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Innovation and Microenterprises Growth in Ethiopia

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  • Gebreeyesus, Mulu

    ()
    (UNU-MERIT)

Abstract

This paper addresses two prominent issues on the development of small enterprises in Africa. Which factors inhibit or foster innovation activities in small enterprises? Do innovators create more jobs? We use a large set of microenterprises survey data from Ethiopia that comprise 1000 observations with ten and fewer workers. The analysis shows that firms larger in size and in manufacturing are more likely to engage in innovative activities. Among the human capital variables vocational training is found to have a strong effect on the innovation activity. However, firms owned by female and old entrepreneurs are less likely to get involved in innovation. In an extended model of firm growth determinants that includes innovation indicators we found strong evidence that innovators grow faster than non-innovators. Firm growth is also affected by other factors such as the firm's initial size, age, access to finance, sector, and owner character. Our estimation results provide supporting evidence to the stylized fact that the smaller, younger, and less capital constrained firms grow faster than their counterparts. Firms in manufacturing also grow faster than other sectors.

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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 053.

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Date of creation: 2009
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Handle: RePEc:unm:unumer:2009053

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Keywords: micro and small enterprises; firm growth; innovation; developing countries; Ethiopia;

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  1. Ana M. Moreno & José C. Casillas, 2007. "High-growth SMEs versus non-high-growth SMEs: a discriminant analysis," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 19(1), pages 69-88, January.
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  7. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
  8. Dunne, Paul & Hughes, Alan, 1994. "Age, Size, Growth and Survival: UK Companies in the 1980s," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 115-40, June.
  9. Arne Bigsten & Mulu Gebreeyesus, 2007. "The Small, the Young, and the Productive: Determinants of Manufacturing Firm Growth in Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 813-840.
  10. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-81, June.
  11. Lu�s M B Cabral & Jos� Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
  12. Arshad M. Khan & V. Manopichetwattana, 1989. "Innovative and Noninnovative Small Firms: Types and Characteristics," Management Science, INFORMS, vol. 35(5), pages 597-606, May.
  13. Ganeshan Wignaraja, 2002. "Firm Size, Technological Capabilities and Market-oriented Policies in Mauritius," Oxford Development Studies, Taylor & Francis Journals, vol. 30(1), pages 87-104.
  14. McPherson, Michael A., 1996. "Growth of micro and small enterprises in southern Africa," Journal of Development Economics, Elsevier, vol. 48(2), pages 253-277, March.
  15. Linsu Kim & Youngbae Kim, 1985. "Innovation in a Newly Industrializing Country: A Multiple Discriminant Analysis," Management Science, INFORMS, vol. 31(3), pages 312-322, March.
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