Determinants of employment growth of micro and small enterprises in Wolaita zone, Ethiopia

This study aimed at investigating determinants of employment growth among MSEs in Wolaita Zone, Ethiopia. Multi-stage sampling technique was employed to select 352 enterprises by using Yamane (1967) formula with 5 per cent precision and 95 per cent confident level. Data were collected using interview schedule through face-to-face interview and observation, key informant interview, focus group discussion and data analysis were carried out by using descriptive and inferential analyses as well as econometric models. The econometrics result indicated that age the promoters, education, previous work experience, risk taking, achievement motivation, age of enterprises, managerial training, size enterprises, access to finance, start-up capital, access to infrastructure, access to premises, social networks, vertical and horizontal linkages, and supporting markets of enterprises were included for analysis. Both size and age of the enterprises were negatively determined employment growth. This gives evidence that smaller and younger MSEs grow faster than older ones. Moreover, enterprises which are engaged in access to finance, education and promoters training were positively and significantly determined employment growth whereas supporting market, physical infrastructure and Vertical linkage determined employment growth negatively and significantly. Social networks can help promoters identify business opportunities as well as overcome a number of obstacles related to transaction costs, contract enforcement, and regulation determined employment growth positively and significantly. Promoting inter-firm and Buyers/Sellers cooperation, enhancing share capital contribution, enhancing micro-financing efficiency, improving infrastructural facilities such as information dissemination, educating and training of MSEs promoters in business development services (BDS) were recommended to enhance employment growth of MSEs.