Innovation and Microenterprises Growth in Ethiopia
Mulu Gebreeyesus
#2009-053
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.
Keywords: micro and small enterprises, firm growth, innovation,
developing countries, Ethiopia
JEL classification: L25, L26, O31, O55
UNU-MERIT Working Papers
ISSN 1871-9872