impacts (Ishengoma and Kappel, 2006).

Generally, SMEs will have to assist and facilitate growth, multiply and replicate into
sufficient mass across industries and sectors. The SMEs sector is considered to be the
backbone of the modern day economy. The importance of this segment is undisputed.
However, the yawning gap between the needs, demands and policy response in this
unorganized sector has always dampened the sector’s prospects (Bansal, 2011).
Hence, it becomes imperative for us to ensure that SME sector, which is facing one of
the toughest times in the industrial history, should be strongly supported by relevant
stakeholders, government, financial institutions, associations, etc. This is to enable the
sector to play its sustainability roles in the economy. SMEs contribution towards
sustainable development is small, taken together SMEs have a very large impact on the
development quality of a specific geographic area. The more presence of SMEs in the
economy of a particular area, the more important is the SMEs role for achieving
sustainability (Abor and Quartey, 2010).

These SMEs potential economic contributions to sustainability might be balanced

against overall economic efficiency of SMEs in comparison with larger companies;
meaning that SMEs operating in a particular community must be internationally
competitive in order to make significant contributions to sustainability (Bansal, 2011).
 22

There are definitely numerous advantages in owning a small business, but the challenge
for small enterprises owners and managers is to maintain the employees’ ongoing
interest in sustainability practices and issues (Remmen et al., 2012). Effective
communication on a regular basis is essential for reaching the business objectives and
integrating sustainable practices into the business environment. Employees must
understand how sustainability fits into the business’s operations and how to maintain the
employees’ commitment towards sustainability is the challenge for owners and
managers. The sustainability initiatives must be a logical extension of the mission of the
business (Remmen et al., 2012).

The highest priority for SME managers is to upgrade the business’s marketing,
technology and management to meet with the strict competition (Ruffe et al.,
2003).Sustainable management is crucial for SME success as Bradley and Cowdery
(2002) reported that 90% of SME failures are because of poor management. An SME
manager must realize the amount of effort required for sustainable management, and
should manage the business accordingly (Bradley and Cowdery, 2002). SME managers
usually focus on human resources, inventory, strategic planning and other business
operations.
 23

2.7. Ethiopia’s MSE Promotion Policy

Ethiopia has launched various bold initiatives and development policies and plans to
spur economic growth. Three major development plans have been executed so far, the
last one being the ongoing Growth and Transformation Plan (GTP). The common and
overarching objective of these development plans has been to ensure broad based
economic growth. This is so because broad based economic growth is the main route to
poverty reduction through employment generation. The role of small enterprises is
indispensable in poverty reduction through employment generation. Cognizant of this, a
national small enterprises development strategy was formulated in 1997. Ethiopia’s
MSE Policy envisages not only reducing poverty in urban areas but also nurturing
entrepreneurship and laying the foundation for industrial development. The strategy was
revised in 2010/11 with renewed interests and more ambitious targets on employment
and number of entrepreneurs and transition to medium size level (Growth and
Transformation Plan, GTP I).

2.8. Some Sub-Saharan Countries Experiences on Performance of

Small Scale Enterprises and Its Implication for Promotion to Medium
Scale Enterprises from Empirical Evidences.

In Kenya according Allan et al., (2009), there are various reasons for the failure of SEs
like: lack of supportive policies for MSE development, intense competition with
replication of micro-businesses, unavailability of funding, manager characteristics
including lack of skills and experience, marketing techniques used including quality of
service and markets served. The cases also demonstrated that MSEs experienced most of
the difficulties cited such as limited skills in business management and even more
limited funding, facing intense competition in the niche market served. It was also made
clearer that MSEs used social networks to access some funding and to retain their
customer’s loyalty. However, where the policies to support micro businesses remain
largely rhetorical, the question of survival and development for micro and MSEs
remains a question of individual ingenuity.
 24

In Nigeria according John O. Okpara (2011), the most common constraints hindering
small business growth and survival in Nigeria are lack of financial support, poor
management, corruption, lack of training and experience, poor infrastructure,
insufficient profits, and low demand for product and services.

As Nurul Indarti and Marja Langenberg (2009), reveals factors affecting MSEs in
Malawi are marketing problems, unfamiliarity with technology, no information access,
lack of entrepreneurial readiness, social network, legality, capital access, lack of
government support, lack of knowledge in preparing business plan.

In Uganda as Esther K. et al. (2008) findings show limited access to credit and market,
business services like marketing information, networking, short-term training are the
major factors inhibiting MSEs in the country.

According to ILO (2004), Women in MSEs of Tanzania faced difficulties in obtaining

appropriate amounts of funding to finance their growth plans because of collateral
requires needed, lack of awareness in joining associations, lack of marketing,
information and advisory services, bureaucracy, unfair competition, harassment and
corruption by licensing and tax officials, perceived unfair tax levels and tax enforcement
procedures.
 25

Figure 2.1:- Conceptual frameworks of Performance of Small Scale Enterprises and

Its Implication for Promotion to Medium Scale Enterprises (Source: - Own Literature
Review)

Access to credit

Lack of
marketing
linkage

External Infrastructure

Lack of raw
material
Enterprises promotion
to the next stage
Political (successes)

Entrepreneurial

Internal

Technological

Managerial
 26

CHAPTER 3
RESEARCH METHODOLOGY

This section discusses on the descriptions of the study area, definition of variable,
research approach methods and sampling techniques, data collection method and data
analysis techniques.

3.1. Description of Study Area

Dire Dawa is one of the cities in Ethiopia, which have governing role in social, political
and economical condition of the country. This city has two levels of government
administration such as city and Kebele administration. It has 61 Kebele administration
of which 24 Kebeles are found in urban (on the year 2004 organized to 9 Keble), the rest
38 Kebeles in rural area. Dire Dawa is located at 505 KM in the east of Addis Ababa
city, geographically lies between 09 28.1 to 09 49.1 latitude north and-41 38.1 to 42
19.1E longitude and 1000-3000 altitude. This city administration is predominantly low
land and has a mean monthly temperature of 24.80 c. The average elevation is about
1500-2000 meter above sea level and the average annual rain fall is about 623 mm, area
and density 1558.61 areas in squ.km.

According to DDASA 2013 and CSA (2011), the total population of Dire Dawa 341
thousand, among this each urban and rural population comprise of 67.93% and 32.07%
respectively. Among these gender distribution of males and females are 171,461
(50.15%) and 170,373 (49.85%) respectively. This census reports stated that the annual
grows of population at the rate of 2.5% in the city.

This administration is still commercial and industrial center in the country. Since, it
found strategic location and relatively better transportation. Network, additionally; it is
being industrial and commercial town due to its nearest location to Djibouti and
relatively well-developed infrastructure. It has trade as the main economic sector that
contributes to economic of the city.
 27

In Dire Dawa, several people have been engaged in MSEs to generate income for them
and their family and to alleviate poverty. (DDMSEDA performance review report 2016)
indicates there are 91 large and medium scale, 1750 small scale and 3729
cottage/handcraft manufacturing industries in the city. According to this report large and
medium, small scale and cottage/handcraft manufacturing industries formal and informal
employed on five years 98,942 persons.

Figure 3.1:- Map of Ethiopia by Regional

 28

Figure 3.2:- Dire Dawa Administrations Division by Kebele THE STUDY AREA

Source: - Land and Development Management Bureau

3.2. Research Design

Saunders et al. (2007), defines research design as the general plan of how the research
questions would be answered. It is the conceptual structure within which research is
conducted. It constitutes a blue print for the collection, measurement, and analysis of
data. The research design for this study was the field survey method. In field surveys,
independent and dependent variables are measured at the same point in time using
questionnaire (Anol, 2012). In addition the study was also Co relational in design
because there was intended to establish the relationship between dependent and
independent variable of the study. Co relational research aims to ascertain if there is a
significant association between two variables (Reid, 1987).
 29

3.3. Definition of Operational Variables

Promotion of Enterprises: - A promotion occurs when an enterprise is moved from one

level to another stage that is higher in profit, job creation of others, increase
responsibility, and/or organizational level. Using appropriate measurements and
utilization of the government supports. Such as: - profit, job creation of others,
technology transfer, quality. This is a dummy variable, promotion status of the enterprise
which takes a value 1 promoted to the next stage and 0 not promoted to the next stage.

Financing: - Financing is one of the crucial elements that determine the development of
small enterprise and necessary to help them to set up and expand their operations,
develop new products, and invest in new staff or production facilities. There exist a
positive relationship between the enterprise promotion the next stage and its access to
finance. In this study, it is considered as continuous variable taking a value of 1if
finance affected the enterprise the next stage and 0 otherwise.

Marketing: - Marketing skills has been considered as one of the most effective factor to
firm survival and growth. The management process through which goods and services
move from concept to the customer. This is a dummy variable, which takes a value 1 if
market affected the enterprise the next stage and 0 otherwise.

Infrastructure: - Relatively permanent and foundational capital investment of a

country, firm, or project that underlies and makes possible all its economic activity. It
includes administrative, telecommunications, transportation, utilities, and waste removal
and processing facilities. Some definitions also include education, health care, research
and development, and training facilities. In this study it is considered as dummy
variable, 1 if infrastructure affected the enterprise the next stage; 0 otherwise

Political: - Government actions which affects the operations of a company or business.

These actions may be on local, regional, national or international level. Business owners
and managers pay close attention to the political environment to gauge how government
actions will affect their company. In this study it is considered as dummy variable, 1 if
political affected the enterprise the next stage; 0 otherwise.
 30

Entrepreneurial: - Entrepreneurs are the prime movers in the business or social sectors.
Without entrepreneurs, there would be no business or social development. They are the
ones who identify gaps in the market and then turn these gaps into business
opportunities. In this study, it is considered as categorical variable taking a value of 1if
entrepreneurial affected the enterprise the next stage and 0 otherwise.

Technological: - The purposeful application of information in the design, production,

and utilization of goods and services, and in the organization of human activities. In this
study, it is considered as dummy variable taking a value of 1if technological affected the
enterprise the next stage and 0 otherwise.

Raw materials: - Basic substance in its natural, modified, or semi-processed state, used
as an input to a production process for subsequent modification or transformation into a
finished good. In this study, it is considered as dummy variable taking a value of 1if raw
materials affected the enterprise the next stage and 0 otherwise.

Management: - Several studies have considered the management capacities of the top
management team as key factors for small business growth. This is a dummy variable,
which takes a value 1 if management affected the enterprise the next stage and 0
otherwise.

Cooperatives: - association of at least 10 individuals who are from the same area.

Enterprise: - It refers to a unit of economic organization or activity whether public or

private engaged into the manufacturing of goods and service.

Factors: - A constituent or element that brings about certain effects or results, or

indicates a specific multiple, number, or quantity.

Respondent: respondents are those individuals who are owner managers or operators of
an enterprise.

Sustainable support Services: - It is facility and provision of services which includes,

facilitating and provision of financial services, premises services, trainings services.
Creation of marketing linkage, provision of business development service, organizing
 31

permanent forum for small scale enterprises, others like licensing, organizing renewal of
license and tax identification (in number) registration (FeMSEDA, 2011).

Variables Variable type and definition

Promotion Dummy, promotion status of the enterprise: 1= promoted to the next
stage; 0= not promoted to the next stage.
Financing Continuous, financing status of the enterprise: 1= finance affected the
enterprise the next stage; 0= not finance affected the enterprise the
next stage.
Marketing Dummy, marketing status of the enterprise: 1= marketing affected the
enterprise the next stage; 0= not marketing affected the enterprise the
next stage.
Infrastructure Dummy, infrastructure status of the enterprise: 1= infrastructure
affected the enterprise the next stage; 0= not infrastructure affected the
enterprise the next stage.
Political Dummy, Political status of the enterprise: 1= Political affected the
enterprise the next stage; 0= not Political affected the enterprise the
next stage.
Entrepreneurial Categorical, Entrepreneurial status of the enterprise: 1= entrepreneurial
affected the enterprise the next stage; 0= not Entrepreneurial affected
the enterprise the next stage.
Technological Dummy, technological status of the enterprise: 1= technological
affected the enterprise the next stage; 0= not technological affected the
enterprise the next stage.
Raw materials Dummy, raw materials status of the enterprise: 1= raw materials
affected the enterprise the next stage; 0= not raw materials affected the
enterprise the next stage.
Management Dummy, Management status of the enterprise: 1= Management
affected the enterprise the next stage; 0= not Management affected the
enterprise the next stage.
 32

3.4. Description of Population and Sampling Method

3.4.1. Target population

All the items under consideration in any field of inquiry constitute a population. Sekeran
(2001) defines a population as “the entire group of people, events, or thing of interest
that the researcher wishes to investigate”. The target population for the study consisted
of 300 small enterprises owners’ in Dire Dawa area. Quite often; it selected only a few
items from the population for the study purposes.

3.4.2. Sampling frame

The sampling frame can be defined as set of source materials from which the sample is
selected. The definition also encompasses the purpose of sampling frames, which is to
provide a means for choosing the particular members of the target population that are to
be includes in the survey (Anthony, 2003).
Table 3.2:- Sample Frame
Sample unit Sample Total Sample Methodology
technique population size to be used
MSEs Agency purposive 2 1 Interview
manager and process
owner
Trade and Industry purposive 2 1 Interview
Bureau manager and
Process owner
Dire Micro Finance purposive 1 1 Interview
TVET agency purposive 3 1 Interview
director
and expert
TVET college vice purposive 2 2 Interview
dean
Small enterprises probability 300 171 Questionnaire
Total sample size 305 175
 33

3.4.3. Sampling technique

Stratified random samplings used to get information from five different sizes of the
small enterprises sectors such as manufacturing, construction, service, sales trade, and
urban agriculture. This technique preferred to assist in minimizing bias when dealing
with the population. The sampling frame can be organized into relatively homogeneous
groups before selecting elements for the sample. According to Janet (2006), this step
increases the probability that the final sample will be representative in terms of the
stratified groups.

3.4.4. Sampling size

According to Catherine (2009), the correct sample size in a study is dependent on the
nature of the population and the purpose of the study. Although there are no general
rules, the sample size usually depends on the population to be sampled. In this study to
select sample size, a list of the population formally 300 small enterprises that were
engaged in manufacturing, construction, service, sales trade, and urban agriculture and
those currently run their business activity. The total population of the study is 300
enterprises which includes manufacturing (91), construction (81), service (76), sales
trade (21), and urban agriculture (31). The selected sample size was considered as
representative of manufacturing, construction, service, sales trade, and urban agriculture
also large enough to allow for precision, confidence and general liability of the research
findings. To determine the sample size and representative of the target population, the
study was used statistical instrument formula. The following formula used for the
calculation of the sample size since it is relevant to studies where a probability sampling
method is used (Watson, 2001).The sample size of study was computed as follows.

 p [1− p ] 
n=  ZA 22 + p [1N− p ] 
 R 
Where, n = sample size required = 171
N = number of population = 300
P = estimated variance in the population = 50%
A = margin of error = 5%
 34

Z = confidence level = 1.96 for 95% confidence

R = estimated response rate = 96%

The proportional stratified sampling for each stratum will be determined by n /N =

171/300= 0.5700 which means that 57% of each strata’s as calculated in the table.

Table 3.1:- proportional stratified sample

Stratum Number of SE Sample size n/N= 0.57
Manufacturing 91 52
Construction 81 46
Service 76 43
Sales trade 21 12
Urban agriculture 31 18
Total 300 171

Regarding selection of small enterprises is that, these enterprises have more economic
potential to transfer in to medium scale enterprises. Due to this, the researcher preferred
small enterprises as target group for this study and considering one respondent from
each enterprise.

3.5. Method of Data Collection

The study employed data collected from both primary and secondary sources. A primary
source in order to realize the target, the study was well-designed questionnaire as best
instrument. These were completed by the owner managers/or operators of the
enterprises. The interview method of data collection is preferred due to its high response
rate. It gives the ten people concerned an opportunity to interact and get details on the
questions and answers. Through interviews, clarification of issues was easily achievable
leading to accuracy of data from the respondents.

Secondary data from files, office manuals, circulars and policy papers were used to
provide additional information where appropriate. Besides, variety of books, published
and/or unpublished government documents, websites, reports and newsletters were
reviewed to make the study fruitful.
 35

3.6. Research Instrument

3.6.1. Questionnaire design

The layout of the questionnaire was kept very simple to encourage meaningful
participation by the respondents. The questions were kept as concise as possible with
care taken to the actual wording and phrasing of the questions. The reason for the
appearance and layout of the questionnaire was great importance in any survey where
the questionnaire is to be completed by the respondent (John A. et al., 2007).
The structured questionnaires in five point Likert scale such as 1=Strongly Disagree,
2=Disagree, 3=Neutral, 4=Agree, 5=Strongly Agree which allows respondents to
indicate level of agreement with the statement provided for small enterprises were
designed and administered to gather relevant information for the study. These
questionnaires were administered after pilot testing and expertise approval.

3.6.2. Interview

Structured interview guide were designed, and Dire Dawa Micro and Small Enterprises
Development Agency managers and process owner, one trade and industry bureau
managers and process owners, one micro finance office head and one TVET agency
director and two TVET college vice dean were purposely selected and interviewed about
factor that affecting the promotion of small scale enterprises in to medium scale
enterprises, the interviewer has used a check list for interview to ensure that all the
questions were to asked.

3.7. Method of Data Analysis

Data processing and analysis are important parts of the research work. After data were
collected, they have to be processed and analyzed. The collected data were edited in
order to identify errors and omissions and correct them when needed. After that the
edited data were coded and classified. All these activities were carried out to make the
data as easily calculated for analysis and make meaningful analyzed based on SPSS
Version.20 technique. Descriptive analysis was used for the demographics part of
respondents and interview questions were analyzed using descriptive narrations. Thus,
statistical tools of inferential analysis like the Pearson product moment correlation
 36

coefficient were utilized to determine the result of the sample population so as to

examine the effect of the external and internal factors on small enterprise promotion.

3.7.1. Model specification

Model specification can be defined as the exercise of formally stating a model i.e. the
explicit translation of theory into mathematical equations and involves using all the
available relevant theory research and information and developing a theoretical model.
Regress and which has more than two outcomes in the form of Likert scale questions are
importantly regressed through inferential analysis. According to Sekaran (2000),
inferential statistics allows to infer from the data through analysis the relationship
between two or more variables and how several independent variables might explain the
variance in a dependent variable. The following inferential statistical methods were used
in this study.

The Pearson Product Moment Correlation Coefficient (PPMCC) according to Phyllis, et

al (2007), inferences have a very important in management research. This is so because
conclusions are normally established on the bases of results. Such generalizations were
therefore, be made for the population from the samples. They speculate that the Pearson
Product Moment Correlation Coefficient is a widely used statistical method for
obtaining an index of the relationships between two variables when the relationships
between the variables is linear and when the two variables correlation are continuous. To
ascertain whether a statistically significant relationship exists between accesses to
finance, adequate market, rules, regulation and procedures, raw materials, infrastructure
facilities and entrepreneur characteristics, technology capacity with promotion of small
scale enterprises in to medium scale enterprises, the Product Moment Correlation
Coefficient was used.

According to Duncan and Dennis (2004), correlation coefficient can range from -1 to
+1. The value of -1 represents a perfect negative correlation while a value of +1
represents a perfect positive correlation. A value of 0 correlations represents no
relationship. The results of correlation coefficient may be interpreted as follows.
 37

Correlation coefficient Interpretation

[-1.00 to -0.8] Strong
[-0.8 to -0.6] Substantial Negative
[-0.6 to -0.4] Medium
[-0.4 to -0.2] Low
[0.2 to 0.2] Very Low
[0.2 to 0.4] Low
[0.4 to 0.6] Medium Positive
[0.6 to 0.8] Substantial
[0.8 to 1.00] Strong

In this study correlation coefficient were to determine the following independent and
dependent relationships; between financial and promotion, between marketing and
promotion, between political and promotion, between raw materials and promotion,
between infrastructure and promotion, relationship between technology and promotion,
between entrepreneur characteristics and promotion and between managerial skills and
promotion of small enterprises in to medium enterprises.

A) Econometric model

In this study of factors affecting of promotion small scale enterprises, researchers often
use linear regression is a method of estimating or predicting a value on some dependent
variable given the values of one or more independent variables. Like inferential analysis
correlations, statistical regression examines the association or relationship between
variables. Unlike correlations, however, the primary purpose of regression is prediction
(Geoffrey M. et al., 2005). In this study multiple linear regression models was
employed. Multiple linear regression analysis takes into account the inter-correlations
among all variables involved. This method also takes into account the correlations
among the predictor scores (John A.et al., 2007). They added multiple regression
analysis, which means more than one predictor is jointly regressed against the criterion
variable. This method is used to determine if the independent variables will explain the
variance in dependent variable. In other words, among a number of factors, which have
been related to promotion of SEs, in this study, the following independent factors are
financial, marketing, political, raw materials, and infrastructure, technology, managerial
and entrepreneurial factors to explain the dependent variable.
 38

The equation of multiple linear regressions on this study was generally built around two
sets of variables, namely dependent variable (promotion) and independent variables
(finance, marketing, political, material, infrastructure, technology, management skills
and entrepreneurial). The basic objective of using regression equation on this study is to
make the study more effective at describing, understanding and predicting the stated
variables.

Multiple Linear Regression Promotion on selected Variables

𝒀𝒊= 𝜷𝟎 + 𝜷𝟏 𝑿𝟏 + 𝜷𝟐 𝑿𝟐 + 𝜷𝟑 𝑿𝟑 + 𝜷𝟒 𝑿𝟒 + 𝜷𝟓 𝑿𝟓 + 𝜷𝟔 𝑿𝟔 + 𝜷𝟕 𝑿𝟕 + 𝜷𝟖 𝑿𝟖 + 𝜺𝒊

Where:- Y i is the response or dependent variable- promotion; X 1 = finance, X 2 =

marketing, X 3 = infrastructure, X 4 = political, X 5 = material, X 6 = entrepreneurial, X 7 =
technology and X 8 = management are the explanatory variables and 𝜺𝒊 = the error term of
the regression equation.β 0 is the intercept term- constant which would be equal to the
mean if all slope coefficients are 0. β 1 , β 2 , β 3 , β 4 , β 5 , β 6 , β 7 , and β 8 are the coefficients
associated with each independent variable which measures the change in the mean value
of Y.

Accordingly, this statistical technique was used to explain the following relationships.
Regress promotion (as dependent variable) on the selected linear combination of the
independent variables using multiple linear regressions models.

B) Multicollinearity test

Multicollinearity As we are producing multiple regression models, we need to be aware

of certain features of the multicollinearity. That means, when two or more independent
variables are highly correlated with each other this is known as multicollinearity. The
existence of multicolinearity might cause the estimated regression coefficients to have
the wrong signs and smaller t-ratios that might lead to wrong conclusions.
 39

There are two measures that are often suggested to test the presence of multicolinearity.
These are: Variance Inflation Factor (VIF) for association among the continuous
explanatory variables and contingency coefficients for independent variables. The
technique of variance inflation factor (VIF) was employed to detect the problem of
multicolinearity among the continuous variables. According to Gujarati (2003), VIF can
be defined as:
VIF (x i ) = 1/1−𝑅2

Where, R2 is the square of multiple correlation coefficients that results when one
explanatory variable (xi) is regressed against all other explanatory variables. The larger
the value of VIF the more “troublesome” or collinear the variable Xi is. As a rule of
thumb, if the VIF of a variable exceeds 10, there is a multicolinearity problem.

3.8. Validity and Reliability of Measurements

A. Validity
Validity is the degree to which a test measures what it purports to measure (Creswell,
2009). Validity is defined as the accuracy and meaningfulness of the inferences which
are based on the research results. It is the degree to which results obtained from the
analysis of the data actually represents the phenomena under study. He contends that the
validity of the questionnaire data depends on a crucial way the ability and willingness of
the respondents to provide the information requested.

A pilot study was conducted to refine the methodology and test instrument such as a
questionnaire before administering the final phase. Questionnaires was tested on
potential respondents to make the data collecting instruments objective, relevant,
suitable to the problem and reliable as recommended by (John A. et al., 2007). Issues
raised by respondents are corrected and questionnaires were refined. Besides, proper
detection by advisor was also taken to ensure validity of the instruments. Finally, the
improved version of the questionnaires were printed, duplicated and dispatched.
 40

The instruments selected can help to show factors affecting promotion of small scale
enterprise to medium scale enterprises. It can clearly address how these factors affect the
promotion of small enterprises in Dire Dawa City Administration. The relevant data was
collected on the factors of the small enterprises that can better indicate the relationship
between factors and the promotion of small enterprises. The structured interviews can
also validate the measurement. Moreover, to have valid conclusion, inferential statistical
model was used to test the relationship between the variables.

B. Reliability of measurements

The reliability of instruments measures the consistency of instruments. (Creswell, 2009)

considers the reliability of the instruments as the degree of consistency that the
instruments or procedure demonstrates. The reliability of a standardized test is usually
expressed as a correlation coefficient, which measures the strength of association
between variables. Such coefficients vary between -1.00 and +1.00 with the former
showing that there is a perfect negative reliability and the others shows that there is
perfect positive reliability.

In this study, each statement rated on a 5 point Likert response scale which includes
strongly agree, agree, neutral, disagree and strongly disagree. Based on this an internal
consistency reliability test was conducted in with a sample of 21 small size enterprises
and the Cronbach's alpha coefficient for the instrument was found as 0.802 which is
highly reliable. Typically an alpha value of 0.80 or higher is taken as a good indication
of reliability, although others suggest that it is acceptable if it is 0.67 or above (Cohen et
al., 2007). Since, instruments were developed based on research questions and
objectives; it is possible to collect necessary data from respondents. Then, instruments
are consistent with the objectives of the study.
 41

3.9. Ethical Consideration

The researcher also assured that the names of respondents would not be revealed in the
study. For reasons of ensuring that respondents become anonymous, direct quotations
from respondents were merely ascribed to unnamed respondents were used. How a
particular participant had responded or behaved (unless, of course, the participant has
specifically granted permission) was not reported in the research. Steps were also taken
to keep ethical considerations intact.

The researcher also committed to report the research findings in a complete and honest
fashion, without misleading others about the nature of the findings. Under no
circumstance, the researcher fabricated data to support a particular conclusion.

Finally, the researcher took appropriate measures to ensure the research would cause no
physical or psychological harm to research participants. As a general rule, therefore, the
study did not raise any ethical concerns.
 42

CHAPTER 4
RESULT AND DISCUSSION
This part is organized in the following manner the first section is about the general
information of small enterprises were presented and analyzed. The second section data
collected through questionnaires and interviews were analyzed moreover, the results of
Pearson’s product moment correlation coefficient and regressions were analyzed.

The purpose of this study critically assess the Performance of Small Scale Enterprises in
Dire Dawa City Administration and Its Implication for Promotion to Medium Scale
Enterprises data were collected from owners or managers of small enterprises found in
Dire Dawa City.

One hundred seventy one questionnaires were distributed to small enterprises out of
which 160 questionnaires were completed and returned successfully which is 94 percent
response rate. The questionnaires contained questions that addressed the objectives of
the study.

4.1. Demographic Data

The demographic data expressed statistically such as age, sex, education level,
occupation and others. The respondent are provide in this section to give the information
a clear picture about the respondent.
 43

4.1.1. Characteristics of business owners

4.1.1.1. Gender of respondent

From the sample that used in the analysis 68.1 percent of the business owners were male
and 31.9 percent were female. Apparently, there is gender gap resulted due to the
predominant activities promoted by men and due to different constraints women have
less involvement in such sectors.
Grahp 4.1.:- Sex of respondents

4.1.1.2. Age of respondent

45 percent of the respondents were found between the ages 30 to 39 years, 27.5 percent
of the respondent the age less than 30. The rests were 20 percent, 6.9 percent and 6
percent are between 40 to 49 years, 50 to 59 years and above 60 years old respectively.
This indicates most of the respondents’ and also business owner found the age between
30 to 39 years old.
Grahp 4.2.:- Age of respondent
 44

4.1.1.3. Education level

The educational level of respondents at the time of the study show that about 46.3
percent of the respondents were TVET, followed by 26.3 percent of the respondents
were high school, 15.6 percent of the respondents were elementary school and 6.9
percent and 5.0 percent were degree and diploma respectively. This indicates most of the
respondents small scale enterprises owners had educational back- ground TVET, on the
other hand higher education graduate person enter in to small scale enterprise this shows
change of behaviors and accept the sectors.
Grahp 4.3. : - Education level

4.1.1.4. Business type

The enterprises were operating in five sectors of the economy. Most of them are
engaged in manufacturing 32.5 percent, in construction 26.9 percent, in service 23.8
percent, in urban agriculture 9.4 percent and in trade 7.5 percent. This division of small
enterprises by sector type was believed to be help full to study each sector critical
performance of small scale enterprises and its implication for promotion to medium
scale enterprises. This is because firms in different sectors of the economy face different
types of problems. That means the degree of those critical factors differ from the factors
that are critical to the other section.
 45

Grahp 4. 4.:- Business type

4.1.1.5 The establishment of the business

The establishment of the business 45 percent were enterprises established between

2013to 2015 years, followed by 36.9 percent were 2010 to 2012 and 18.1 percent were
established between 2007 to 2009 years. This indicates that most of them established
between 2013 to 2015 years. This refers to that the businesses have been around long
enough to understand the issues.
Grahp 4. 5.:- Establishment of the business
 46

4.2. Performance of Small Scale Enterprises and Its Implication for

Promotion to Medium Scale Enterprises
4.2.1. Inferential statistics results

The results of inferential statistics are presented. For the purpose of assessing the
objectives of the study, Pearson’s product moment correlation coefficient and multiple
linear regression analyzes were performed with the aid of these statistical techniques,
conclusions are drawn with regard to the sample and decisions are made with respect to
the research hypothesis.

4.2.1.1. Pearson’s product moment correlation coefficient

Pearson’s product moment correlation coefficient was used to determine whether there
is significant relationship between financial factors, marketing factors, political factors,
raw materials factors, infrastructural factors, technological factors, management’s
factors and entrepreneurial factors variable with promotion. The following section
presents the results of Pearson’s product moment correlation on the relationship between
independent variables and dependent variable.

The table below indicates that the correlation coefficients for the relationships between
promotion and its independent variables are linear and positive ranging from substantial
to strong correlation coefficients.
 47

Table 4.1.:- The relationship between independent variables and promotion

Independent Pearson Correlation Promotion
Financial Pearson Correlation 0.731
Sig. (2-tailed) 0.000
N 160
Marketing Pearson Correlation 0.840
Sig. (2-tailed) 0.000
N 160
Infrastructural Pearson Correlation 0.695
Sig. (2-tailed) 0.808
N 160
Political Pearson Correlation 0.808
Sig. (2-tailed) 0.000
N 160
Raw material Pearson Correlation 0.786
Sig. (2-tailed) 0.000
N 160
Entrepreneurial Pearson Correlation 0.641
Sig. (2-tailed) 0.000
N 160
Technological Pearson Correlation 0.691
Sig. (2-tailed) 0.000
N 160
Management Pearson Correlation 0.700
Sig. (2-tailed) 0.000
N 160
Correlation is significant at the 0.01 level (2-tailed).
As it is clearly indicated in the above Table 4.1, a strong positive relationship was found
between marketing factor and promotion (r =0.840, p < .01), and political factor and
promotion (r = 0.808, p < .01), which are statistically significant at 99% confidence
level. This implies that at a 1% level of significance it was discovered that marketing
and political factors play significant role in determining the promotion of small scale
enterprises in Dire Dawa City.

Moreover, the table presents the association between the selected variables and
promotion of small scale enterprises for a sample of 160 small scale enterprises in Dire
Dawa City. There is substantial, however statistically significant relationship between
raw materials factors and promotion (r = 0.786, p <.01). This would imply that, the more
raw materials the better promotion of SEs would be. The result on table above further
indicates that, there is a substantial positive correlation between financial and promotion
 48

(r = 0.731, p <.01), which is statistically significant at 99% confidence level. This

implies that SEs with financial performed considerably better. There are positive
relationship between management factors and promotion (r = 0.700, p < 0.01),
infrastructural factors and promotion (r = 0.695, p < 0.01), and technological factors and
promotion (r = 0.691, p < 0.01), and entrepreneurial factor and promotion of small scale
enterprises (r = 0.637, p < 0.01), which is statistically significant at 99% confidence
level.

4.2.1.2. Multiple linear regressions analysis

The multiple linear regression analysis was used to examine two sets of variables,
namely dependent variable (promotion) and independent variables (finance, marketing,
political, material, infrastructure, technology, management skills and entrepreneurial).
The basic objective of using regression equation on this study is to make the study more
effective at describing, understanding and predicting the stated variables.

Multiple Linear Regression promotion (as dependent variable) on the selected variables
(as independent variables) using multiple regressions.

Table 4.2:- Model summary

Model R R Square Adjusted R Std. Error of Sig.
Square the Estimate

1 0.904a 0.817 0.807 0.21413 0.000

a) Predictors: (constant), financial factor, marketing factor, infrastructural factor,
political factor, raw materials factor, entrepreneurial factor, technological factor,
management factor.

The table 4.2 revealed that, the correlation between the observed value of promotion and
the optimal linear combination of the independent variables (finance, marketing,
infrastructures, political, raw material, entrepreneurial, technological, and management )
is 0.904, as indicated by multiple R. Besides, given the R Square value of 0.817 and
adjusted R square value of 0.807, it may be realized that 81.7% of the variation in
promotion can be explained by the independent variables. The remaining 18.3 % of the
variance is explained by other variables not included in this study.
 49

Table 4.3.: - Model summary

Model Sum of Squares df Mean Square F Sig.

Regression 30.885 8 3.861 85.092 0.000b
Residual 6.851 151 0.045
Total 37.736 159
a) Dependent variable: Promotion
b) Predictors: (constant), financial factor, marketing factor, infrastructural factor,
political factor, raw materials factor, entrepreneurial factor, technological factor,
management factor.

The overall prediction of the model was found to be significant at 1% as indicated and
with F-value of 85.092. Even though the model is significant and the regression power
of the model is relatively high independent variables that affect promotion of the next
stage.

Table 4.4.:- Coefficients a

Model Unstandardized Standardized t Sig.
Coefficients Coefficients
Variables B Std. Error Beta
(Constant) 0.530 0.107 9.186 0.000
Financial 0.301 0.039 0.402 5.800 0.000
Marketing 0.214 0.071 0.264 4.729 0.000
Infrastructural 0.175 0.045 0.295 3.865 0.000
Political 0.395 0.065 0.413 4.594 0.000
Raw materials 0.189 0.078 0.076 2.415 0.017
Entrepreneurial 0.184 0.045 0.227 3.386 0.001
Technological 0.329 0.053 0.313 3.870 0.000
Management 0.217 0.069 0.348 3.129 0.006
P < .01
a) Dependent variable: Promotion
b) Predictors: (constant), financial factor, marketing factor, infrastructural factor,
political factor, raw materials factor, entrepreneurial factor, technological factor,
management factor.
 50

Table 4.4 further shows that, all the explanatory variables included in this study
significantly explain at 99% confidence level to the variation on the dependent variable.
The standardized beta coefficient column shows the contribution that an individual
variable makes to the model. The beta weight is the average amount the dependent
variable increases when the independent variable increases by one standard deviation
(all other independent variables are held constant).As these are standardized we can
compare them. Thus,

Finance factors: finance factors are also statistically significant at 1% level and
enterprises which have access to finance promote better than those which have no access
to finance or credit. For various reasons ranging from a lack of collateral to bias against
small enterprises, Small enterprises tend to face greater financial constraints than do
larger enterprises. The highest influence on the promotion of small scale enterprises is
from the independents variables financial factors is 0.402. Small enterprises which have
access to credit promote better than those which have shortage of capital or credit and
solving this problem leads to solution of promote.

Market factors: market factors are statistically significant at 1% significant level. The
influence on the promotion of small scale enterprises is from the independents variables
marketing factors is 0.264. Thus, enterprises with access to market have promote
significantly but, enterprises with market problem or limited access to market have less
chance of promote or their potential is likely to decrease. Marketing problems include
inadequacy of market, difficulty of searching new market, lack of demand forecasting,
lack of market information and absence of relationship with an organization/association
that conduct marketing research.

Infrastructural factors: Infrastructural factors are statistically significant at 1%

significant level. The influence on the promotion of small scale enterprises is from the
independents variables infrastructure is 0.295. Thus, small enterprises with access to
infrastructure have promoted significantly but, small enterprises with infrastructure
problem have less chance of promote to medium enterprises. Infrastructures include
power interruptions, insufficient and interrupted water supply, lack of business
development services and lack of sufficient and quick transportation service.
 51

Political factors: political factors are also statistically significant at 1% level and the
highest influence on the promotion of small scale enterprises is from the independents
variables political factor indicate 0.413. Small enterprises which have access to political
support promote better than those which have no access. For different reasons small
enterprises face or challenge to promote the next stage. The political factors such as,
lack of government support, lack of access to information on government regulations
those are relevant to business, high tax levied, unclear evaluation criteria of promotion
and lack of participation in criteria development.

Raw materials factors are statistically role play. Raw material factors with the beta value
of 0.076 the least predictor of promotion when compared with the other explanatory
variables. This would imply that, the more access raw materials the better promotion of
small enterprises than others. Small enterprises with raw materials factors have no more
chance of promote to next stage in the case of raw materials problems. So raw materials
include insufficient supplies, shortage of quality raw material, insufficient competent
suppliers or vendor and fluctuation of raw materials prices.

Entrepreneurial factors are statistically significant at 1% significant level. The high

influence on the promotion of small scale enterprises is from the independents variables
entrepreneurial factors is 0.227. Small enterprises which have access to entrepreneurial
promote better than those which have no access to entrepreneurial capability of small
enterprises with access to entrepreneurial. Entrepreneurial play significant role in
determining the promotion of small scale enterprises But, small enterprises have
promoted significantly with entrepreneurial problem have less chance of promote to
medium enterprises. It includes lack of innovation and creativity, lack of tolerance to
lack of persistence and courage to take responsibility for ones failure work hard, lack of
confidence , lack of setting goal and objective, lack of motivation and drive and lack of
information to exploit business opportunities.

Technological factors are statistically significant at 1% significant level. The highly

influence on the promotion of small scale enterprises is from the independents variables
technological factors is 0.313. Thus, enterprises with access to technological have
promoted significantly but, enterprises have technological problem to promote the next
 52

stage or their potential is likely to decrease. Technological problems may include lack of
appropriate machinery and equipment, lack of money to acquire new technology, unable
to select proper technology, ineffective cooperation with technical and vocational
college and lack of skills to handle new technology.

Management is statistically role play. The highly influence on the promotion of small
scale enterprises is from the independents variables management factor is 0.348. This
would imply that, the more access management the better promotion of small enterprises
than others. Small enterprises have management problem no more chance of promote to
next stage in the case of management problems. These problems may include Lack of
clear division of duties and responsibility among employees, Poor and ineffective
communication, Lack of strategic business planning, Lack of well trained and
experienced employees and Shortage of accessible training facilities.

The above Table 4.4 displays the estimates of the multiple regression of performance
against its variables for the sample of 160 small scale enterprises. The hypothesis which
states that the business environments of Dire Dawa designed at small scale enterprises
development do not affect the promotion of small scale enterprises to medium scale
enterprises in the selected of Dire Dawa City is tested at 1% level of significance, it
was discovered that the business environments of Dire Dawa designed at small scale
enterprises development do play a significant role in determining the promotion of small
scale enterprises in to medium scale enterprises. Thus, the null hypothesis therefore, be
rejected and it is accepted that, the business environments of Dire Dawa designed at
small scale enterprises development do affect the promotion of SEs in Dire Dawa City.
The unstandardized coefficients B column, gives us the coefficients of the independent
variables in the regression equation including all the predictor variables as indicated
below.

𝑌𝑖 = 0.530 + 0.301𝑿𝟏 +0.214𝑿𝟐 + 0.175𝑿𝟑 + 0.395𝑿𝟒 + 0.189𝑿𝟓 +0.184𝑿𝟔 +.329𝑿𝟕 +.217

𝑿𝟖
 53

Multicollinearity

For this study the researcher was checked this assumption with tolerance and VIF
statistics. Andy (2006) suggests that a tolerance value less than 0.1 almost certainly
indicates a serious colinearity problem. Liu (2010) also suggests that a VIF value greater
than 10 because for concern and in these research data the values are below10 for all
predictors. It seems from these values that there is not an issue of co linearity between
the predictor variables. This means that the derived model is likely to be unchanged by
small changes in the measured variables. In another word, these values give us some
idea as to how accurate our regression model is. There for, no concerned with biasing
effect of multicollinearity.

4.3. Analyses for Interview

1) Information analyses about Key informant group

The reason for selecting Micro and Small Enterprise Agency, TVET Agency and Dire
Micro Finance organization managers or director, process owner and expertise working
together for the long period of time. So it was reliable for the study to get appropriate
and recent information in order to answer the specific objective and the research
question of the paper.

Analysis of interview result for question on strategic plan regarding promotion of small
enterprise, according to one of the key informant who is the micro and small enterprise
agency manager, process case team leader, TVET College v. deans and micro finance
loan and saving office manager the promoting plan is incorporated on the strategic plan
of agency. As the strategic plan indicates within the plan period from the year 2015/16-
2019/20 (2008 to 2012 E.C. ) the agency plan to perform in order to promote according
to GTP II from the total number of enterprises promoting 2% of small scale enterprise
to medium scale enterprise. But until now, there are 91 enterprises that were promoted to
medium enterprises and large industries in the last 5 years. The main reason for the lack
of implementation is lack of commitment on the administrative body. Even if there are
enterprises that could be promoted to medium enterprise there is the gap of commitment
beside the agency so. It create dependency syndrome on the enterprises and make
 54

difficult the support to give the appropriate enterprise and it was the obstacle on the
promotion process.

According to the trade and industry bureau as main vision of city administration which
is to make East Ethiopia industry zone the business society expects so many activities
from the administration to promote the business scales. But it is the main gap of the
government body commitment to promote in each scale. On the other hand, the
perception about micro and small enterprise is still very low both the enterprise and the
public sector organizations didn’t have confidence that today’s micro small enterprise
can change and will promote in to large scale industries as the result of weak awareness
the commitment become low.

According to respondents the indicators that help to promote the enterprise, as of the
three organization respondent, says the major indicators are first the number of
employee within the businesses .second the amount of capital within the business period,
the capacity of creating new job opportunity for other person is important to use as
indicator. Additionally, the market share of the enterprise means creating the market link
for others promoting their product using different means of communication and
participating in bazaar and exhibitions. Production capacity also other indicator,
producing export goods or product that substitute imported products and educational
back ground of the employee with in the business. Additionally, the criteria to consider
appropriate utilization of government support such as, effective utilization of industrial
extension services from TVET College and frequent customer from micro finance
institutions.

Last but not least one is performing the duty and responsibility what the business
expected such as, performing the yearly tax payment within the exact period of time.
Performing the yearly registration and renewal of the business license are the indicators
that help to promote to the next business level. So, if it does not fulfill the pre
requirements or indicators that affect the promotion of small scale enterprise to medium
scale enterprises.
 55

The interviewed was asked to describe key external and internal factors affecting
promoting small scale enterprises to medium enterprises. Regarding the support given to
the enterprises, According to the agency owner processer case team leader , attitude
toward the extent the agency create favorable condition, the agency have giving different
kinds of support based on the responsibility. The supports such as training, financial
facilitation, market linkage, facilitation of production and market place and so on.

Among these supports TVET plan training based on the need of the enterprise were gave
widely in different concept which can help the development and promotion of
enterprises. Additionally, the financial facilitation was given by the micro finance in
each kebeles in order to serve the public effectively. Even if the opinion gained from
different enterprise have complain on collateral system of the micro small enterprise it is
the only option of collateral as this moment but it may change if we get the best option
for the future.

Regarding in creating the market linkage were the big problem and gap have to be focus
broadly in the future. Especially like other developed country using the micro and small
enterprise development effectively needs to link the micro and small enterprises market
to large industry to use their semi processed products as the resource of production.
Additionally there is no sufficient production and market place for the business
enterprise. The production and market place that had been constructed previously also
hadn’t given appropriate services because of the location it constructed. So constructing
the new market and production place and available to the business society would be
grieving the wide focus in order to be effective the promotion process and the
development of the enterprise.

The expertise TVET College v. deans and micro finance loan and saving office manager
respectively state that the main challenges of the enterprises were lack of sufficient
production and market place with appropriate location and weak perception toward the
small enterprise development in each level of the public organization make difficult to
give sufficient and appropriate support to the enterprises in order to improve their
business activities. On the other hand, the enterprises were got satisfactory and
appropriate trainings that can help through the business life.
 56

To sum up, as the result disclose from the three organization interviewed all agree that
there is different challenges that can the promotion of small scale enterprise to medium
scale enterprise among them financial problem, market linkage, lack of production and
market place, weak perception toward the public organization to support based on
enterprises need are the major external factor affecting of the promotion process.

2) The business enterprise their own challenges and benefit’s gained from the
business

Analysis of interviews results for question concerning on the business enterprise their
internal factors that saw in the enterprise the major is dependency on government rather
creating different kinds of work activities on their own. The creativity for the new
activities are very less so, it is dangerous indication for the future because the project
work may phase out within the specific period of time rather they focus on the other
business activities.

Additionally, regarding those enterprise problem to promote enterprises to medium and

large scale industry are the very weak perception about the micro and small enterprise
development, mostly they perceive as only to solve their daily problem. The other
problem is lack of team work which some of the members are doing their work in full
time and effort but some of the members don’t give their effort elusively. According to
micro finance saving and loan department manager, weak saving trend were the major
problem of the enterprises. Most of the time they haven’t saved whatever amount of
money they got from the working activities so, it is difficult to accumulate capital and
improve their business activity widely. Effective utilization of government support also
their own challenges, most of the time they borrow some amount of money from micro
finance institution and then utilize for daily consumption rather than improving their
business by making additional investment and also lack of management skill and lack of
business plan for their business activities were the major problems and factors affecting
promotion.
 57

According to both TVET college vice deans small scale enterprise may not give
attention to industry extension program such as kaizen, technology, entrepreneurship
skills and management skills’ are factors that affecting small scale enterprise promote in
to the next stage.

Finally, the result obtained from interviewed is almost the similar with that of result
obtained from the quantitative analysis of the questionnaires. The only difference
response on the issue of training facility made by the government that discussed by the
agency and enterprises respondent.
 58

CHAPTER 5
CONCLUSIONS AND RECOMMENDATIONS

5.1. Conclusions

This research was conducted in Dire Dawa City Administration with the prime intent of
critically assessing Performance of Small Scale Enterprises and Its Implication for
Promotion to Medium Scale Enterprises. The research method involved 160 enterprises
to come to a better understanding on both internal and external the factors that affect the
promotion process, the sample frame was taken from formally registered enterprises by
Micro and Small Enterprise Agency. Among the registered enterprises manufacturing,
construction, service, trade and urban agriculture were some of the activities they were
engaged. The analysis was a descriptive one that were used to demographics part of
respondents and the interview questions were analyzed using descriptive narrations and
inferential statistics, Pearson’s product moment correlation coefficient and using
multiple regressions.

The result show that, the respondents’ profile indicates male’s respondents in small
enterprises is 68.1percent compared with 41.9 percent females. The age of most
respondents 45 percent fall within the range of 30-39 years. Most of small enterprises
respondent educational qualification is in TVET indicating 46.3 percent. Respondent’s
business type most engaged manufacturing sector 32.5 percent. Establishments of the
business’s respondents mostly fall between 2013- 2015 indicate 45 percent. This refers
to that the businesses have been around long enough to understand the issues.

As the findings marketing factors affecting small enterprises from the findings indicate a
strong positive relationship was found between marketing factor and promotion (r
=0.840, p < .01), and political legal factor and promotion (r = 0.808, p < .01) which are
statistically significant at 99% confidence level. This implies that at 1% level of
significance it was discovered that marketing. This indicate that the fact that
government sector are support different access to enterprise, they faced with different
problem to promote the next level in ability to access market factors and political legal
factors were the major problem confronting small enterprises. Thus, since marketing and
 59

political are one of the most activities required by businesses to promote or transfer
through satisfying the needs and wants of customers, its constraints on the other hand
hinders promote of firms.

The result of study a substantial positive correlation between raw materials factors and
promotion (r = 0.786, p < 0.01), statistically significant relationship between financial
and promotion (r = 0.731, p <.01), a positive relationship between management factors
and promotion (r =0.700, p < 0.01), Infrastructural factors and promotion (r = 0.695, p <
0.01), small scale enterprise substantial faced the problem to promote the next level.
Material, financial, infrastructures are the most important external factors that hinder the
business promotion of sectors.

According to the findings, technological factors and promotion (r = 0.691, p < 0.01), and
Entrepreneurial factor and promotion of small scale enterprises to medium scale
enterprises (r = 0.637, p < 0.01). This indicate that the owners of the business, has lack
of commitments, lack of setting goal, lack of successful businesses and knowledge,
inappropriate selection of technology are the major constraints. These constraints on the
other hand limited promote of small enterprise.

On the other hand, various governmental bodies designed various programs aimed at
developing small enterprises sectors. Most of the programs were not given the
appropriate backing and as such the impact of the program could not be felt is the
promotion of small enterprise. This is mainly because of the facts that these programs
are not effectively implemented in line with their intended objectives owing to various
reasons.

According to the findings, there is low commitment of some governmental bodies ,

weak perception towards the development of small enterprises, lack updating the
strategic plan regarding the promotion to the next level, lack of strong supporting and
controlling mechanism, low coordination and communication specially, the major sector
such as Micro Small Enterprises Development Agency, TVET and Micro Finance
Institution.
 60

Another the major internal problem in the promotion process identified were
management factor which include lack of clear division of duties and responsibility
among employees, ineffective communication, lack of well trained and experienced
employees, lack of strategic business planning, shortage of accessible training facilities.
Technological factors include lack of appropriate machinery and equipment, lack of
money to acquire new technology, and ineffective cooperation with TVET College.
Lastly, the major entrepreneurial factor such as weak perception about the development
of small enterprises, lack of setting goal and objectives, lack of tolerance to work hard
and dependency on the government.

In terms of the stated research hypothesis the specific empirical finding, emerged from
the investigation that there exists significant positive relationship between independent
variable and dependent variable. Moreover, the selected independent variables may
significantly explain the variations in the dependent variable in study area.

The result of this study implies that, the study has further identified that the different
influences in which each of the factors under study have in different categories of the
business. The research clearly illustrates those critical affecting small enterprises
considerably all sectors. It has been focused that the external are prevalent to the
business such as marketing, political, material and financial factors had very high effects
on the promotion of small enterprises compared to the other factors in the research area.
This causes for to continue the business activities weak promotion process of the
enterprises.
 61

5.2. Recommendations

Based on the conclusions, the following recommendations are forwarded:-

1. The government, private sectors, NGO’s should facilitate access to credit for small
enterprises, Micro Finance Institution and Banks need to allocate a certain portion of
their loan-able funds for small enterprise entrepreneurs. This has to be supported by
special lending and repayment arrangements. Thus, in order to address problems of
credits, financial institutions, the Federal and Regional Governments and donors can
assist by way of the increasing lines of credit and special windows for assisting
growth-oriented.
2. The government should cooperate with planners and stakeholders with regard to
extension of all-round support and introduce various marketing strategies to ensure
rapid development of markets for the produce of small enterprises so that their
capacity to create employment and wealth is strengthened.
3. Government should build common basic infrastructural facilities.
4. The government should arrange and give raw materials, equipments, machines and
other necessary materials through lease in which small enterprises can cover the
payment during the operations to reduce doubt of getting back payments for the
borrowed finance. This will help small enterprises for more produce, ensure fair
competition.
5. Small enterprises owners should set vision and goals in terms of what is to be
accomplished, selection of technology and to improve the productivity.
6. Small enterprises owners/managers should improve internal operations through
upgrading their skills, financial system borrowed amount for the intended purposes
and able to save money on for future investment and practice ways of gathering
customer information for the purpose of satisfying their needs through conducting
market research and creating network with other small enterprise ,successful
businesses and knowledgeable individuals, because the more businesses know about
their customers, the better they can meet their needs. The network with external
bodies from supply of raw materials to distribution is suggested because it keeps
them from sudden stoppage of production due to limitations of resources and
customers.
 62

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 67

APPENDIX A
HARAMAYA UNIVERSITY
POSTGRATUATE PROGRAME DIRECTORATE
Department of Management
MBA Program

Questioner to be filled the small scale enterprises operators or owners.

Dear respondent!
With this questionnaire, the researcher intends to assess the Performance of Small
Scale Enterprises in Dire Dawa City Administration and Its Implication for
Promotion to Medium Scale Enterprises for the partial fulfillment of Masters Degree
in Business Administration and it is for academic purpose. Therefore, you are kindly
requested to answer the questions honestly and thus you are required to feel because the
researcher assures you that all written responses are confidential and will be kept
completely in secrete. For genuinely doing so by devoting your time and exerting effort,
the researcher really remains very grateful to you. Mean while, the wishes to bring in to
your attention, the outcome of this study will highly depend on your sincere and timely
response.

This questionnaire contains two parts: part I and II. Part I requires demographic
information whereas part II requires statement designed to measure the external factor
and internal affecting promoting small scale enterprises. Detailed instruction is given for
each part in the questionnaire for your guidance. Kindly give your assessment by
placing a tick (√) mark in the appropriate box parallel to each item.

Melkamu zewdu is doing the research under the guidance of Mr. Robson
Mekonnin(Assistant professor) at Haramaya University college of Business and
Economics. In case you want to contact him, Melkamu zewdu can be reached at +251
920 05 54 27 mobile number and natanmelkamu422@gmail.com at e-mail.

NB: - You do not need to write your name

Thank you in advance for your co-operation!!
 68

Part one – Demographic Profile of the Respondents

The following statement requires information about yourself and they will not be used to
identify any individual or not write your name. Please fill in only one-person per question.
Questioner to be filled the small scale enterprises operators or owners.
Pleas tick (√) appropriately represents your response in each of the following table questions.

Demographic variable Response

1. Gender
Male
Female
2. Your Age (in year).
< 30
30-39
40-49
50-59
60 and above
3. Your education level
Elementary school
High school
TVET
Diploma
Degree
Others
4. Your Type of Business
Manufacturing
Construction
Service
Sales trade
Urban Agriculture
5 The established year of the business
2007- 2009
2010- 2012
2013- 2015
 69

Part two: - Variable related to the external factor and internal affecting
performance of small scale enterprises and its implication for promotion to
medium scale enterprises.
The following statement requires information about Performance of Small Scale
Enterprises in Dire Dawa City Administration and Its Implication for Promotion to
Medium Scale Enterprises. Indicate scale of your agreement with each statement
1.strongly disagree 2.disagree 3.neuteral 4.agree and 5.strongly agree.
EXTERNAL

Disagree
Strongly

Strongly
disagree

.neutral

Agree

agree
External

Financial
1 Shortage of working capital
2 Inadequacy of credit institutions
3 High collateral requirement from banks and
other lending institutions
4 High interest rate charged by banks and
other lending institutions
5 Unfamiliarity with financial Information

Marketing
1 Inadequate market for product
2 Searching new market is so difficult
3 Lack of demand forecasting
4 Lack of market information
5 Lack of continuous improvement of product
6 Lack of promotion to attract potential users
7 Poor customer relationship and handling
8 Poor supplier relationship and handling
 70

External

Disagree
Strongly

Strongly
disagree

.neutral

Agree

agree
Infrastructural
1 Power interruptions
2 Insufficient and interrupted water supply
3 Lack of business development services
4 Lack of sufficient and quick transportation service
Political-Legal
1 The tax levied on my business is not reasonable
2 Lack of government support
3 Lack of access to information on government
regulations that are relevant to my business
4 Unclear evaluation criteria of promotion
5 Lack of participation in criteria development
Raw materials
1 Insufficient supplies
2 Shortage of Quality raw material
3 Insufficient competent suppliers or vendor
4 Fluctuation of raw materials prices
 71

INTERNAL

Disagree
Internal

Strongly

Strongly
disagree

.neutral

Agree

agree
Entrepreneurial Factors
1 Lack of innovation and creativity
2 Lack of tolerance to work hard
3 Lack of confidence
4 Lack of setting goal and objective
5 Lack of motivation and drive
6 Lack of persistence and courage to take
responsibility for ones failure
7 Lack of information to exploit business
opportunities
Technological Factors
1 Lack of appropriate machinery and equipment
2 Lack of money to acquire new technology
3 Unable to select proper technology
4 Ineffective cooperation with Technical and
Vocational College
5 Lack of skills to handle new technology
Management Factors
1 Lack of clear division of duties and
responsibility among employees
2 Poor and ineffective communication
3 Lack of well trained and experienced employees
4 Lack of strategic business planning
5 Poor organization and structural
6 Lack of cash management skill
7 Lack of material measurement
8 Shortage of accessible training facilities
 72

Disagree
Strongly

Strongly
disagree

.neutral
Statement

Agree

agree
The following related dependent variables promotion small scale enterprises to
medium scale enterprises.
1 Do you think that your profit of business create
favorable condition to promote small scale
enterprises to medium scale enterprises.
2 Do you believe that your business create job
opportunities to promote small scale enterprises
to medium scale enterprises.
3 Do you think that rules and regulation to
promote small scale enterprises to medium scale
enterprises.
4 Do you believe that your business fulfilled the
indicators that decide to promote small scale
enterprises to medium scale enterprises?
5 Do you think that product quality and transfer
new technology that decides to promote small
scale enterprises to medium scale enterprises.
6 Generally the city administrations provide
adequate support and motivate to promote small
scale enterprises to medium scale enterprises.

Thank you for your cooperation!!

 73

APPENDIX B
HARAMAYA UNIVERSITY
SCHOOL OF GRAGUATE DIRECTORATE
Department of Management
MBA Program

To be responded by DDMSEDA, Trade Industry Bureau, Micro Finance Head and

TVET agency director and College Dean.

This structured interview has been prepared to examine the Performance of Small
Scale Enterprises in Dire Dawa City Administration and Its Implication for
Promotion to Medium Scale Enterprises. The information you are going to provide
will be used only for academic purpose and further benefiting the business society by
preparing possible suggestion.

Therefore, you are kindly requested to give genuine responses and treated confidentially.

I would like to thank you very much in advance for your cooperation.

1. Dose the agency incorporate the plan that promotion small enterprise to medium
enterprises on strategic and annual plan?
2. What are the indicator and prerequisites in order to promotion small enterprise to
medium enterprises?
3. Do you believe the agency create sufficient awareness regarding the benefits of
promotion on the enterprises?
4. Do the regulations and rules create favorable condition for enterprises promotion?
5. In what extent the agency create favorable condition to the enterprises?
6. What are the main factor affecting of the sector that make difficulties the promotion?
7. What are the main factor affecting of the cooperatives and operators that make difficult
to promotion?
8. How to minimize the promotion problem of small enterprise to medium enterprises?
 74

APPENDIX C
Correlations Matrix

promotion Financial Marketing Infrastructu Political Raw Entreprene Technologica Manageme

ral legal Material urial l nt
Promotion Pearson 1
Correlation
Sig (2-tailed)

N 160

Financial Pearson
Correlation .731** 1
Sig (2-tailed)
.000
N
160 160
Marketing Pearson
Correlation .840** .759** 1
Sig (2-tailed)
.000 .000
N
160 160 160
Infrastructu Pearson
ral Correlation .695** .775** .705** 1**
Sig (2-tailed)
.000 .000 .000
N
160 160 160 160
Political Pearson
legal Correlation .808** .809** .804** .760** 1**
Sig (2-tailed)
.000 .000 .000 .000
N
160 160 160 160 160
Raw Pearson
Material Correlation .786** .745** .840** .594** .814** 1**
Sig (2-tailed)
.000 .000 .000 .000 .000
N
160 160 160 160 160 160
Entreprene Pearson
urial Correlation .641** .533** .646** .707** .705** .607** 1**
Sig (2-tailed)
.000 .000 .000 .000 .000 .000
N
160 160 160 160 160 160 160
Technologi Pearson
cal Correlation .691** .922** .738** .869** .863** .702** .683** 1**
Sig (2-tailed)
.000 .000 .000 .000 .000 .000 .000
N
160 160 160 160 160 160 160 160
Manageme Pearson
nt Correlation .700** .874** .767** .894** .832** .709** .764** .946** 1**
Sig (2-tailed)
.000 .000 .000 .000 .000 .000 .000 .000
N
160 160 160 160 160 160 160 160 160
**. Correlation is significant at the 0.01 level (2-tailed).
 75

APPENDIX D
Model Summary
Multiple Regressions
Model R R Square Adjusted R Std. Error of the
Square Estimate
1 .904a .817 .807 .21413

a. Predictors: ( constant), Financial, Marketing, Infrastructural, Political , Raw

materials, Entrepreneurial, Technological, Management
Coefficients

Model Standardized
t Sig.
Unstandardized Coefficients Coefficients
Variables B Std. Error Beta
coefficients .000
(Constant) .530 .107 9.186
Financial .301 .039 .402 5.800 .000

Marketing .214 .071 .264 4.729 .000

Infrastructural .175 .045 .295 3.865 .000

Political .395 .065 .413 4.594 .000

Raw materials .189 .078 .076 2.415 .017

Entrepreneurial .184 .045 .227 3.386 .001

Technological .329 .053 .313 3.870 .000

Management .217 .069 .348 3.129 .006

a. Dependent Variable : Promotion
 76

APPENDIX E
a
Coefficients

Model Collinearity Statistics

Tolerance VIF

Financial .353 3.950

Marketing .458 6.320

Infrastructural .308 4.803

Political Legal .345 6.912

1
Raw materials .430 7.685

Entrepreneurial .394 2.536

Technological .369 5.906

Management .578 7.155

 77

APPENDIX F

a
Collinearity Diagnostics

Model Dim Eigenvalue Condition Variance Proportions

ensi Index (Constant) Financial Marketing Infrastructu Political Raw materials Entrepre Techno Mange
on ral Legal neurial

1 8.736 1.000 .00 .00 .00 .00 .00 .00 .00 .00 .00

2 .105 9.100 .01 .06 .00 .04 .00 .01 .00 .04 .01

3 .070 11.146 .10 .03 .00 .06 .00 .00 .01 .01 .00

4 .040 14.734 .00 .04 .01 .07 .00 .00 .05 .10 .01

1 5 .016 13.162 .08 .05 .02 .05 .09 .04 .10 .01 .00

6 .014 14.980 .09 .01 .04 .03 .01 .00 .06 .01 .04

7 .009 20.491 .03 .01 .05 .06 .01 .10 .04 .10 .04

8 .005 12.614 .07 .10 .08 .10 .07 .03 .10 .05 .09

9 .004 18.684 .00 .10 .09 .00 .09 .08 .04 .09 .08

a. Dependent Variable: Promotion