FACTORS AFFECTING BUSINESS PERFORMANCE OF MICROAND SMALL ENTERPRISES: THE CASE OF EASTERN HARARGHE ZONE HARAMAYA TOWN

Abstract

The purpose of this research was to investigate factors affecting the business performance of micro and small enterprises with a special emphasizes on manufacturing, urban agriculture, service, trade and construction, in Haramaya town, in eastern Harargee zone Oromia region. The types of research method used under this study were descriptive and explanatory research. The major purpose of descriptive research was description of the state of affairs as it exists at present and explanatory was to show relationship between variables was correlated with an aim of estimating the integrated influence of the factors on business performance. The data was collected through questionnaire from a sample of 223 operators selected by using stratified sampling technique and face-to-face interviews were conducted with 10 operators of MSEs selected by using convenience sampling technique out of 641 MSEs owners/managers in Haramaya town. Questionnaires were analyzed using statistical analysis such as descriptive and inferential analyses and the interview questions were analyzed using descriptive narrations through concurrent triangulation strategy. The empirical study elicited ten major factors which seem to affect business performance of MSEs in Haramaya town which include: regulatory, shortage of working premises, technological, infrastructural, finance, management, entrepreneurial orientation, shortage of raw materials, market orientation and record keeping factors were discussed. The findings show that technological, infrastructures, management, entrepreneurial orientation, market orientation and record keeping are positively and significantly affect the business performance of MSEs. However shortage of raw material is negatively and significantly affects the business performance of MSEs. On other hand; variables, such as regulatory and finance are positively affect the business performance of MSEs, while shortage of working premise is negatively affect the business performance of MSEs. Developing economies see SMEs as a path out of poverty, unemployment and household income generation, thereby realizing industrialization and sustainable growth. There should be a keen interest to adopt proactive policies so as to create competitive domestic industries. The present paper confirms previous findings and contributes additional evidence that suggests working on factors affecting MSEs would improve performance and compensate the multidimensional constraints imposed by the existing market in developing economies. The finding of this study offers important insights for government bodies, to operators of MSEs and suggestions for other researchers are forwarded