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The industry and location impacts of investment incentives on SMEs start-up in Ethiopia

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  • Seife Ayele

    (Faculty of Technology, Open University, Milton Keynes, UK)

Abstract

This paper examines impacts of investment incentives (exemptions from paying duties on imported capital goods and income taxes) on entrepreneurial choices of industry and location in indigenous small and medium-sized enterprises (SMEs) in Ethiopia. Evidence from the 1990s showed that just a few supported industries received the lion's share of the incentives, to set up in locations intended to receive the least support. Close study of the entrepreneurs showed that they set up enterprises where they live, work, and in industries where they have accumulated training or experience. The study concludes that investment incentives are rather weak policy instruments of indigenous SMEs and regional development in Ethiopia, and that other developing countries need to be cautious about such instruments. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Seife Ayele, 2006. "The industry and location impacts of investment incentives on SMEs start-up in Ethiopia," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(1), pages 1-13.
    • Handle: RePEc:wly:jintdv:v:18:y:2006:i:1:p:1-13
    DOI: 10.1002/jid.1186
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    References listed on IDEAS

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    1. Zee, Howell H. & Stotsky, Janet G. & Ley, Eduardo, 2002. "Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries," World Development, Elsevier, vol. 30(9), pages 1497-1516, September.
    2. Ingram, William D & Pearson, Scott R, 1981. "The Impact of Investment Concessions on the Profitability of Selected Firms in Ghana," Economic Development and Cultural Change, University of Chicago Press, vol. 29(4), pages 831-839, July.
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    Cited by:

    1. Kefyalew Endale, 2024. "The Effects of Informal Competition on Manufacturing Firm Productivity in Ethiopia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 15129-15160, September.
    2. Sungur Onur, 2019. "Spatial Distribution of Investment Incentives and the Impact of New Incentive System for Less Developed Regions in Turkey," Review of Economic Perspectives, Sciendo, vol. 19(1), pages 25-48, March.
    3. Kanbiro Orkaido Deyganto, 2022. "The effect of tax incentives practices on the sustainability of micro, small and medium enterprises in Ethiopia during the outbreak of corona virus pandemic," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-22, December.
    4. Adriana Giurgiu, 2012. "Investment Incentives and the Global Competition for Capital – By K.P. Thomas," Journal of Common Market Studies, Wiley Blackwell, vol. 50(1), pages 190-190, January.

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