The Pursuit of Success in Small and Medium Enterprises (SMEs) and Business Environment in

Ethiopia

A thesis submitted in accordance with the requirements of the degree of

Doctor of Philosophy (D.Phil)

By
Adil A. Thabit

November, 2017

ABSTRACT
The purpose of this study was to identify the environmental factors affecting the business
success of Small and Medium Enterprises (SMEs) in Ethiopia as perceived by
owners/managers. SMEs are considered to be the most efficient tools able to push
economic and social developments as they offer useful services to consumers and provide
employment opportunities. Being one of the most important sectors for economic
development in many countries, Small and Medium Enterprises are becoming the center
of attention for researchers. Despite their contribution to economic and social
development, SMEs have been suffering from a number of impediments that challenge
their survival and growth. Internal and external environmental factors that affect SMEs
provided impetus to conduct this study in regard to the perception of owners/managers.
This mixed methods study set five research objectives and formulated fourteen
hypotheses. Based on systematic random sampling, a structured questionnaire was
distributed and primary data was collected from 369 SME owners/managers. The data
were handled using both descriptive and inferential statistical analyses methods based
on SPSS version 23. To find out factors that affect business success of SMEs as perceived
by owners/managers, fourteen hypotheses were tested at a 5% significance level. To
determine the individual and combined effect of factors on business success, simple and
multiple regression analyses were used. The result revealed that firm characteristics,
personality characteristics, entrepreneur competences, political-legal environment,
economic environment, socio-cultural environment, technological environment, supplier
relationship, and competitive environments were significant factors. The study also
revealed that owners/managers perceived external factors affected their business success
more than internal factors. Based on the findings, conclusions and recommendations
were made. Limitations were also acknowledged. As one of the few studies that attempted
to investigate the success factors of SMEs from the perspective of owner-managers, the
study contributes to a better understanding of the factors that could play a role in similar
contexts.

2
Key words: SMEs, Environments, Perception, Owner/Managers, Pursuit, Business
success, Ethiopia

3
 Table of Contents
Abstract…………................................................................................................................................
Acknowledgement..............................................................................................................................
Declaration………...............................................................................................................................
Dedications…….................................................................................................................................
List of Tables…….............................................................................................................................
List of Figures…...............................................................................................................................
List of Acronyms...............................................................................................................................
CHAPTER ONE..................................................................................................................................
INTRODUCTION...............................................................................................................................
1.1 The Ethiopian Context...............................................................................................................
1.2 Small and Medium Enterprises in Ethiopia................................................................................
1.3 Background of the Study...........................................................................................................
1.4 Statement of the Problem...........................................................................................................
1.5 Objectives of the Study............................................................................................................
1.5.1 General Objective.....................................................................................................................
1.5.2 Specific Objectives...................................................................................................................
1.6 Justification of the Study.........................................................................................................
1.7 Significance of the Study.........................................................................................................
1.8 Scope of the Study...................................................................................................................
1.9 Definitions of Key Terms........................................................................................................
1.10 Structure of the Report.............................................................................................................
CHAPTER TWO...............................................................................................................................
REVIEW OF LITERATURE............................................................................................................
2.1 Introduction.............................................................................................................................
2.2 Meaning and Importance of SMEs..........................................................................................
2.3 Performance, Success and Failure of SMEs.............................................................................
2.3.1 Success as Survival...................................................................................................................
2.3.2 Success as Growth....................................................................................................................
2.3.3. Measure of Success..................................................................................................................
2.4 Success Factors of SMEs.........................................................................................................

4
2.4.1 Overview of Environmental Factors.........................................................................................
2.4.2 Internal Factors.........................................................................................................................
2.4.2.1 Characteristics of SMEs.........................................................................................................

2.4.2.2 Characteristics of Entrepreneurs..........................................................................................

2.4.2.3 Firm Strategies.......................................................................................................................

2.4.3 External Factors........................................................................................................................

2.4.3.1 Macro Environmental Factors................................................................................................

2.4.3.1.1 Economic Factor.................................................................................................................

2.4.3.1.2 Political and Legal Factor...................................................................................................

2.4.3.1.3 Socio-Cultural Factors........................................................................................................

2.4.3.1.4 Technological Factors.........................................................................................................

2.4.3.2 Micro Environmental Factors................................................................................................

2.4.3.2.1 Customer Relationships......................................................................................................

2.4.3.2.2 Suppliers Relationship........................................................................................................

2.4.3.2.3 Competitors........................................................................................................................

2.4.3.2.4 Ethnic Sensitivity................................................................................................................

2.4.3.2.4.1 Ethnic Composition of Workers.......................................................................................

2.4.3.2.4.2 Concomitance of Ethnic Membership and Business Premises.........................................

2.5 Entrepreneurs’ Perception of Success......................................................................................

2.6 Development of Conceptual Framework and the Research Gap..............................................
2.7 Hypotheses of the Study..........................................................................................................
2.8 System of Literature Review used...........................................................................................
CHAPTER THREE...........................................................................................................................
RESEARCH METHODOLOGY......................................................................................................
3.1 Introduction.............................................................................................................................
3.2 Understanding Research Philosophies.....................................................................................
3.2.1. Ontology..................................................................................................................................
3.2.2. Epistemology...........................................................................................................................
3.2.3. Axiology..................................................................................................................................

5
3.2.4. Applicable Research Philosophy..............................................................................................
3.2.5 The Positivist Paradigm............................................................................................................
3.3 The Interpretivist Paradigm.....................................................................................................
3.4 Philosophical Context of the Study..........................................................................................
3.5 Methodological Choice............................................................................................................
3.6 Research Strategy....................................................................................................................
3.7 Research Logic: Inductive versus Deductive..........................................................................
3.8 Research Approach..................................................................................................................
3.9 Research Process.....................................................................................................................
3.10 Time Horizon...........................................................................................................................
3.11 Research Study Descriptions...................................................................................................
3.12 Target Population, Sampling Technique and Sample Selection...............................................
3.12.1. Target Population...................................................................................................................
3.12.2. Sample Frame........................................................................................................................
3.12.3. Sampling Methods.................................................................................................................
3.12.4. Sample Size...........................................................................................................................
3.13 Catering for the non- response.................................................................................................
3.14 Data Collection Methods and Procedures................................................................................
3.14.1. Primary and secondary Data Source and Tools......................................................................
3.14.2. Data Collection Procedure.....................................................................................................
3.15 Validity and Reliability of Instruments..................................................................................
3.16 Data Processing and Analysis Procedure...............................................................................
3.17 Role, Nature and Attributes of Hypothesis............................................................................
3.18 Descriptive Analysis..............................................................................................................
3.19 Inferential Analysis................................................................................................................
3.20 Ethical Issues in the Study.....................................................................................................
CHAPTER FOUR...........................................................................................................................
RESULTS AND ANALYSIS..........................................................................................................
4.1 Introduction...........................................................................................................................
4.2 Data Analysis.........................................................................................................................
4.3 Data Preparation....................................................................................................................
4.4 Return Rate............................................................................................................................
4.5 Reliability..............................................................................................................................

6
4.6 Descriptive and Inferential analysis.......................................................................................
4.6.1 Descriptive Analysis..............................................................................................................
4.6.1.1 Demographic Characteristics of the Respondents............................................................
4.6.1.2 Demographic Characteristics of the Businesses.................................................................
4.6.1.3 Business Success...............................................................................................................
4.6.1.4 Success Factors..................................................................................................................
4.6.1.4.1 Internal Factors...............................................................................................................
4.6.1.4.1.1 Firm Characteristics.......................................................................................................
4.6.1.4.1.2 Entrepreneur Characteristics..........................................................................................
4.6.1.4.2. External Factors...............................................................................................................
4.6.1.4.2.1. Macro Environmental Factors.......................................................................................
4.6.1.4.2.2. Micro-Environmental Factors.......................................................................................
4.6.2 Inferential Analysis................................................................................................................
4.6.2.1 Multicollinearity................................................................................................................
4.6.2.2 Normality Test...................................................................................................................
4.6.2.3 Correlation Analysis..........................................................................................................
4.6.2.3.1 Correlation Analysis between the Independent and Dependent Variables......................
4.6.2.3.1.1 Correlation between Firm Characteristic and Business Success...................................
4.6.2.3.1.2 Correlation between Socio-Demographic Characteristics and Business success..........
4.6.2.3.1.3 Correlation between personality characteristics and business success.........................
4.6.2.3.1.4 Correlation between Competencies of the Entrepreneur and Business success............
4.6.2.3.1.5 Correlation between Economic Factors and Business Success.....................................
4.6.2.3.1.6 Correlation between Political-legal Factors and Business Success..............................
4.6.2.3.1.7 Correlation between Technological Factors and Business success...............................
4.6.2.3.1.8 Correlation between Access to Networking and Business Success..............................
4.6.2.3.1.9 Correlation between Customer Relationship and Business Success.............................
4.6.2.3.1.10 Correlation between Suppliers’ Relationship and Business Success..........................
4.6.2.3.1.11 Correlation between Competition and Business Success...........................................
4.6.2.3.1.12 Correlation between coexistence of ethnic membership and business premises and
business success........................................................................................................
4.6.2.3.1.13 Correlation between External and Internal Factors and Business success..................
4.6.2.4 Regression Analysis.............................................................................................................
4.6.2.4.1 Firm Characteristics as a predictor of business success..................................................

7
4.6.2.4.2 Socio-demographic Characteristics as Predictor of Business Success.............................
4.6.2.4.3 Personality Characteristics as Predictor of Business success..........................................
4.6.2.4.4 Competences of the entrepreneur as predictor of Business success................................
4.6.2.4.5 Economic Factor as predictor of Business success..........................................................
4.6.2.4.6 Political-legal factor as predictor of Business success....................................................
4.6.2.4.7 Technological Factor as predictor of Business success...................................................
4.6.2.4.8 Access to Networking as Predictor of Business Success.................................................
4.6.2.4.9 Customer Relationships as Predictor of Business Success..............................................
4.6.2.4.10 Supplier Relationships as Predictor of Business Success..............................................
4.6.2.4.11 Competition as Predictor of Business Success..............................................................
4.6.2.4.12 Coexistence of Ethnic group & Business premises as Predictor of Business success....
4.6.2.4.13 External and Internal Environmental Factors as Predictor of Business Success............
4.6.2.4.14 Environmental factor that predicts the business success more......................................
4.7 Hypotheses Testing................................................................................................................
4.8 Implications and Summary of Hypothesis Testing..................................................................
CHAPTER FIVE.............................................................................................................................
CONCLUSIONS AND RECOMMENDATIONS...........................................................................
5.1 Introduction...............................................................................................................................
5.2 Conclusion of Main Variables...............................................................................................
5.2.1 Internal Factors......................................................................................................................
5.2.2 External Factors.....................................................................................................................
5.3 Contributions and Recommendation of the Research Findings................................................
5.3.1 The contributions of the Research.........................................................................................
5.4 Recommendations of the Research..........................................................................................
5.4.1 Recommendations for Practitioners......................................................................................
5.4.2 Recommendations for Policy................................................................................................
5.5 Future Research Directions......................................................................................................
5.6 Research Limitations...............................................................................................................
References…….....………………………………………………………………………………………………………………………170
Appendices………..........................................................................................................................

8
 ACKNOWLEDGEMENTS

Agony and pleasure are two sides of a coin in pursuing a D.Phil study. It is like building blocks
step by step, escorted with pain, hardship, frustration and a sense of accomplishment. Writing this
D.Phil thesis has been a journey involving many people. I realized that it was, in fact, teamwork
that got me here. In completing this research, I am greatly indebted to various wonderful people
for their assistance and contributions in one way or another. I would like to deeply acknowledge
the intellectual sharing of many great individuals.

First and foremost, my sincere thanks and gratitude goes to my respected supervisor, Prof. Dr.
Junaid Shaikh, for providing invaluable assistance, guidance, support, encouragement and
insightful comments at different stages of this research. Thank you, again for all that you did
throughout the entire process and made me able to complete this study.

It is humbling to gratefully acknowledge the support of some special individuals. Words fail me
to express my appreciation and thanks in particular to Dr. Abera Demsis, Mr. Amare Abewa, Mr.
Mesfin Andarge, and Mr. Adamu Hailemariam with whom we shaped up this work and the many
rounds of discussions that helped me a lot. They were always beside me during the happy and
hard moments to push and motivate me. Thank you doesn’t seem sufficient but it is said with
appreciation and respect to all of them for their support, encouragement, care, and understanding.

I give my heartfelt thanks to Dr. Amanuel Gebru for critically editing this thesis. I am also
indebted to Ms. kalkidan Aklilu for spending her precious time in formatting this research paper.
Their support was invaluable in completing this research.

I would like to express my appreciation to all management team and staff members of SMART
Management Services Plc. and its portfolio companies. They have always been working hard to
ensure smooth operations in all companies’ business undertakings when I was engaged in my
PhD study. I would like to thank all of them for sharing my burden and enabling me to focus on
my study.

My special acknowledgements finally go to my family. They form the backbone and origin of my
happiness. Their understanding encouraged me to work hard and continue pursuing the doctoral
program. Their love and support without complaint or regret enabled me to complete the
program. I am greatly indebted to my wife Mrs. Arsema Abebe for patience and understanding
during the long study period. She took every responsibility and underwent all the challenges that
come with taking care of the family. I owe my every achievement to them all.

9
 DECLARATION

Student number: TA231076

I, Adil Abdella Thabit, declare that “The Pursuit of Success in Small and Medium
Enterprises (SMEs) and Business Environment in Ethiopia” is my original work and
has not been submitted for the award of any degree in any other university.

__________________ November 20, 2017

Signature Date
Adil A. Thabit

10
 DEDICATION

This thesis is dedicated to my dear wife Arsema and my

beloved children Mikias and Ruth. Without their
support, patience and understanding, I could not have
reached this stage. This doctoral study is for my children
as a reminder that nothing is too hard nor too late to
achieve.

11
List of Tables

Table 2.1: European Commission Category of MSMEs....................................................................

Table 2.2. The World Bank Definition of MSMEs...........................................................................

Table 2.3. FeMSEDA Definition and Category of MSE....................................................................

Table 3.1: Ontology and epistemology of research paradigms..........................................................

Table 3.2 Axioms of the two research philosophies..........................................................................

Table 3.3: Differences between quantitative and qualitative research.................78Table 3.4: Major
Differences between Deductive and Inductive Logic..............................................................
Table 3.5: Sample Frame for SMEs...................................................................................................

Table 3.6 Summary of characteristics of the major research strategies..............................................

Table 3.7: Summary of ethical issues that need addressing in a research process............................

Table 4.1: Internal consistency of the survey instrument.................................................................

Table 4.2: Cross tabulation of work experience and relevant experiences.......................................

Table 4.3: Cross tabulation of owners’/managers’ parents Education.............................................

Table 4.4: Annual Turnover of enterprises as reported by owners/managers..................................

Table 4.5: Size of enterprises (In terms of Employee numbers)......................................................

Table 4.6: Economic Factor.............................................................................................................

Table 4.7: Political-legal factors.....................................................................................................

Table 4.8: Technological Factors.....................................................................................................

Table 4.9: Socio-cultural Factors.....................................................................................................

Table 4.10: The Micro-environmental factors variables:.................................................................

Table 4.11 Multicollinearity test......................................................................................................

Table 4.12 Correlations (Pearson Correlation) Sig. (2-tailed)..........................................................

Table 4.13: Regression Model summary.........................................................................................

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Table 4.14: Coefficients of firm characteristics...............................................................................

Table 4.15: Coefficient of socio-demographic characteristics.........................................................

Table 4.16: Coefficient of Personality characteristics......................................................................

Table 4.17: Coefficient of Entrepreneurs competences...................................................................

Table 4.18: Coefficient of Economic Factor....................................................................................

Table 4.19: Coefficient of Political-legal factor...............................................................................

Table 4.20: Coefficient of technological factor...............................................................................

Table 4.21: Coefficient of Access to Networking............................................................................

Table 4.22: Coefficient of Regression for Customer Relationships.................................................

Table 4.23: Coefficient of correlation for Supplier Relations..........................................................

Table 4.24: Regression Coefficient of Competition.........................................................................

Table 4.25: Coefficient of coexistence of ethnic group and business premises................................

Table 4.26: Coefficient of external and internal environmental factors...........................................

Table 4.27: Coefficient of external and internal environmental factors...........................................

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List of Figures

Figure 2.1: Conceptual Framework...................................................................................................

Figure 3.1 Research Onion................................................................................................................

Figure 3.2 Research Process..............................................................................................................

Figure 4.1: Age group of owners/managers.....................................................................................

Figure 4.2: sex composition of owners/managers............................................................................

Figure 4.3: Educational Status of owners/managers........................................................................

Figure 4.4: Work Status of Respondents (hired/not)........................................................................

Figure 4.5: Parents Business ownership..........................................................................................

Figure 4.6: Involvement in Day-to- Day Operation.........................................................................

Figure 4.7: Legal form of Business Formation................................................................................

Figure 4.8: Business Areas of Enterprises.......................................................................................

Figure 4.9: Business Ownership Type.............................................................................................

Figure 4.10: Operational Age of Enterprises...................................................................................

Figure 4.11: Location of the Enterprise from the Main road............................................................

Figure 4.12: Normal P-P Plot of Regression Standardized Residual: Internal Environmental
Factor..........................................................................................................................

Figure 4.13: Normal P-P Plot of Regression Standardized Residual: External environmental
factor...........................................................................................................................

Figure 4.14: Normal P-P Plot of Regression Standardized Residual: Business Success..................

14
List of Acronyms

UNDP United Nations Development Program

SPSS Statistical Package for Social Sciences
SD Standard Deviation
MUDC Ministry of Urban Development and Construction
NGOs Non-Government Organizations
MSEs Micro and Small Enterprises
MSMEs Micro, Small and Medium Enterprises
MoTI Ministry of Trade and Industry
MOFED Ministry of Finance and Development
ILO International Labor Organization
GoE Government of Ethiopia
FeMSEDA A Federal Micro and Small Enterprises Development Agency
DV Dependent Variable
ANOVA Analysis of Variance

15
 CHAPTER ONE
INTRODUCTION

1.1 The Ethiopian Context

Ethiopia, a country in the Horn of Africa, borders Eritrea in the North, Djibouti in
Northeast, the South Sudan and Sudan in the West, Somalia in the east and Kenya
in the South. With an area of 1,235,000 square kms, Ethiopia is as large as France
and Spain combined. About 65% of Ethiopia’s landmass is arable, of which only
15% is cultivated. According to the Central Statistics Agency of Ethiopia,
Ethiopia’s population is estimated to be around94 million, of which over 50% are
under the age 20 and about 82.5%, reside in rural areas. In terms of population
density, the number of inhabitants per square km is about 96.96. The capital city
Addis Ababa has about 3.4million inhabitants (CSA, 2017).

Ethiopia is an ethnically diverse country with more than 83 languages. Amharic,

the official language is spoken by 60% of the population; Oromigna and Tigrigna
are also commonly spoken. English is the most widely spoken foreign language
in big cities. Geographically, Ethiopia has a rugged topography with an elevated
central plateau varying in height between 2,000 and 3,000 meters. In the north and
center of the country, there are about 25 mountains, with peaks that rise over
4,000 meters (peak of Ras Dashen is at 4,620 meters). Dallol, one of the world’s
lowest and hottest places on earth is 48 meters below sea level, with active
volcanoes located at ErtaAle. Colorful hot brine springs are found in the
Northeastern part of the country. Lake Tana, found in the northern part of
Ethiopia, is the source of the Blue Nile River, which along with White Nile forms
the Nile, the longest river in the world stretching 6, 853 kilometers. Similarly,
Omo River rises in western part of the Ethiopian plateau and feeds into Lake
Turkana on the Kenyan border (Mezgebe, 2010).

Ethiopia has two main climate seasons- a dry season and a rainy season. The dry
season runs from October to May and the rainy season is between June to

~ 16 ~
September. Due to huge variation in altitude, the country is not uniformly
characterized by a tropical climate across the national space. Under 1,830 meters,
average temperature is 27°C. Between 1,830 and 2,440 meters, the temperature is
about 22°C. Above 2,440 meters, the temperature is cooler (around 16°C) and
precipitation is abundant (from 1,270 meters to 1,780 meters per year).

Over 82.5 percent of the Ethiopian population is currently living in rural areas.
The vast and dispersed settlements in the rural areas have large populations with
minimal access to social and economic services- such as healthcare, Education,
and Transportation; and economic resources are limited (Mezgebe, 2010).

Ethiopia’s economy is gradually changing from farming to agro-industry and

industrialization. Following the overthrow of the communist government and
introduction of a new constitution over two decades ago, various market
transforming policies have been put in place encouraging private investment
including the Small and Medium Enterprise (SME) sector. In 2003, the
government introduced the Industrial Development Strategy which identified
Micro and Small Enterprises (MSEs) as priority areas.

The Ethiopian government has also embarked on a comprehensive five-year

development strategy called Plan for Accelerated and Sustained Development to
End Poverty (PASDEP, 2005/06- 2009/10). UNDP (2012) has indicated that the
development of MSE’s is the key component of Ethiopia’s industrial policy
direction that will contribute to the industrial development and economic
transformation of the country. Even the country's most recent grand plans (the
Growth and Transformation plan-GTP I, 2011-2015 and GTP II, 2016-2020) have
stressed the need for providing support to MSEs. The five-year Growth and
Transformation Plans (GTP I and II) have given particular attention to the
expansion and strengthening of micro and small-scale enterprises (MoWUD,
2007:17-28).

The Government has attempted promoting the development of the sector through
institutional plans, workable laws and regulations, in order to encourage the

~ 17 ~
growth and development of SMEs that ultimately contribute to national growth
and transformation.

As a result, many SMEs facilitated job creation, entrepreneurship, poverty

alleviation, and enhanced national economic development (MoFED, 2010).

However, there are inherent problems which affect the long term survival and
business performance of SMEs in the country due to lack of financial resources,
management experience, poor location, poor infrastructure, low demand for
products or services, corruption and shortage of raw materials (Akabueze, 2002;
Drbieand Kassahun, 2013). Hence, the purpose of this research was to analyze the
environmental factors that affect the success of SMEs as perceived by their
owner-managers.

1.1[1.2] Small and Medium Enterprises in Ethiopia

In most developing countries, SMEs by advantages of their size, location, capital
investment and capacity generate greater employment. MUDC (2013) revealed
that there were different government policies to lay the foundation of basic
administrative and institutional infrastructure of the state during the 1940’s and
1950’s that consolidated the gains of reforms that were made to accelerate the
process of industrialization in Ethiopia. Of the several reforms, the development
of SME’s is one which addressed the Business Enterprise Registration
Proclamation No.184/1961 that required the business enterprises to register under
the Ministry of Commerce and Industry. Furthermore, according to the Industrial
Regulation Legal Notice No.292/1971 manufacturing enterprises were required to
obtain a temporary license of six months validity and a permanent license. The
Investment Proclamation No. 242/1966 provided SME’s tax relief, access to land
and buildings, public utilities and other facilitations of advisory and
administrative nature. Although these attempts were made to support SME’s
development in the country, the socialist regime which followed a centrally
planned economic system from 1974 until its demise in 1990 was characterized
by excessive government interventions, burdensome rules and regulations,

~ 18 ~
bureaucratic red-tape as well as excessive and costly administrative and legal
requirements to obtain trading license. Still worse the Proclamation No.26/1975
ended up in the state owning and controlling the means of production. Moreover,
the Proclamation No.76/1975 restricted acquisition of private businesses to a
single license and capital ceilings which were set at 300,000 birrs for wholesale
trade, 200,000 for retail trade and 500,000 for industrial establishments. The
regime also nationalized private property and together these actions of the
socialist state had caused the previously existing private sector virtually to
collapse and vanish.

In the late 1977, the Handicrafts and Small-Scale Industries Development Agency
(HASIDA) was established by Proclamation No. 124/1977. The objective of this
proclamation was to give further impetus to the development of the public
economy by encouraging cooperative development in the small-scale sector by
issuing licenses to cooperatives, regulating their activities, and assisting in the
provision of inputs and training (MUDC (2013)). As Teshome (1994) noted, the
communist government (the Dergue regime) had declared a new program of
mixed economy development with two declarations in two successive years: The
Small-Scale Industry Development Special Decree No.9/1989 and Special Decree
on Investment No.17/1990. The former decree allowed the establishment of
small-scale enterprises by business organizations, cooperatives and individual
entrepreneurs and replaced the restrictive Proclamation No.76/1975 and allowed
participation by the Diaspora and raised the capital ceiling for small scale
enterprises from birr 500,000 to between two and four million birrs (MoTI, 1997).
The Decree No.17/1990 had lifted the restriction of private sector participation to
a single license and allowed individuals to undertake investment in an unlimited
number of enterprises though the journey into mixed economy development was
short lived due to various factors.

After the downfall of the Dergue regime, the Ethiopian Peoples’ Revolutionary
Democratic Front (EPRDF), the current ruling party had introduced public sector
reform and private and market economy development. The licensing and
supervision of micro financing institutions proclamation in 1996 and the Federal
~ 19 ~
and Regional SME’s Strategy in 1997 were adopted to enhance the operation of
SME’s. Furthermore, Federal and Regional SME’s Development Agencies were
established with the main objectives of utilizing local raw material, creation of
jobs, adoption of new and appropriate technologies, and enhancement of the
development of SME’s (MUDC, 2013). SMEs, as part of the industrial sector, are
increasingly becoming popular and important in the Ethiopian economy as they
would play a decisive role in contributing to employment creation, poverty
reduction and wider distribution of wealth and opportunities. The current Growth
and Transformation Plan (2010 -2015) has also given priority to MSE’s
development, and identified SME’s as one of the seven growth pillars of the
country (MoFED, 2011).

However, SMEs have faced a number of constraints from external and internal
factors, such as, lack of access to markets, finance, business information; lack of
business premises; low ability to acquire skills and managerial expertise; low
access to appropriate technology and poor access to quality business infrastructure
(Stevenson and Annette, 2006).

1.2[1.3] Background of the Study

Small and Medium Enterprises (SMEs) are regarded as the engine of economic
growth and equitable development in both developed and developing economies;
and their importance is well recognized worldwide due to its significant
contribution to meet various socio-economic objectives, such as higher growth of
employment, promotion of exports and fostering entrepreneurship (Hidayet, et al.,
2010). Because they generate more new jobs than large firms or microenterprises
by introducing innovative ideas, products, and business methods, small and
medium enterprises (SMEs) are generally thought to play a crucial role in driving
economic growth in both developing and developed countries (Small Enterprise
Assistance Funds, 2004).

However, there are no uniform definitions of Small and Medium Enterprises.

Different organizations and countries define Small and Medium Enterprises

~ 20 ~
differently. In Ethiopia, the private sector is substantially dominated by micro,
small and medium Enterprises (MMSEs). As per the 2017 FeDRE definition,
MMSEs includes all enterprises that operate with human power of not more than
100 persons and with paid up capital of total assets not exceeding Birr 20 million
(MoI, 2017). However, this study adapted a definition given by the Ethiopian
Central Statistical Agency: “Small and Medium Enterprises are enterprises with
employees of between 5 and 50”. In this definition, the CSA has included level of
employment, turnover, capital investment, production capacity, level of
technology and subsector as variables in the definition of enterprises. Therefore,
this study took the definitions given for each sector.

The SMEs Sector in Ethiopia is the second largest employment generating sector
following agriculture. The sector contributes 3.4% of the total GDP constituting
33% of the industrial sector’s contribution and 52% of the manufacturing sector’s
share of the GDP in the year 2001(CSA 2005, cited by Selamawit, Aregawi and
Negus, 2014).

According to Khrystyna, et al. (2010), there are 125 million formal MSMEs in the
world, including 89 million in emerging markets. However, these MSMEs are
suffering from different impediments, internal or external to the enterprise. For
example, Ethiopian SMEs are prevented from reaching their full growth potential
due to systematic inefficiency, shortage in human resource, research and
development fund, shortage of business sites, underdeveloped infrastructure, and
constraints to access financial services (Sungil, et al., 2013). These impediments
can be broadly categorized as external and internal factors that influence the
success and failure of SMEs.

Toyin, et al. (2014) identified four major challenges confronting small businesses
as: lack of adequate funding, poor record keeping and information management,
inability to distinguish business capital from personal money, and shortage of
crucial infrastructural facilities. Though most of the literature attributes the poor
performance of SMEs to external factors, problems that are within the firm are
rarely scrutinized (Yukichi, et al., 2012). Simeon and Lara (2009) also identified

~ 21 ~
four factors that are associated with the growth of small firms. These factors are
individual entrepreneur characteristics, firm characteristics, relational factors like
social network or value-chain, and contextual factors such as business
environment.

In addition, researchers in different countries identified factors that can affect the
success of SMEs in various countries as limited access to finance, low level of
education, poor managerial skills, shortage of technical skills, inability to convert
part of their profit to investment; lack of proactive government attention towards
the sector, high lending rate, lengthy loan application procedures, strict collateral
requirement, lack of information, failures to protect creditors, improper business
models , and others (Fredu and Edris , 2016;World Bank, 2015; Ashenafi, 2012;
Eshetu and Zeleke, 2008; Pietro , et al., 2012; Imoughele and Ismaila, 2014;
Johnson, et al., 2014; Ramón and Rodrigo , 2013; Amare and A. Raghurama ,
2017).

The major SMEs’ success factors are basically grouped in to internal and external
(Yassine (2013). In the study, internal factors are further extended into SMEs
characteristics, entrepreneur attributes, and firm strategies. The study further sub-
classified external factors into macro environmental and micro environmental
factors. To examine these factors as success constraints of SMEs, the study used
different measurements of performance and success. Having reviewed the
literature on environmental factors that affect the success of firms, this study
envisaged to explore how these factors were perceived by owner-managers in the
Ethiopian SME context.

Waldinger, Howard, and Ward (1990 cited in Tulay et al 2011) defined ethnic
entrepreneurship as ‘‘a set of connections and regular patterns of interaction
among people sharing a common national background or migration experiences.
Since ethnic entrepreneurship has a critical role in developing and building the
economy at the social level, it is not surprising that it has become increasingly
popular for researchers to study ethnic entrepreneurship. Ethnic entrepreneurship
is business ownership among immigrants, ethnic-group members, or both Valdez

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(2008). Ethnic entrepreneurs have formed enclaves that serve as shelters for the
entrepreneurial activities of ethnic group members, providing resources that
enable them to confront economic discrimination and competition. In this context
those who are running a business out of their ethnic territory may sometimes feel
they are strangers especially when the local community’s perception is different
from the entrepreneurs’ perspectives.

1.3[1.4] Statement of the Problem

The SMEs sector has been considered as an enabler of economic growth, poverty
reduction, and social development due to its effect on employment and income
generation, import substitution, its role as a springboard to entrepreneurship and
industrialization, input distribution for large industries and distribution of
products through linkage and sub-contracting, and income distributions among
different sections of the society (Mead and Liedhom, 1998 Liedholm, 2002
Bekele and Worku, 2008; Kabongo and Okpara, 2009).

The contribution of a business enterprise to economic development largely

depends on how it deals with challenges including threats and constraints. Micro,
Small and Medium Enterprises (MSMEs) with their small size and their lack of
economies of scale, are to a great extent, disadvantaged by globalization and trade
liberalization. In addition, at the local level, they have to deal with challenges and
constraints including unfavorable legislation and regulation, poor co-ordination
and support, limited access to finance, inadequate training, deficient marketing
and sales policy, poor networking, deficient infrastructure, and inappropriate
technology (Mamingi, 2011).

Aiming to identify key predictors of long term survival and viability in small
businesses and enterprises in Ethiopia, a study by Eshetu and Zeleke, (2008)
revealed that both internal and external factors have contribution for the success
of the enterprises in different ways. The success of the enterprises can also be
enhanced by support from external environmental elements. According to Hailu
(2010), the essential factors in bringing success to Micro and Small Enterprise

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development are existence of functional networks, adequate physical
infrastructures, availability of raw materials, access to finance, production
technology and market promotion.

Berihu , et al.(2014)found that the key success factors for Small and medium
Enterprises were personal qualities such as having an articulate vision or ambition
and innate abilities, working experience in the formal sector as a factory
employee or having worked in family businesses, managerial and entrepreneurial
skills and higher equity in the invested money. According to Hanna (2010) and
the Ethiopian Ministry of Urban Development and Construction (MUDC) (2013),
though the extent varied across regions and cities, in Ethiopia irregular supply of
raw materials, lack of working premises, insufficient startup and working capital,
lack of access to market, lack of access to land and limited technical and
managerial skills and inefficient management of SMEs were the major obstacles
of the sector.

In addition, owners of the enterprises and SMEs coordinators and experts

continuously cite critical problems they face in their day-to-day operations related
to internal and external factors. As argued by Zuzana and Mthuli (2013), the
contribution of entrepreneurship in high-value added activities for the fast-
economic growth of Ethiopia is limited because of a weak business environment.
However, the macro and micro business environment of Ethiopia along with
demographic variables of owner managers and the experience and size of the
enterprise together with owner manager perception of the environment as a
success factor for SMEs is not well studied.

From the broader perspective, the success factors are categorized into internal and
external factors to the enterprises. The internal factors are again written-off as
SME characteristics (size, age and location of the enterprise), Characteristics of
the entrepreneur (socio-demographic characteristics, background characteristics
of entrepreneur), Personality characteristics (need for achievement, locus of
control, and propensity for risk taking), Competence and skill of entrepreneur
(entrepreneurial, managerial and functional competencies), and Firm strategies.

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On the other hand, external factors are grouped into three major sets as Macro
environmental factors (constituting economic, political and legal, technological,
and socio-cultural variables), micro environmental factors (constituting customer
relationships, supplier relationships, and competitors). However, in multi-cultural
and ethnicity-based setups like Ethiopia, the ethnic sensitivity factor, (constituting
ethnic composition of workers and firms’ premises and owners’ ethnic affiliation)
is missing in the literature that caught the attention of the researcher and
motivated the same to bridge the gap identified.

This research is conducted to develop a clear understanding of the relationship

between environmental factors and the pursuit of business success in Small and
Medium Enterprises (SMEs) in Ethiopia, as perceived by owner-managers, and to
extend the SMEs success factors framework by inserting an attribute- ethnic
sensitivity. The conceptual framework together with the gap identified is attached
to the second chapter.

1.4[1.5] Objectives of the Study

1.5.1 General Objective

The general objective of the research is to understand the effect of environmental
factors on business success in Small and Medium Enterprises (SMEs) in Ethiopia,
as perceived by owner-managers.

1.5.2 Specific Objectives

The key specific objectives of the study are:

1. To identify relevant internal environmental factors which influence business

success as perceived by owner-managers of SMEs in Ethiopia,
2. To identify the major external environmental factors that influence the SMEs’
business success in the opinion of owner-managers,
3. To determine the combined effect of the external and internal environmental
factors on the performance of SMEs in Ethiopia as perceived by owner-
managers,

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4. To examine which environmental factors contribute more to the success of
SMEs,
5. To examine the effect of concomitance of firms’ premises and Entrepreneurs’
ethnic membership on business success of SMEs.

1.5[1.6] Justification of the Study

Although there have been a number of studies conducted in Ethiopia, their focus
was mainly on micro and small enterprises’ access to finance from Micro finance
institutions. These prior studies were not focused on inclusive success factors of
SMEs as perceived by owner-managers about their environment, which is one of
the prime motives for this study. Furthermore, the researcher has been running
small and medium businesses in Ethiopia for more than a decade, and he has also
the feeling of disquiet about the business success of SMEs in Ethiopia. This
sentiment of unease developed due to the researcher’s quest for business success
confronting the existing business environmental factors. The impacts of several
environmental forces on SMEs business undertakings served as the driving force
to inquiries aiming to come up with some fresh insights in the specific areas. Such
environmental factors as identified are still impedimental constraints of the SMEs
that make the road to success rough.

The researcher’s view on this issue is also shared by several owners and managers
of SMEs and documented in a World Bank Group report on “Doing business in
Ethiopia: 2016”,which ranks Ethiopia 146th out of 189 countries (World Bank
Group: Doing Business: 2016). The researcher believes that SMEs in Ethiopia
have been vulnerable to the business environment challenges which might have
had an impact on their performance. According to Man and Lau (2005), SMEs are
more likely than larger firms to be affected by changes in their internal and
external environment. Thus, an important issue arises concerning the ability of
small and medium firms in Ethiopia to cope up with a very challenging
environment.
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In addition to the prime motive stated above, the absence of a comprehensive
model for the success of SMEs applicable to multi-cultural and ethnic setups is
also the justification behind the researcher’s aim. Though individual studies on
specific factors of SMEs have been conducted in Ethiopia, a model that can treat
every success factor along with the ethnic sensitivity element is missing. In
countries like Ethiopia, where the administration system is ethnic based
federalism, some entrepreneurs may not feel comfortable doing business out of
their ethic territory. There is no sufficient literature on the study area, to the best
knowledge of the researcher, as to whether ethnic sensitivity and ethnic
composition of workers do have impact on the success of SMEs or not. As
described in the statement of the problem section, the ethnic sensitivity attribute
as a Micro environmental factor comprises of workers’ ethnic composition and
entrepreneurs’ ethnic membership and the work place (region) of the SMEs.

This study, therefore, is carried out in order to develop a clearer understanding on

the effect of environmental factors on business success in Small and Medium
Enterprises (SMEs) in Ethiopia, as perceived by owner-managers.

1.6[1.7] Significance of the Study

The study provides a comprehensive overview for policy makers, governmental
institutions and other concerned bodies at the national, regional and local levels.
In addition, it can act as a strategic vehicle for harmonizing the SME development
activities with their perceived values to the environmental factors. From the
academic perspective, the study contributes to future development in the areas
particularly in a developing country context. This study helps to inform the SMEs
owners, managers, and workers on the factors that are affecting SME success and
hence, entrepreneurs and workers can formulate ways of dealing with the
problems.

From a theoretical perspective, this study fills the knowledge gap and adds to the
literature on the effect of the internal and external environment factors together
with specific attributes on the success of SMEs from the owner managers’

~ 27 ~
perspectives in the context of Ethiopia. In addition, the effect of owner ethnic
sensitivity on the success of SMEs is a particular contribution of the present study
since prior research on the area is almost nonexistent. To sum up, the study is
significant in different ways for SMEs, entrepreneurs and the academia.

1.7[1.8] Scope of the Study

The study has both geographic and conceptual scope. Conceptually the study is
limited to Small and Medium Enterprises that precludes micro enterprises.
Though there are relatively different definitions and categories of SMEs used by
different organizations in Ethiopia, the study used the definition and category
given by the Central Statistics Agency and the Ministry of Industry. From the
geographical scope perspective, this study is restricted to Ethiopia specifically to
SMEs found in Addis Ababa and nearby areas of Oromia region, within 100 km
radius as 70% of the manufacturing firms of Ethiopia is concentrated in this zone
(UN, 2002).

In view of the fundamental role of the owner-managers in the SMEs, they are
considered as the key stakeholders within the firm. This study focused on small
and medium sized enterprises that are currently active and registered by the
Ministry of Trade. Thus, the study investigates the contemporary business
environment in Ethiopia and its effect on the success of SMEs. Furthermore, the
present study is delimited to formal SMEs of the manufacturing sector. Though
the study mainly focused on Addis Ababa city, the surrounding areas are covered
purposively due to the ethnic sensitivity factor having clear relevance to these
areas.

1.8[1.9] Definitions of Key Terms

Key terms and concepts used in the thesis are defined as follows;

SME: Small and Medium Enterprises are defined in different ways by different
organizations and different countries. However, this study adapted a definition

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given by Ethiopian Central Statistical Agency which defines the term as: “Small
and Medium Enterprises are enterprises with employees of between 5 and 50”. In
this definition, the CSA has included level of employment, turnover, capital
investment, production capacity, level of technology and subsector as variables in
its definition. Therefore, this study took the definitions given for each sector.

Entrepreneur/owner-manager: in this study entrepreneur and owner manager

are used interchangeably to denote a person who started a business which he/she
manages.

Success: Though success of a business is defined from different perspectives, the

definition used in this study is adapted from Ahmad and Seet (2006) who used
both financial and non-financial attributes to measure success.

Ethnicity: In this study ethnicity is used to define a person’s affiliation to an

ethnic group recognized in Ethiopia. A person’s ethnic affiliation was considered
based on his/her declaration of ethnic membership.

Concomitance of firms’ premises and Entrepreneurs’ ethnic membership:

Due to different factors entrepreneurs may not want to work in their original ethic
area and start a business somewhere out of their ethnic territory (according to the
current system). In this case, the success of entrepreneurs working out of one’s
ethnic origin or working within their ethnic territory is studied as a factor for
SMEs success. Therefore, in this study, the concomitance of firms’ premises and
entrepreneurs’ ethnic membership was used to denote whether a person is doing
business out of the region/area of his ethnic membership without a serious
problem.

Entrepreneur: Refers to any business owner regardless of how he/she is engaged

in innovative activities.

1.9[1.10] Structure of the Report

The study is organized into five chapters.

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Chapter One: Introduction

In this chapter, an overview of the subject, SME and the technical aspects of the
research are included. Therefore, it encompasses the introduction, statement of the
problem, objectives of the study, scope of the study, significance of the study,
limitations of the study, future research directions, and other relevant matters.
This chapter principally provides the preliminary inductions about the nature of
the research and what is exactly done by the researcher.

Chapter Two: Review of Literature

Chapter two covers conceptual sources which the researcher reviewed in the
process of conducting the study and the system or ways of obtaining the sources.
In this chapter, the arguments of different researchers on SMEs success factors
are presented in an organized manner to support the survey conducted. The
chapter further contains constructs from the simple meaning of SMEs to the
conceptual framework used for formulating and testing the hypotheses. This
chapter is also used as a stepping stone for formulating and testing hypotheses due
to the conceptual framework developed.

Chapter Three: Research Methodology

Chapter three lays out the methodology used by the researcher to complete the
research work. Under this chapter, the target population, sampling frame,
sampling techniques, sample size determination frameworks, and data collection
methods are included. In addition, the hypothesis along with justification and
testing method are stated in this chapter. In this chapter, details of method and the
statistical package for analyzing the data are also discussed.

Chapter Four: Analysis, Discussion and Interpretation

In this chapter, data analysis and discussion of findings are presented. Data
display instruments such as charts, percentages, tables and figures were used to
present similarities and differences in the research findings. In addition, output
from the Statistical Packages for Social Science (SPSS) is used to do factor

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analysis. In this chapter, therefore, the descriptive and inferential aspects of the
study have been focally presented.

Chapter Five: Conclusions and Recommendations

In this chapter a summary of the major findings is presented. Based on the

findings, conclusion is drawn which is used to suggest to stakeholders that are
identified in the study to act in specific ways. In this chapter, therefore, the
summary, conclusion and suggestion along with the policy implications are
presented.

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 CHAPTER TWO
REVIEW OF LITERATURE

1.10[2.1] Introduction
To help establish a clear study background, identify gaps and factors associated
with the success of SMEs, the relevant literature was reviewed. In this review, the
works of different authors on the subject of SME success factors and related
concepts were included. The review indicated that variables that contribute to the
success of small businesses were not consistently agreed upon by researchers.
Despite the diverse emphasis researchers gave to the success of SMEs, they
agreed that the business success of SME is highly influenced by both external and
internal factors. Some dwelt on the internal factors (Mukole, 2010; Toyin, et al.,
2014; Habtamu, et al., 2013). Others focused on the external factors that affect the
success of Small and Medium Enterprises (Thitapha, 2003; Louis D., et al., 2008;
Getnet, 2014). Though these researchers gave particular focus to some of the
factors, and not others, based on the scope of their study, no factor, internal or
external, was able to affect business performance fully. Because enterprises are in
the open system, they have double faceted interaction with the environment and
their success can be viewed from the angle of internal limitations and external
factors.

Focusing on the two crucial themes that are repeatedly revealed throughout the
reviewed literature as main factors; the conceptualization of most determinant
factors of success- internal factors and external to the firm- is the emphasis of this
chapter. The chapter emphases these main factors significantly contributing for
the success of enterprises, the meaning and definitions of SMEs, importance of
small and medium enterprises, success as perceived by managers, and the
measures of success. In addition, in the external micro environmental factors,
ethnic sensitivity comprising of ethnic compositions of SME workers and the
concomitance of SME Premises and owner ethnic membership as a factor for the

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success of SMEs based on self-declaration are encompassed. This chapter begins
with the meaning and importance of SMEs in different contexts. Then it proceeds
with an identification of the measures of SMEs’ success. Subsequently, the
chapter reviews the general understanding of factors contributing to SMEs’
success/failure. It proceeds with an investigation of the internal as well as external
factors that influence SMEs’ success. Next, the chapter sums up the main findings
of the review of literature and shows how these findings are then related to the
aims of this study. And finally, the chapter concludes by synthesizing the
literature.

1.11[2.2] Meaning and Importance of SMEs

Small and Medium Enterprise are defined and understood in different ways, using
different attributes, and categories. According to the European Commission
(2015), Small and Medium Enterprises (SMEs) are defined as ‘firms with less
than 250 employees, with turnover of less than 50 million euro, and total assets
less than 43 million euro’. The World Bank Group SME Department (2004) cited
in Gentrit and Justina (2015), has defined Micro, Small, and Medium Enterprises
in terms of three quantitative criteria: number of employees, total assets in U.S.
dollars and annual sales in U.S. dollars. The attributes and the categories of these
enterprises are shown in the subsequent picture. Tom and Van der (2008), on the
other hand, use annual turnover as a base to define SMEs. They define SEM as ‘a
formal enterprise with annual turnover, in U.S. dollar terms, of between 10 and
1000 times the mean per capita gross national income, at purchasing power parity,
of the country in which it operates’. In this SME definition, Tom and Van der
used the lower and upper ‘turnover’ limit only to define the sector. Their
argument is that Small and Medium Enterprise (SME) should be treated as a
single category and that the distinction between small and medium is not
necessary.

However, Amare and Raghurama (2017) reject the idea because it fails to
recognize Micro enterprises and due to its inappropriate recommendation that

~ 33 ~
SMEs be taken as a single category, which is inconsistent with the reality existing
today (World Bank, 2015; European Commission, 2015). To this end, Amare and
Raghurama (2017) modify the definition into “MSMEs are some formal
enterprises with annual turnover in U.S dollar terms, of 10, 505 and 1000 times
the per capita Gross National Income (at World Bank Atlas Method) of a country
in which it operates for Micro, Small and Medium enterprises, respectively”. This
definition implies that there can be only four definitions of MSMEs worldwide
based on the World Bank income categories of nations. In the definition,
researchers noted that the definition should go with the income category of
countries supplied by the World Bank for low-income, lower middle-income,
upper middle-income, and high-income economies.

According to the European commission, enterprises qualify as micro, small or

medium-sized if they fulfill maximum ceilings for staff headcount and either a
turnover ceiling or a balance sheet ceiling is met (European Commission, 2009).

Table 2.1: European Commission Category of MSMEs

Source: European Commission (2009)

The World Bank, on the other hand, uses three quantitative criteria for defining
SMEs: number of employees, total assets in U.S. dollars and annual sales in U.S.
dollars (Independent Evaluation Group (IEG), 2013). A business must meet the
quantitative criteria of number of employees and at least one financial criterion to
be categorized as a micro, small or medium enterprise.

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Table 2.2. The World Bank Definition of MSMEs

Source: (Independent Evaluation Group (IEG)(2013)

In the European Commission definition, it is determined that meeting the criteria

of the number of employees is mandatory, while satisfying other two financial
criteria is a choice of the enterprise (Gentrit and Justina, 2015). If we compare the
two criteria, “approximations” are observed in the quantitative criteria of number
of employees, with the exception that the World Bank raises the upper limit for
medium-sized businesses to 300 workers. Inconsistencies are most pronounced in
financial criteria. Besides differences in denomination (EUR/USD), which is
understandable, financial criteria used are quite different. While the EU uses the
criteria of annual turnover and balance sheet total, the Word Bank uses the criteria
of total assets and total annual sales. While for a micro business the EU sets a
turnover of up to two million Euros; for World Bank, it must not exceed annual
sales of one hundred thousand dollars. EU sets maximum annual turnover
threshold of50 million Euros to distinguish medium businesses from large ones,
while the World Bank sets it to only fifteen million dollars for the two financial
criteria.

According to the Ethiopian Central Statistics Agency (1997), enterprises that have
less than ten employees have been labeled as micro enterprises and; those
enterprises that hire 10 to 19 employees are considered as small enterprises. In
addition, if the enterprise has employees of between 20 and 99, it is taken as
medium; while businesses that have more than 100 employees are categorized as
large businesses.

However, the Federal Micro and Small Enterprises Development Agency

(FeMSEDA) (2011) does not have the category ‘Medium’; as it considers only
two categories- ‘micro and small’ and ‘medium and large’. According to

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FeMSEDA, enterprises are categorized into two as micro and small,
Microenterprises are businesses with a total of less than five workers and a total
asset of less than or equal to birr 100,000 (US$ 6,000 or EUR 4,500). For small
enterprises the number of employees is expected to be 6 to 30 and a total asset of
less than or equal to birr 1.5 million (US$ 90,000 or EUR 70,000). The
classification of micro and small enterprises in the service sector has different
requirements in terms of total assets. Though Central Statistical Agency and
FeMSEDA are organizations run by the same government, in the same country, in
terms of helping the country’s growth, they could not produce the same definition
for Micro, Small and Medium Enterprises.

Table 2.3. FeMSEDA Definition and Category of MSE

Source: FeMSEDA, 2011

To define and categorize SMEs as Small and Medium, different researchers used
different parameters like number of employees, annual turnover, and balance
sheet. Nonetheless, Amare and Raghurama (2017) argued that the number of
employees is not the best attribute to define SMEs/MSMEs in the automation era
when a limited number of employees could run an enterprise that is beyond their
traditional category. They argue that enterprises should be defined based on
‘turnover’ to distinguish them as Micro, Small and medium because ‘progression
and regression’ of enterprises is based on revenues generated. The proposed
definition and category of MSMEs considered the World Bank income groupings
of countries (World Bank Data Team, 2016).

To make use of research findings and concepts on MSMEs/SMEs without

geographical barriers and to support SMEs related policies with research findings,
Amare and Raghurama (2017) contended that ‘annual turnover’ is a better base

~ 36 ~
for defining MSMEs as the firm’s performance progression or regression is due to
turnover.

In addition to the definitional variability, the terminology used for the category of
businesses that do not fall into large enterprises is problematic in that some refer
to them as small businesses, others use the concept of small and medium
enterprises, still some address them as Micro, Small and Medium enterprises
(Gentrit and Justina, 2015;Ibid).

Despite the lack of agreement on the definitions and categories of enterprises,

researchers understand the polygonal importance of SMEs. The importance is also
reflected in figures. According to Khrystyna, et al. (2010), there are 125 million
formal SMEs in the world including 89 million in emerging markets. As a result
of the recognition of their importance development promoters and international
organizations assist SMEs in different mechanisms ranging from supplying
startup capital to providing technical assistance to push them to the next level. In
this regard, understanding the transition from micro to small and medium
enterprises (SMEs) in developing countries could help to tackle the problem of
the “missing middle” in the firm size distribution, and potentially play an
important role in mapping a path for development.

Because they generate more new jobs than large firms or micro enterprises, small
and medium enterprises (SMEs) are generally thought to play a crucial role in
driving economic growth in both developing and developed countries (Small
Enterprise Assistance Funds, 2016). However, SMEs’ global contributions to
employment generation, export and other socio-economic aspects is not equally
perceived due to the absence of a universally accepted definition of SMEs , which
has led to the significant challenge of identifying and investigating SMEs’
problems (Manish and Sunil, 2016; Amare and Raghurama, 2017).

Small and Medium Scale Enterprises (SMEs) are regarded as the engine of
economic growth and equitable development in both developed and developing
economies; and the importance is well recognized worldwide due to their
significant contribution in helping realize various socio-economic objectives

~ 37 ~
(Hidayet, et al., 2010).SMEs are also considered as major contributors to Gross
Domestic Product (GDP). For example, in the U.S International Trade
commission report compiled by Alexander, et al. (2010), SMEs are acknowledged
as ‘50% contributors of GDP’ generated by the non-agricultural sector and 30%
of merchandize export between the years 1997 to 2007.

Instead of large-scale industries, SMEs having gained importance in the

developing economies have become valued choices as a result of being economic
enterprises with quick adaptation, and less capital but more labor intensive.
SMEs, representing a vast share of businesses in developing countries, have great
contribution for economic growth, employment generation and export promotion.
For example, in South Africa, SMEs account for about 91% of the formal
business entities and contribute about 51 to 57% of the GDP, and provide almost
60% of employment (Mukole, 2010).

In Ethiopia, the youth unemployment problem, concentrated among relatively

well-educated first-time job seekers can be solved through entrepreneurship, as
job hunters can create their own job Pieter (2007). For example, in this Eastern
African nation, 12% of employees were engaged in the Micro and Small
Enterprises in the capital city, Addis Ababa, and close to 40% outside Addis
Ababa (Wondwossen, 2015). Not surprisingly, small-scale businesses are a prime
driving force for economic growth, job creation, and poverty reduction and are
additionally recognized as providing a feeder service to large scale industries
(Arega, et al., 2016). The importance of Small and Medium enterprises can be
aggregated into economic importance contributing to the GDP, employment
opportunity creation that alleviates social problems, and hastens industrialization.

Despite their importance, Ethiopian SMEs are suffering from different

impediments, internal or external to the enterprise. For example, they are
constrained from reaching their full growth potential due to systematic
inefficiency, shortage in human Resource Research and Development fund,
shortage of business sites, underdeveloped infrastructure, and constraints to
access financial services (Sungil, et al., 2013).

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Similarly, Toyin, et al. (2014) in a study conducted in Nigeria, identified four
major challenges confronting small businesses; lack of adequate funding, poor
record keeping and information management, inability to distinguish business
capital from personal money, and lack of crucial infrastructural facilities. Though
most literatures attribute the causes of poor performance of SMEs to external
factors; problems that are within the firm are rarely scrutinized. Based on a
randomized experiment in Ghana, Yukichi, et al. (2012) argued that the basic
level management training, one of the internal factors, improves business practice
and performance. Entrepreneur characteristics, firm characteristics, relational
factors (like social network or value-chain), and contextual factors (such as
business environment) are the four factors associated with the growth of small
firms (Simeon and Lara, 2009).

In addition, researchers have identified factors that typically affect the success of
SMEs in different countries as limited access to finance, low level of education,
poor managerial skills, shortage of technical skills, inability to convert part of
profit to investment, lack of information, inexperienced operators, discouraging
regulatory environment, and others (Fredu and Edris , 2016;World Bank, 2015;
Ashenafi, 2012; Eshetu and Zeleke, 2008; African Development Bank, 2012;
Imoughele and Ismaila, 2014; Johnson, et al., 2014; Ramón and Rodrigo ,
2013;Amare and Raghurama , 2017).

In his PhD thesis, Yassine (2013), identified SME success factors as internal and
external ones. In the present study, internal factors are looked from SMEs
characteristics, entrepreneur characteristics, and firm strategies perspectives. The
study further categorized external factors into macro-environmental factors and
micro-environmental factors. To investigate these factors as success factors of
SMEs, the study used a different measurement of performance and success.

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1.12[2.3] Performance, Success and Failure of SMEs
Though the underlying motivators for individual differences in evaluations of
entrepreneurial success are still largely unknown, the terms ‘success’, ‘survival’,
‘growth’ are very closely linked and sometimes used interchangeably. The
‘success’ of small firms has also been a subject to a great deal of research
(Marjan, et al., 2011;Yassine, 2013). In addition to sales and size of employment
as some measurement criteria for performance, Radha and Patricia (2002) added
five other indices of performance: return on sales, net cash flow, percent of repeat
sales, level of personal satisfaction, and goal achievement. Performance decided
early is a dual variable that is often referred to as firm success or failure (Ostgaard
and Birley, 1995 cited in Yassine, 2013). The concept of failure is ambiguous as it
consists of bankruptcy, insolvency, liquidation, death, deregistration,
discontinuance, ceasing to trade, closure, exit and several other words that make
defining failure a daunting task. Similarly, defining and interpreting success is
illusive.

In subsequent sections, the success of small and medium enterprises is looked at

from survival and growth viewpoints.

2.3.1 Success as Survival

A number of studies in the entrepreneurship field take the concept of success as
similar to survival. In a study by Mirjam (2003) analyzing business survival
amongst young white (self-employed) small business owners in the U.S., it was
argued that the longer a business could survive and prevent involuntary exit, the
more successful it would be. A more direct definition of success was given by
Helen, et al. (2012) relating it to survival “as continued business operations, and
failure was going out of business”. The authors who equate survival with success
find support in the dynamic models of industrial organization. In the models, it is
indicated that young ventures that obtain profit decide to stay in the market, while
those that make losses end up abandoning the activity (Nobuyuki, 2003). Though
success was stated as synonymous to survival, there are still other studies that
uphold that success and survival are very different concepts and variables such as

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those related to the entrepreneur or the initial size of the business are associated
with these two concepts in different ways. For example, Javier, et al. (1997)
developed a model and explained why some firms survive while other firms with
equal economic performance do not. In this study, researchers argued that
organizational survival is not strictly a function of economic performance but
depends on a firm's own threshold of performance, too. According to Esther and
Rosa (2009), the final decision to cease operations or stay in the market will
partly depend on the entrepreneur, and more specifically on his/her personal and
professional interests, since in most cases this decision will have a significant
effect on his/her lifestyle and emotions.

In the study, it is revealed that the use of a greater number of indicators is not a
measure that identifies the successful newly-created business from the
unsuccessful but the fact that those indicators are from different perspectives. In
the literature, there is strong assertion that the success of an entrepreneurial
business must be due to the entrepreneur. The business is a purposeful personal
creation and thus the characteristics of the entrepreneur are seen to be important.
As for the enterprise itself, most studies of the survival of firms primarily find that
the age and size of a firm seemed to positively affect its survival (Ruth and Willy,
2016; Tresphory and Parameswar, 2016). Besides the traditional factors of firm
age and size, organizational strategies are found to have an impact on the survival
of SMEs (Evripidis, et al., 2017; Moses, 2007).

As there is no absolute demonstrated superiority of any of the aforementioned

theoretical perspectives over others, Geroskil, et al. (2010), it is essential to bear
in mind that there are important elements in all of the theories to explain the
survival of firms.

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2.3.2 Success as Growth
In the literature, growth has long been used as a simple measure of success in
business (Asma, et al., 2015; Pius, et al., 2014). Much of the economic literature
has focused on firm growth, due to its importance to the economy (Wei, 2012;
Shigang, 2010; Eseroghene, 2013). However, divergence of theories is an
apparent feature when reviewing relevant studies and a clear and coherent idea of
the phenomenon of firm growth is not easy to distil from the literature (Yassine,
2013). As formulated by Yassine, the main theories can be divided into four
groups: classic models, stochastic models, resource-based models, and models of
learning and selection and a five-stage model of SMEs progress is proposed as
existence, survival, success, takeoff, and maturity. Taking the literature back to
the 1970s, when Birch (1979) highlighted the economic importance of rapidly-
growing firms, it is mentioned that surviving and achieving a fast ‘growing’ stage
have significant effects in the economy.

High-growth firms that make a tremendous contribution to the economy, through

innovation and job creation; and the factors of growth within SMEs, particularly
in relation to high growing firms, garner substantial interest among academics,
policy makers, economists, and business managers alike in understanding the
characteristics and strategies of these firms (Yassine, 2013).

Another firm attribute that has been identified in the literature as having an
influence on growth is the location of the firm. Habtamu, et al. (2013) argued that
firm location may determine its growth, since the local market affects firms. In
the study, it is explained that some locations are more conducive to firm growth,
with small firms in accessible remote locations growing faster than firms in
central areas. However, Yassine (2013) contended that a firm does not necessarily
restrain its sales to its local market as firms can expand into other geographic
markets provided that they can access modern channels of communication and
logistics.

With regard to firm specific resources, financial resources and human capital are
the most important resources for small business growth. The importance of

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financial resources in promoting firm growth has been documented. However, the
empirical evidence still remains ambiguous with some empirical studies reporting
a positive effect of financial resources on small business growth while other
studies demonstrating only moderation effects and even some negative effects
(Yassine, 2013).

2.3.3. Measure of Success

Even though there is no unified growth measure that has been used consistently
among researchers, a wide range of growth measures have been utilized.
Generally, firm growth has been measured by using absolute or relative changes
in sales, assets, employment, productivity, profits, and profit margins (Frederic, et
al., 2003; Yassine, 2013). Each of these measures has its advantages and
disadvantages in helping understand growth. However, these variations have led
to contradictory results reported by previous studies, which render the topic of
growth to be problematic. Indeed, the different forms of growth, based on the
different measures, may have different determinants and effects.

While some researchers advocated the strict use of financial indicators, others,
especially in recent studies emphasized the relevance of non-financial aspects of
success. Financial measures are necessary but not sufficient to capture total
organizational performance (Yassine, 2013). From financial measures, researchers
still measure the success of SMEs in terms of its contribution to GDP (Imoughele
andIsmaila, 2014). Closer attention to these success measurement issues allows
empirical studies to be more precise and meaningful.

According to Wei (2012), the term “success” was defined based on both
traditional criteria such as profit and growth and intrinsic factors such as personal
satisfaction and sense of achievement. The measure of “overall performance”
however is given by the average of sales and profit growth rates (Shigang, 2010)
and by market share (Eseroghene, 2013). Given the complexity associated with
evaluating the performance of smaller firms, and the difficulty in obtaining
accurate data on financial performance of small firms, Haber and Reichel (2005)
cited in Yassine (2013), suggested the use of multiple measures of SMEs

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performance. Consequently, this study will analyze both financial and
nonfinancial measures as factors affecting the success of SMEs.

1.13[2.4] Success Factors of SMEs

In this section, factors that positively or negatively affect the success of small and
medium enterprises are discussed. After reviewing generic environmental factors
together, the external macro, external micro, and internal environmental factors
are conceptualized in detail.

2.4.1 Overview of Environmental Factors

Business environment provides a window to market opportunities and threats, and
SMEs are a deliberate response to those dynamics (Shigang, 2010). In the
contemporary business development realities, it can become difficult to the SMEs
to sustain and survive unless the costs are correctly accounted for, controlled and
reduced to sustain and remain in the competitive world. To address all these
costing issues, the impact of the environment on business success, internal or
external, must be studied so that performance can be enhanced (Sofyan, 2015).

In regard to environmental analysis, Rakesh (2014) commend the use of PEST

(Political, Economic, Socio-cultural, and Technological) analysis as a major tool
for understanding the political stability, business position, foreign business
prospects, etc. Evripidis, et al. (2017) have also developed a conceptual
framework for SMEs success categorizing success variables into entrepreneurial,
enterprise and business environment factors. In the study, the researchers
mentioned that the entrepreneurial (personal) factors include those variables
which are considered specifically related to the owners/managers of SMEs and
consist of their personality traits, characteristics and features, acquired skills,
experience and background dimensions. And the enterprise factors are identified
as all factors relating to the business itself, that is, the structural characteristics,
policies and strategies of the firm. In the study, the business environmental factors
are identified as external determinants reflecting the political, legal, economic,

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socio-cultural, technological and ecological elements that are in line with the
PEST analysis framework.

However, Heather (2010) proposed the ‘Degrees of Turbulence’ model as a self-

assessment tool to aid SMEs in their environmental scan and to help in assessing
the potential impact and adjusting to the impending changes in the external
environment to ensure continued viability. In both of the studies, it is noted that
environmental scanning for SMEs is vital because micro, small, and medium
enterprises (MSMEs) have high labor intensity and supportive role in job creation.
The industry and services sectors of SMEs are the foundation to improve the
opportunities for the success of enterprises and to help the poor who strive to get
out of it (Erick Ariel, 2012). Even though recognition about the role of SMEs’
sustained economic growth is increasing, their contribution is not as expected. To
measure their contribution, there is some systematic research in this area to help
support the various policies in favor of SMEs, primarily because of the lack of
uniform data (Amare and Raghurama, 2017).

The International Labor Organization (2005) assesses the business environment

for small enterprises from the vantage point of three perspectives; a) the policy,
legal, and regulatory framework, b) the organizational framework and c) the
markets, and social and economic settings.

Considering seven main areas of firm activity that are subjected to regulation as
part of the business environment like ease of entry, access to credit, ease of exit,
property registration, contract enforcement, business sophistication, and
innovation, (Erick Ariel, (2012) noted that the three pillars (the ease of entry, the
effectiveness of credit information sharing, and the sophistication and innovation
of the business environment) support the idea that ‘competitive business
environments have a positive impact on SMEs’.

Looking at the issue from another perspective Mosses (2007) reported that social
capital developed from managerial networking and social relationships with top
managers at other firms, government officials (political leaders and bureaucratic
officials), and community leadership is able to enhance organizational

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performance (Moses, 2007). The author further revealed that the impact of social
capital on organizational performance differs between firms that pursue the
different competitive strategies (low-cost, differentiation, and combination of
low-cost and differentiation) and those who do not.

Other dimensions were addressed in a study covering 76 countries (Meghana, et

al., 2007) that included dimensions of the business environment, such as lower
costs of entry and better credit information sharing, which are linked with a larger
size of the SME sector for success, while higher exit costs are associated with a
larger informal economy. The findings suggested that policy makers who are
interested in a huge SME sector should focus on fostering a competitive business
environment.

An Algeria study (Asma, et al., 2015) on the other hand revealed that the growth
of SMEs is hampered by several interrelated factors including business
environmental factors that are beyond the SMEs’ control and internal factors of
the SMEs. The study further noted that unfair competition from the informal
sector, cumbersome and costly bureaucratic procedures, burdensome laws,
policies, and regulations, an inefficient tax system, a lack of access to premises,
and to external financing, and low human resources capacities are the key
business environmental factors affecting SMEs. The main internal factors
identified in the study that are responsible for the unstable and limited growth of
SMEs are entrepreneurial characteristics, low managerial capacities, lack of
marketing skills, and low technological capacities. Likewise, a Nigeria study
(Mba and Cletus 2014) indicated that poor financing, inadequate social
infrastructures, lack of managerial skills, and multiple taxation were major
challenges confronting SMEs.

According to a study by Pius, et al. (2014), enterprises lack sufficient internal

skills and experience to handle the challenges that negatively affect their
development, which therefore necessitates the use of external business
development services (BDS). Personal characteristics of owners/managers could
also have an adverse impact on accessing bank loans, which in its own right, may

~ 46 ~
have negative bearing on the performance of enterprises (Ramón and Rodrigo,
2013). For example, a study in Eritrea revealed that age of the owner/manager has
significant effect on SMEs’ access to bank loans that in turn can have an impact
on the success of the firm (Sebhatu, 2014; Nuraeni, 2014).

In a study investigating the perceived success factors of small and medium

enterprises amongst Malaysian entrepreneurs, Wei (2012) found that the
perceived success factors across ethnic groups and gender were reputation for
honesty, good customer service and hard work. The study further revealed that
entrepreneurs considered individual factors (such as reputation for honesty, good
customer service and hard work) more important than environmental factors (such
as government support and political involvement). Another study (Eseroghene,
2013) revealed that technological, customer, and competitive factors have a
partial effect on the market share of Nigerian SMEs while the socio-cultural factor
of the Nigerian business environment has an inverse effect on the market share.

In a study on the effect of environmental scanning and the formality of the

strategic planning process on the performance of SMEs, Maxwell (2014) found
out that both factors have a positive effect. The study further revealed that the
formality of strategic planning emerged as the factor with a stronger impact on
SME performance than environmental scanning.

In the study steered to examine the relationships between Entrepreneurial

Orientation (EO), firm performance, and Business Climate Perceptions (BCP) in
small and medium enterprises, (John, et al.,2013) found a positive association
between BCP and overall performance. The study also revealed similar
associations between EO, firm performance, and BCP in both owner managed
companies and non-owner managed firms.

The association between entrepreneurial orientation and performance is extremely

complex due to the influence of many internal and external factors (Bojan and
Zoran, 2014). The study referred to above posited that entrepreneurial orientation
can be captured by the propensity to act autonomously, the tendency to be
aggressive toward competition, to proactively pursue market opportunities, and to

~ 47 ~
have the willingness to innovate and bear risk and found positive relationship
between entrepreneurial orientation and financial and non-financial performance.
The study also affirmed the positive relationship between entrepreneurial
orientation and external environment.

In a study on the relationship between the entrepreneurial characteristics and the

performance of Small and Medium-sized Enterprises (SMEs) in the context of
manufacturing, Nusrat and Tarun (2014) concluded that of the identified six
groups of competencies (opportunity, organizing, relationship, strategic,
commitment, and conceptual competencies), four -opportunity, organizing,
relationship, and strategic competencies -have significant impact on the
performance of the firms. The study further showed that commitment and
conceptual competencies are not significant for firm performance in the short run.
But the study suggested the need for entrepreneurs to focus on all the
competencies for better future performance in the long term.

In a related study, Shigang (2010) investigated the impact of environment factors

on Chinese SMEs’ performance and found that environment dynamism was not
related to SMEs’ performance. Instead performance was largely attributed to top
managers’ ability to develop effective strategies that are compatible with
environmental conditions.

In a Thai study, Chuthamas, et al. (2011) identified eight factors that affect the
success of SMEs as SMEs characteristics, management know-how, products and
services, customer and market, way of doing business, resources, strategy, and
external environment. Of these factors, the researchers isolated SMEs
characteristics, customer and market, way of doing business, resources, and
external environment as the most significant factors that affect the success of
SMEs.

Studies also looked at how firm size, age and ownership correlate with business
performance in agribusiness SME. In this line of research Tresphory and
Parameswar, (2016) and Robert, et al., (2013) found out that age has a significant
positive correlation while firm size and ownership have insignificant and weak

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negative correlation with business performance of SMEs. Furthermore, the
researchers regressed age, firm size and ownership simultaneously using multiple
regression methods and showed that these variables moderately predict the effect
of business performance. Using qualitative data from CEO interviews and
secondary data from Finnish and Norwegian Small and Medium Enterprises
(SME), Markku and Erlend (2010) examined CEOs’ perceptions of the resource-
based view (RBV) and Porter’s five forces model. In the study, the researchers
noted that resources like advanced production technology or a flat organizational
structure are essential to reduce the weaknesses of the companies and enhance
their success.

Businesses characterized by inability to obtain loans from formal money lending

institutions such as commercial banks, and to convert part of their profit back into
investment, and having poor managerial skills, shortage of technical skills, and
low level of education are very near to failure (Eshetu and Zeleke, 2008). Eshetu
and Zeleke further indicated that both internal and external factors have
contribution for the success of enterprises in different ways. The success of
enterprises can also be enhanced with support from external environmental
elements. Among others, the government by addressing the political and legal
dimensions can play a major role (Amare and Raghurama, 2017). According to
Hailu (2010), the essential factors contributing to successful Micro and Small
Enterprise development are existence of functional networks, adequate physical
infrastructures, availability of raw materials, access to finance, the level of
production technology and market promotion.

Another perspective is that the key success factors for Micro and Small
Enterprises are personal qualities such as having an articulate vision or ambition
and innate abilities, experience in the formal sector as a factory employee or in a
family business, managerial and entrepreneurial skills and higher equity in the
invested money (Berihu, et al., 2014). Zuzana and Mthuli (2013) have argued that
the contribution of entrepreneurship in high-value added activities for the fast-
economic growth of Ethiopia is limited because of a weak business environment
though the area is dry in terms of sufficient evidence.
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From a broader perspective, the success factors discussed in the previous section
and further articulated in the subsequent sections are categorized in two internal
and external factors to the enterprises. The internal factors are again written off as
SME characteristics (size, age and location of the enterprise), Characteristics of
the entrepreneur (socio-demographic characteristics and background
characteristics of entrepreneur), personality characteristics of entrepreneur (need
for achievement, focus of control, and propensity for risk taking), competence and
skill of entrepreneur (entrepreneurial, managerial, and functional competences),
and firm strategies. In the same fashion, external factors are categorized into two
major sets as macro environmental factors or external macro factors that
constitute economic, political and legal, technological, and socio-cultural factors;
and micro environmental factors or external micro factors that comprise customer
relationship, supplier relationships, and competitor factors. In the external micro
factor category, ethnic sensitivity that comprises ethnic composition of workers
and concomitant of firms’ premises and owner ethnic membership are included.

2.4.2 Internal Factors

Although external environmental factors may be expected to significantly impact
businesses, existing research also indicates that firm-level factors also affect
business performance (Louis, et al. (2008). Internal factors are all firm-specific
factors that are influenced by specific firm action that includes the availability of
resources, personal skills and abilities for pursuing entrepreneurial functions and
the effective use of resources inside the firm (Joaquínand, 2001; Melody, et al.,
2006). Since they involve the decisions, behavior and actions of the entrepreneurs
and their team, these internal factors are within the scope of the enterprise that
could be potentially controllable. However, if they are not properly managed,
internal factors can turn out to be a cause for SMEs failure. Evidence for this
potential cause of business collapse comes from Dockel and Ligthem (2005) who
revealed that over 65% of firm failure is caused by firm based factors. Their study
grouped, internal factors into three categories: characteristics of the SMEs,
characteristics of the entrepreneur, and strategies of the firm.

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2.4.2.1 Characteristics of SMEs
The links between firm characteristics and business performance have been
studied by different researchers. For example, Evripidis, et al. (2017) identified
enterprise factors as all factors relating to the business itself, that is, the structural
characteristics, as well as policies and strategies of the firm. Chuthamas, et al.
(2011) distinguished SMEs characteristics as the most significant factors that
affect the business success of SMEs. Business characteristics that affect firms’
performance have been identified by Yassine (2013) as size, age, and location of
business.

The relationship between firm size and the likelihood of survival is shaped by
technology and the stage of the industry life cycle and while the likelihood of
survival confronting small entrants is generally less than that confronting their
larger counterparts, the relationship does not hold for mature stages of the product
life cycle, or in technologically intensive products (Rajshree and David, 2001),
There is strong positive relationship between firms’ size and performance
(Antonio, et al., 2005).

In addition to firm size, startup capital has also drawn research interest as an
important variable alongside other factors. In a study investigating the growth
determinants of Micro and Small Enterprises in Northern Ethiopia, (Habtamu, et
al. (2013) found that enterprises that started business with less capital grew faster
than enterprises with more initial capital. However, the study has serious
limitations as the sample was limited to a single regional city making any
conclusive confidence impossible. Moreover, the study failed to give important
details of enterprise size and other defining attributes. A further limitation is that
medium enterprises were excluded. Given these important limitations, a further
study has to be conducted to see the effect of size on the growth and success of
SMEs in Ethiopia.

In other parts of the world the relationship between firm age and business
performance has been investigated from a range of perspectives; in particular,
industry dynamics and organizational ecology (Yassine, 2013). Using

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contemporary data for an extensive sample of 1,020 Indian firms, Sumit (1997)
investigated the impacts of firm size and age on firm-level productivity and
profitability. The study revealed that older firms although more productive were
nonetheless less profitable, whereas the larger firms, conversely, were more
profitable but less productive. However, as explained by Sutton (1997) and cited
in Yassine (2013), the impact of age on firm performance is inconclusive and
often yields contradictory results depending on the data and method of estimation
used. For instance, Donaldand Carl (1998) contended that based on the literature
younger small firms were more likely to show high rates of growth compared
with small firms that had been in existence for longer periods. Yet this is
restricted to MSEs and the claims are limited to enterprises that started business
with just one worker.

Geography or more specifically enterprise geo-location may also be a factor at

work. Kala and Guanghua (2010) define location of enterprise as ‘a decision of
where a business is to be located which could be small, medium and large cities or
urban or rural locations’. In the study, it is revealed that capital cities are not
attractive for firms to locate, when they are large. According to Carl (2002)
location is found to be an important factor for the success of the business. In the
study, it is revealed that firms located in urban and commercial areas are more
likely to survive during a given year than those located in rural areas or those
being operated. As measured by the number of employees hired in a given year,
the study also showed urban and commercial locations are associated with faster
growth of businesses. For the growth of enterprises, the location of the enterprise
is also mentioned as an important factor in the study conducted in Ethiopia
(Habtamu, et al., 2013).

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2.4.2.2 Characteristics of Entrepreneurs
Among scholars and experts there is no absolute agreement over the definition of
entrepreneur, as some say entrepreneur is anyone who works for himself, and still
others say that ‘an entrepreneur doesn't just work interdependently but also
engages in innovation and leadership’. However they agree that an entrepreneur
takes an idea, develops a business around it, manages the business, and assumes
the risk for its success. To be successful in innovating and managing the
businesses started, entrepreneurs need a variety of qualities and for many years,
researchers have shown great interest in understanding the characteristics of
entrepreneurs.

According to Yassine (2013), the success factors related to the characteristics of

the entrepreneur have been categorized into three groups: the socio-demographic
characteristics of the entrepreneur, his/her background characteristics, and his/her
personality characteristics.

A person's social background and previous experiences, parent’s occupation,

gender and self-employment, and experiences are categorized under socio-
demographic characteristics of entrepreneurs (Nishantha, 2009). Extending the
variables under thesocio-demographic characteristics of entrepreneurs that are
factors for the success of SME, Yassine (2013) reclassifies them into age, gender,
and background characteristics of entrepreneurs (education, previous work
experience and family background).

Based on this new typology education and age of owner/manager had a significant
relationship while marital status and gender had less significant relationship with
the business performance of SMEs (Ruth and Willy, 2016). According to Pius, et
al. (2014), individual characteristics such as individual awareness level, age, and
educational attainment influence entrepreneurs’ judgment and assessments of
situations and ultimately their success as managers. Reynolds et al. (2000) cited in
Yassine (2013) showed that individuals aged 25-44 years were the most
entrepreneurially active. It has also been reported that the economic status of the

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family, age, technical education/training, and work experience of entrepreneurs
are important factors for the success of SMEs (Nair and Anu, 2006).

Researchers have also considered the gender of entrepreneurs as an important

factor that predicts the success and the performance differences between male and
female owned businesses. In one report businesses headed by women were not
more likely to go out of business, nor less successful, than those owned by men
(Arne and Kevin, 1991). The processes of generating sales and income involving
female are quite similar to those of their male counterparts but women are not as
well positioned as their male counterparts to exploit business opportunities
because of their structural disadvantages both within and outside of the business
arena (Karyn., et al., 1991; Peter ., 1994). Women entrepreneurs often suffer from
lack of technical expertise and knowledge management (Fatimaezzahra and
Edhec, 2006). However, Chell and Susan (1998) found no effect of gender on
performance of enterprises.

However, there is some evidence that there may be a practically significant

difference in business life expectancy. For instance, in Ethiopia, the majority of
businesses that failed were operated by women and female-headed firms that
ceased operation had an average lifetime of 3.2 years, while male-headed firms
that ceased operation had an average lifetime of 3.9 years (Eshetu and Zeleke,
2008).

In addition to gender the literature has also addressed background characteristics

of entrepreneurs, education, previous experience and family background. As
previous researches have indicated, the relative profit tends to be high when an
entrepreneur has more education and experience in the line of business while the
profitability tends to be low when the entrepreneur has only start-up, managerial
and high-growth experience without an educational background (Hyungrae,
1996).

Apart from relevant experience, the impact of education on the business success
of an entrepreneur has been the subject of much discussion and speculation in
both the popular and academic press. Using U.S. census data and considering

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earnings potential as a measure of success, Peter(1994) in a study aimed at
explaining the relationship between years of formal education and success of the
self-employed entrepreneurs and the research revealed that self-employment
earnings increased $1207.63 a year for each year of education ($1212.76 for
males and $414.81 for females). There is strong positive relationship between
levels of general education and several entrepreneurial success measures (Pat H.,
et al., 2008).

A track record of work experience in other businesses is considered by

researchers as a factor with considerable effect on the performance of SMEs.
Many researchers have argued that the greater the entrepreneurs’ previous
experience, the higher their entrepreneurial quality will be, as the experience will
have involved a learning process that helps them to identify opportunities, reduce
their initial inefficiency, and also improve their capacity in performing various
tasks (Karyn ., et al., 1991;Peter ., 1994). Entrepreneurial factors that are related
to success consist of personality traits, acquired skills, background dimensions,
and working experience in the formal sector as a factory employee or having
worked in family businesses (Evripidis, et al., 2017; Berihu, et al., 2014).

The secret to being a successful entrepreneur is linked with having a family with
dependable financial resources. Children appear to learn about entrepreneurship
through their family and community. Parental entrepreneurship and genes are the
two main drivers of sibling similarities in entrepreneurship (Matthew, et al.,
2016). ‘If one does not have money in the form of a family with money, the
chance of becoming an entrepreneur drops quite a bit (Benjamin, 2015).

Personality variables used in previous studies were categorized according to the

five-factor model of personality (Stephenand Timothy., 2013). Scholars have
studied the characteristics of entrepreneurs and attempted to develop a typical
personality profile with the key characteristics of successful entrepreneurs
(Brownhilder, 2011). Examining the prevalence of five psychological attributes-
need for achievement, locus of control, risk-taking propensity, tolerance of
ambiguity, and Type A behavior in a sample of established entrepreneurs,

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Thomas and David (1987) found few but indicative relationships between
psychological attributes (regarded as hallmarks of the entrepreneurial personality)
and financial performance. The personality characteristics of the entrepreneur in
this study are investigated from the need for achievement, locus of control, and
propensity of risk taking standpoints.

The need for achievement results in high ambition and self-drive, which are
necessary if entrepreneurs are to realize significant goals against many odds. Ina
study attempting to establish a connection between the need for achievement and
locus of control and entrepreneurial activity, Ove (2003) found the need for
achievement failed to predict entrepreneurial activity, while locus of control
showed predictive validity only for men.

In personality psychology, locus of control is the degree to which people believe

that they have control over the outcome of events in their lives, as opposed to
external forces beyond their control (Julian, 1966). Internal locus was positively
associated with favorable work outcomes, such as positive task and social
experiences, and greater job motivation (Thomas, et al., 2006).

Propensity for risk taking combines all factors dealing with risk, including taking
calculated risks, being realistic when analyzing opportunities, and spreading one’s
risk. All these are said to be key factors that impact positively on entrepreneurship
(Yonca and Nuray, 2006). As advocated by Brockhaus (1982) cited in Yassine
(2013), the propensity for risk taking could be considered as one of the
fundamental characteristics of the entrepreneur. However, authors are still far
from agreement on this notion. For example, Robert (1980) argued that risk taking
propensity may not be a distinguishing characteristic of entrepreneurs.

Entrepreneurial competencies are seen as important to business growth and

success. However, the core concept of entrepreneurial competencies, its
measurement and its relationship to entrepreneurial performance and business
success is in need of further rigorous research and development in practice (Siwan
and Jennifer, 2010). To link the characteristics of small and medium enterprises'
owner managers and their firms' performance together, Thomas, et al. (2002)

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developed a conceptual model that consisted of constructs of competitive scope,
organizational capabilities, entrepreneurial competencies and performance; and
revealed the existence of positive relationship between competencies and
performance.

The increased demand for a highly skilled workforce has contributed to the rising
importance of obtaining a college education for better performance (Boyles,
2012). With the same reason, skills are required for the entrepreneurs to be
successful. Though skills and competencies are clustered into different categories,
this study focuses on the category identified by Yassine (2013) and Siwan and
Jennifer (2013) subsuming entrepreneurial competencies, managerial
competencies, and functional competencies.

Entrepreneurial competencies represent the skills needed to play the

entrepreneurial role that involves various tasks to be performed, including
developing a challenging but achievable vision, formulating strategies,
recognizing unmet consumer needs, scanning the environment, spotting high
quality opportunities, and producing superior products or services (Chandler and
Hanks (1994) cited in Yassine (2013). Entrepreneurial skills are needed to
develop innovative products and services and to generate solutions to emerging
needs in the marketplace.

The three entrepreneurial skills mentioned by Thomas (2002) are; developing a

business concept: formulating a business plan, and mastering presentation skills.
Other skills identified by Yassine (2013) include skills related to environmental
scanning which involves: recognizing a market gap, exploiting a market
opportunity and transmit these opportunities into profitable outcomes.

Managerial competences as assets allied to the aforementioned skills represent

another set of knowledge, skills, behaviors and attitudes that contribute to
personal effectiveness (Anand and Punia, 2013). As most entrepreneurs in SMEs
are owner-managers, performing managerial tasks is their sole responsibility; and
managerial competencies are very important to the performance of SMEs. In
performing entrepreneurial activities, the effectiveness of entrepreneurs;

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therefore, rely on their management competency (Lado and Wilson 1994).
According to Alisa (2014), the six competencies that make effective managers
are: proficient communication skills, understanding multigenerational workforce
trends, providing high-impact performance feedback, focusing on employees’
career development needs, maximizing leadership strengths, and advocating
organizational changes necessary for developing and keeping top talent. As
described by Lyons (2002) cited in Yassine (2013), managerial competences are
the skills needed to organize the work on a day-to-day basis.

From this perspective, the six skills under managerial competences are:

Management: planning, organizing, supervising, directing, networking;

Marketing/Sales: identifying customers, distribution channels, supply chain;

Financial: managing financial resources, accounting, budgeting;

Legal: organization form, risk management, privacy and security;

Administrative: people relations, advisory board relations; and

Higher-order: learning, problem-solving.

Functional competencies refer to the skills needed by entrepreneurs to perform

their practical duties. Undertaking this role requires that entrepreneurs possess the
ability to utilize tools, technical knowledge, and procedures relevant to the
specific business (Yassine, 2013). Functional competencies are also understood as
job-specific competencies that drive proven high-performance and quality results
for a given position. Unless entrepreneurs possess these functional competencies,
the success of their business may not be guaranteed in terms of human resource
administration, marketing, record keeping, communicating and other functional
areas.

2.4.2.3 Firm Strategies

The performance of a firm is mostly determined by the business strategy it adapts
(John and Richard, 2011). However, on a study that attempted to identify factors
that are affecting business success of small and medium enterprises (SMEs) in

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Thailand, by Chuthamas, et al. (2011), business strategy was not among the most
significant factors affecting business the success of SMEs. To formulate a strategy
that best serves the interest of SMEs, entrepreneurs are supposed to take different
measures. Among others, entrepreneurs should be able to conduct internal and
external environmental assessment to design the best strategy for their business.
Prior assessments can also help entrepreneurs to evaluate and foresee the impact
of any political and legal, economic, socio cultural, technological, and other near
and far environmental elements.

2.4.3 External Factors

The purpose of an external environmental assessment is to develop a finite list of
opportunities that could benefit a firm and threats that should be avoided (Fred,
2011). External factors are those factors that are beyond the control of
entrepreneurs and consequently are among the essential elements that affect the
success of SMEs. Though the attention given by SMEs entrepreneurs based on
their competency and skills can indeed produce results by addressing their
particular vulnerabilities, it is known that environmental factors affect the
operations of any business. Although often understood as a construct
environmental factors can have dimensions. Yassine (2013) categorized the
external factors into macro environmental factors (external macro) and micro
environmental (external micro) factors. According to this classification, macro
environmental factors are those factors that affect the general environment and
micro environmental factors are those that affect the environment that is relatively
near to the business.

2.4.3.1 Macro Environmental Factors

Environmental variations that result from changes in technology, economic and
political forces, or, from natural disasters, can create uncertainty in SMEs; and
SMEs respond in varied ways based on whether the changes of the environment
are expected to have a temporary or permanent effect on the business (Louis, et
al., 2008). In this regard, Fred (2011) says that the purpose of external
environmental scanning is not to develop an exhaustive list of every possible

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factor that could influence the business; but, instead identifying key variables that
can offer actionable responses. In the present study therefore, the macro
environmental factors, beyond the reach of the entrepreneur/the business, are
grouped into economic, legal and political, technological, and socio-cultural
forces.

2.4.3.1.1 Economic Factor

The economic factors refer to a set of economic aspects that have great influence
on business organizations and their operations that include gross markets for
goods and services, availability of capital, strength of capital markets, availability
of economic resources and fiscal policy. Economic factors have a direct impact on
the potential attractiveness of various strategies. The survival and success of every
business enterprise depend fully on its economic environment (Louis, et al.,
2008). Because economic environment is external to the enterprise, every
enterprise has to function strictly within the policy framework and respond to the
changes therein as governments keep on changing these policies from time to time
in view of the developments taking place in the economic scenario, political
expediency and the changing requirement (Fred, 2011). The economic factors that
mainly affect the success of an enterprise are financial resources and taxation
(Yassine, 2013).

Financial resources are the fundamental elements for the success of businesses.
Entrepreneurs should have sufficient financial resources not only to help their
businesses during the start-up stage, but also throughout the lifetime of the
business (Yassine, 2013). SMEs can get financial resources from diverse sources,
most importantly in the form of loans (Eshetu and Zeleke, 2008). However,
financing SMEs is challenging because these firms are vague in terms of
information, riskier, more financially constrained, and more debt-dependent than
large firms (Lars, 2015). According to the African Development Bank (2012), the
large majority of banks in East Africa considered the lack of adequate information
as the most important deterrent to their involvement in SME financing. Ethiopia
does not constitute an exception in regard to the financial constraint. Though there

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are enterprises that are successfully transitioning from Micro to Small and then to
Medium levels, there are also enterprises which are dying due to a variety of
reasons, lack of finance being one (Ethiopian Economics Association, 2015).
Moreover, the practice of banks financing SMEs in Ethiopia is not much
emphasized due to the fact that banks are required to finance government mega
projects and increase their reserve and liquidity requirements following the
revision of the reserve requirement (Getnet, 2014). Using the Survey of Ethiopian
Large and Medium Scale Manufacturing Industries and the World Bank’s
previous Enterprise Survey, the study by the World Bank (2015) revealed the
existence of a missing middle phenomenon where small enterprises are more
credit constrained than either Micro or Medium/Large Enterprises.

Taxation involving SMEs is another challenge but considered a necessity for

growth and expansion. Because most of small and medium enterprises do not
have well established financial records, the issue is dire. The absence of proper
financial accounting in many small and even medium-scale enterprises may be
due to various reasons, ranging from concern that critical information may reach
competitors to non-transparent and evasive practices to minimize the tax burden
(Thitapha, 2003).However the subject of taxation can divide perceptions. Also,
the effect of taxation may not be uniformly felt by different businesses. For
instance, SEMs may have particular vulnerabilities. An Albanian study
(Iraj,2001), for instance, revealed that the growth of SMEs in the country has been
hampered by a variety of barriers including by what was considered to be a high
rate of taxation and contributions. Similarly, according a World Bank report, the
most common complaint of entrepreneurs in Ethiopia was high tax rates (World
Bank, 2009). To alleviate this perceived tax burden, Ethiopia has been supporting
SMEs through the investment incentives scheme, consisting of exemptions from
income taxes and duties on imported capital goods and the scheme applies to
SMEs operating in specific industries (engineering firms) and located in
government-preferred locations (Seife, 2006). However, Aloysuis (2009) argued
that it is difficult to evaluate the success of presumptive taxation initiatives
against their goals, whether those goals are increased participation in the formal

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tax system, obtaining some basic level of revenue from all economic agents,
educating new taxpayers, or reducing compliance costs for at-risk taxpayers.

2.4.3.1.2 Political and Legal Factor

Political and legal environments, as another set of macro environmental factors,

influence the success of businesses. Political, governmental, and legal factors can
represent key opportunities or threats to both small and large organizations-
operating both domestically and internationally. Therefore, the increasing global
interdependence among economies, markets, governments, and organizations
makes it imperative that firms consider the possible impact of political variables
on the formulation and implementation of successful competitive strategies (Fred,
2011). According to Yassine (2013), the political and legal factors that widely
affect the success of enterprises are looked at from the government support and
regulatory environment perspective.

As most can agree, starting or sustaining business is very challenging to most

entrepreneurs; and the need therefore arises for seeking support from any
stakeholder including the government. The type of support granted by
government might be different based on the need. It may vary from providing
startup capital based on the feasibility of the business plan to providing funding
for innovation so that businesses could be transformed from micro to a relatively
large enterprise. A number of studies have reported the importance of government
support for SMEs (Yusuf, 1995; Yassine, 2013). Moreover, as a Pakistan study
revealed there is a significant positive relationship between business success and
its determinants, government support being one (Javed, et al., 2011).

However, there are also studies that report that government support has an
insignificant role in small business success (Mambula (2004) cited in Yassine
(2013). Government can provide support to Small and Medium enterprises when
the support makes a demonstrable difference. However, the modality of the
government support might not be expressed directly in terms of financial support.
The government can enact a regulation to create a conducive environment for
SMEs. In addition, the government can establish a funding agency so that the

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financial constraints of the business could be solved to a certain level (Mba and
Cletus, 2014).

Realizing the importance of its support to SMEs, the government of Ethiopia has
organized an agency that helps meet the infrastructural and financial needs of
micro and small businesses. However, the government support is yet to be
strengthened if there is real transformation of enterprises to the next higher level
and their contribution to the Gross Domestic Product (GDP) is significant (Amare
and Raghurama, 2017). Starting from organizing a federal level agency, Federal
Micro and Small Enterprises Development Agency (FeMSEDA), the Ethiopian
government has issued different directives and regulations that can be seen as a
stepping stone for the sustained assistance of the government to the sector.
However, the government through its agency did not include medium enterprises
in its support scheme because the category only has Micro and Small enterprises
(Amare and Raghurama, 2017).One of the mechanisms a government can arrange
support to SMEs is making a regulatory environment workable and conducive for
the sector. According to Liu (2008) for example, the Chinese government
encourages SMEs to expand their markets by enforcing financial policies that
allow, among others, imports and exports credit, export credit insurance, etc. In
Ethiopia, the regulatory and legal environment plays an important role for the
development and promotion of SMEs and their financing needs (World Bank,
2015). Therefore, the regulatory environment for SMEs can have a wider
coverage that could influence their operation in matters of finance, marketing,
premises etc. (Gebrehiwot and Wolday, 2001). However, there are also studies
that show the negative effect of regulations on the performance of SMEs
(Yassine, 2013). According to a survey conducted by the Department for Business
Innovation and Skills in the UK (2011) cited in Yassine (2013), health and safety,
tax-related, sector-specific, employment related, and environmental related
regulations are the most mentioned regulations that hinder small business
operations. However, if firms positively respond to them these regulations could
seldom be obstacle for the success of the business (Liu, 2008).

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2.4.3.1.3 Socio-Cultural Factors
Socio cultural environment consists of customs, lifestyles, and values that
characterize the society in which a firm operates. These elements of the socio-
cultural environment can impact SMEs’ innovation and performance in different
ways. In the scholarly literature on the development of entrepreneurship and small
business, researchers have emphasized the importance of socio-cultural
environment and background features of the people (Halkos and Tzeremes, 2013).
The socio-cultural component of the environment influences the ability of the
firm to obtain resources, market its goods and services, and function within the
society and it helps SMEs to identify the opportunities and threats (Rakesh, 2014).
Social, cultural, demographic, and environmental changes have a major impact on
virtually all products, services, markets, and customers. Small, large, for-profit,
and nonprofit organizations in all industries are being shaken and challenged by
the opportunities and threats arising from changes in social, cultural,
demographic, and environmental variables (Fred, 2011). Culture, as distinct from
political, technological or economic contexts, has relevance for economic
behavior and entrepreneurship (Anderson and Jack, 2002). Patricia, et al. (2011)
viewed cultural differences across societies into four quantifiable dimensions:
uncertainty avoidance, individualism, masculinity and power distance and
hypothesized that entrepreneurship is facilitated by cultures that are high in
individualism, low in uncertainty avoidance, low in power-distance and high in
masculinity. However, in analyzing the effect of culture on the performance of
SMEs, socio-cultural environment has been studied in terms of access to
networking (Yassine, 2013).

A network is a specific type of relation linking a defined set of persons, objects or

events or a set within which certain types of mutually rewarding relationships
exist (Yassine, 2013, p. 81). Though entrepreneurship and small business were
studied from psychological and economic approaches, the effect of socio-cultural
factors on enterprise development is not well researched (Patricia, et al., 2011).
As defined by Brass (1992) cited in Patricia, et al. (2011), social networks are ‘a
set of actors (individuals and organizations) and a set of linkages between those

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actors’. Social networks are therefore, a set of relationships that can define the
perception of a community, whether a business community or a more general
notion of community in society. In this context, understanding entrepreneurship as
a social phenomenon allows researchers to focus on social capital and social
networks. In applying social capital, Anderson and Jack (2002) argued that if
there is exploitation of social capital by any one person or entrepreneur, the
implication is there are both winners and losers.

Taking this idea, Alejandro and Patricia (2000) identified four negative
consequences of social capital: exclusion of outsiders, excess claims on group
members, restriction on individual freedoms and downward leveling of norms. In
business, entrepreneurs deal with many stakeholders including suppliers,
customers, employees, government authorities, competitors, and other
stakeholders. As postulated by the resource dependency theory, entrepreneurs use
their social relations to get the resources they need to support their businesses
(Bruce and Jeffrey, 2000; Miller, et al., 2001). Although entrepreneurs usually
grasp some of the resources necessary to create a business, they also need other
resources which they obtain through their contacts to produce and deliver their
goods or services.

In Ethiopia, the networking of entrepreneurs takes different forms like

neighborhood, friendship, kinship, gender and ethnic ties and the networks
provide social, emotional and financial support (Wassie and Alice, 2009). Using
both non-parametric and parametric statistical methods, Merima and Jack (2011)
conducted a study and found a negative relationship between ethnic ties and
performance in the case of the handloom sector in Ethiopia which may indicate
that these ties are useful as long as they are inclusive in nature.

2.4.3.1.4 Technological Factors

Technological advancements can dramatically affect a firm’s products, services,
markets, suppliers, distributors, competitors, customers, manufacturing processes,
marketing practices, and competitive position (Fred, 2011). Today, no firm can be
free from the influence of technological developments. In assessing the external

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environment, identification and evaluation of key technological opportunities and
threats is very crucial. Therefore, if they are to have a competitive edge, SMEs
need access to appropriate technology. However, in a study conducted to examine
factors that determine small and medium enterprise (SME) survival in Korea, it
was revealed that technology resources provide no direct survival benefits
(Hyunsuk, et al. 2012). Technological aspects that affect Small and Medium
Enterprises the most are access to technology, access to information, and access to
infrastructure (Yassine, 2013).

Though technology is essential for SME to be successful in their operation, access

to technology varies depending on the skill of owners. In a Malaysia study, for
example, the level of ICT skills possessed by SME owners was found poor,
hindered indexing adoption and usage of technology (Junaidah, 2015). The
benefits businesses can get from accessing technologies are increased flexibility,
improved employee efficiency and productivity, delivering management training,
and others (John and Paul, 2004; James, 2005).

Access to information is indispensable for the initiation, survival and growth of

firms (Yassine 2013) and the availability of new information is dependent on
personal characteristics (such as the level of education), infrastructure qualities
(such as media coverage and telecommunication systems), and on social capital
such as networks (Junaidah , 2015). According to the European Union (2015), the
key enabling technologies (KETs) for SMEs can make a significant contribution
in stimulating the industry in terms of growth and job creation. However, SMEs
have difficulties in accessing infrastructures which provide technological services
to industries due to limited human resources, financial capacities or lack of
awareness. Many small enterprises continue to rely heavily on private or even
physical contacts for market related information (Yassine, 2013; Hyunsuk, et al.,
2012).

According to Ole and Kalle (2004), Information Technology (IT) infrastructure is

defined as a shared, evolving, heterogeneous installed base of IT capabilities
based on open and standardized interfaces. In the European Union (2015) action

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plan, the term technology platform is synonymously used with technology
infrastructure and; accessing the knowledge of key Enabling Technology is
acknowledged as a major competitive factor for SMEs to generate innovative
solutions to products, processes and services. As it is stated in the plan, external
service providers are urgently required to deliver Key Enabling Technologies and
services at high levels due to the majority of SMEs not being in a position to have
all needed facilities and infrastructures at their disposal.

Though infrastructure has broader semantic implication, the crucial role of the
economic infrastructure services for business performance has been most widely
highlighted (Yassine, 2013). Investments, productivity and growth of businesses
are encouraged by good quality and accessible infrastructure. Further, reliability
and availability of infrastructure and the provision of utility services are crucial
for development (Anna and Maurizio, 2010). According to William and Sanela
(2001), water, sewerage, solid waste management, transportation, electricity, and
telecommunications are some of infrastructures. These items are the most
important elements either to start a business or expand the business in order that
each of these services can be delivered in different degrees. Using a descriptive
research design, Mba and Cletus (2014) conducted a study on 120 registered
operators of SMEs in Port-Harcourt city of Nigeria and identified inadequate
social infrastructure as one of the major challenges hindering SMEs.

As noted in ‘Doing Business 2010: Reforming through difficult times (2009) cited
in Yassine (2013), managers witnessed that their spending on items fuel,
electricity, telecommunications, and water amounted to 9% of annual sales which
is more than their expenses for machinery. As the supply of these infrastructural
inputs depends on the economic development of a nation (William and Sanela
(2001), expecting far more infrastructure -related constraints in Ethiopia should
come as no surprise.

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2.4.3.2 Micro Environmental Factors
According to Business Dictionary (2017), micro environmental factors are
‘Factors or elements in an organization's immediate area of operations that affect
its performance and decision-making freedom’. The micro environmental factors
are also known by the name external micro environmental factors that comprises
important elements like input suppliers, customers, marketing intermediaries,
competitors, and publics, (Economics Discussion, 2017). Yassine (2013)
categorized micro environmental factors into customer relationships, supplier
relationships, and competitors. In addition to the above three sub categories, this
study extends the micro environmental factors into ethnic composition of workers
and the concomitance of premises (sites/ territory) of the business and ethnic
membership of the entrepreneurs.

2.4.3.2.1 Customer Relationships

Customer Relationship Management is an activity, approaches and technologies
that firms use to manage and analyze their customer relations and data throughout
the lifecycle of the customer, with the purpose of enhancing business relationships
with customers and driving sales growth (Werner, et al., 2004). Based on a
marketing philosophy, most firms now emphasize the marketing concept that
values the attention given to customers.

The literature on the effect of customer relationship on the performance of

business reports fixed findings though much the positive effect seems to be
greater as empirically observed. According to Werner, et al. (2004) customer
relationship management has three theoretically sound process stages: initiation,
maintenance and termination phase. The study also revealed that implementing
customer relationship management has a moderate positive association with both
perceptual and objective company performance. However, Oliver and Jacquelyn
(2010) noted that customer relationship management does not affect firm
performance directly. Though the concept of customer relationship management
as a strategic endeavor is critical for the success of a business (Hubert, 2002),

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there is acute shortage of literature in Ethiopia on customer relations in most of
the businesses that calls the attention of researchers.

2.4.3.2.2 Suppliers Relationship

To be effective in its operation, an enterprise integrates itself with the supplier or
buyer of products. In the same way firms form relationships with customers, and
businesses also develop ties with inputs suppliers. In the literature it is highlighted
that supplier relationships are of particular importance to SMEs (Chin-Chun, et
al., 2008; Vijay and Chin‐Chun, 2006; Joseph and Christian, 2001).

With special emphasis on small and medium size enterprises, Lenny, et al. (2007)
conducted a study in Turkey and found that supply relationship has a direct and
significant impact on operational performance and insignificant impact on
organizational performance. According to the study referred to, supplier
relationship had a positive impact on other operations of the business, though the
impact was not seen in the aggregate performance of the organization. Also, the
relationship between operational performance and organizational performance
were reported to be directly related, which has found validation in subsequent
studies. For example, a study conducted in India by Anantharaman and Paul
(2003) revealed that each and every operation under study (HRM in this case) had
an indirect influence on the financial performance of the organization. The study
further revealed that not even a single HRM practice has direct causal connection
with organizational financial performance. However, many researchers have
suggested that small businesses of all sizes need an established supply chain
function to be successful in a complex business environment and create smooth
and productive relationships with input providers (Chin-Chun, et al., 2008; Vijay
R. and Chin‐Chun, 2006; Joseph P. and Christian, 2001; René and Yvon, 2004).

2.4.3.2.3 Competitors
In assessing the external micro environment, collecting and evaluating
information on competitors is essential for successful strategy formulation and
competition in virtually all industries can be described as intense and sometimes
as ‘cutthroat’ (Fred, 2011). Researchers argued that competitive concentration,

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along with market actions and strategies of competitors have positive or negative
impact on entrepreneurial performance (Jamie, et al., 2010; Shigang, 2010). In a
study conducted in China to help Chinese SMEs in maintaining and improving
effectiveness, Shigang (2010) investigated the competitive strategy and business
environment that influence Chinese SMEs’ performance. The researcher found a
negative relationship between competitive pressure and the performance of an
enterprise although the importance of competitive strategy to achieve their
competitive advantage is confirmed to be significant. Therefore, conducting micro
environmental analysis to figure out the role of competitors and counter-
competition intelligence and actions is crucial for the success of an SME
(Yassine, 2013).

2.4.3.2.4 Ethnic Sensitivity

According to Mariam Webster’s Dictionary (2017), the word ethnic is defined as
‘of or relating to large groups of people classed according to common racial,
national, tribal, religious, linguistic, or cultural origin or background’. Waldinger,
Howard, and Ward (1990) cited in Tulay, et al. (2011) defined ethnic
entrepreneurship as ‘‘a set of connections and regular patterns of interaction
among people sharing a common national background or migration experiences.
Similarity in race and ethnicity creates the strongest divides in personal
environments, with age, religion, education, occupation, and gender following in
roughly that order (Miller, et al., 2001). The reason for the conception of ethnic
entrepreneurship is that ‘those who were considered strangers to the local
community and denied entrance to the primary job market would have to find
ways to avoid the economic difficulty through some self-employment activities
that they turn into businesses that require less entry barrier and a highly liquid
nature’ (Radha and Patricia, 2002; Min Zhou, 2004).

Those who are running a business out of their ethnic territory may sometimes feel
alienated, especially when the local community’s perception is different from the
entrepreneurs’ perspectives of looking at the relational situation. Recently,
politically motivated uprisings in Ethiopia had targeted entrepreneurs and the

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businesses owned and managed by the entrepreneurs that hailed from a specific
tribe. When such ethnic based violence is persistent, the entrepreneur’s
confidence to work out of his/her ‘ethnic territory’ could be eroded and force
them to withdraw the investment from the area where they are facing hostility.
However, this event being a recent occurrence, the effect of the phenomenon on
the success of the business did not get a chance to be investigated. This gap is
expected to be bridged by this study involving existing concepts regarding the
effects of ethnic composition of workers and the association of ethnic territory
and ethnic membership.

2.4.3.2.4.1 Ethnic Composition of Workers

As stated by Sander and Mirjam (2012), one of the most salient and relevant
dimensions of team heterogeneity is ethnicity. According to Paul, et al. (2014),
the performance of the firm can be determined by whether the worker
composition is diversified or not. In their study, it was revealed that work force
diversity in terms of ethnicity has positive impact on performance, which serves
to confirm the notion that ‘diverse firms may enhance strategic problem-solving
and decision-making capabilities’.

A Kenya study (Jonas, 2014) suggested that inter-ethnic rivalries lower efficiency
in the private sector adding that the economic costs of ethnic diversity vary with
the political environment. In the study it was also revealed that the highly diverse
ethnic composition of Kenyan workers in the horticulture sector leads to lower
productivity especially when there is political turmoil and ethnic conflict.
Following the work of 550 students who set up 45 real companies as part of their
curriculum in an international business program in the Netherlands, Sander and
Mirjam (2012) found that a moderate level of ethnic diversity has no effect on
team performance in terms of business outcomes (sales, profits and profits per
share). However, the study revealed that if at least the majority of team members
are ethnically diverse, ethnic diversity has a positive performance impact.
Applying a resource-based framework, Orlando (2000) examined the
relationships among cultural (racial) diversity, business strategy, and firm

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performance in the banking industry and found out that cultural diversity adds
value and contributes to firm competitive advantage. An ethnically diversified
firm is likely more successful than its homogeneous counterpart due to the rich
diversity and high quality of the ideas generated by ethnically diversified firms
(Poppy, et al., 1996). However, in a study conducted in China involving a sample
of 1,079 Chinese firms in the materials and industrial sectors, higher ethnic
heterogeneity was found to negatively impact the financial performance of the
firm investigated (Sefa, et al., 2016).

2.4.3.2.4.2 Concomitance of Ethnic Membership and Business Premises

The association between ethnic territory and ethnic membership has drawn the
concern and attention of entrepreneurs perhaps more than ever before.
Entrepreneurs doing business out of ‘their territory’ feel insecure when the safety
of their business and their lives are vulnerable due to ethnically motivated
violence (Tesfaye, 2016). For example, a study conducted in South Africa,
Johannesburg, has contributed significantly to understanding of xenophobic
sentiments and immigrant identities. Based on extensive fieldwork, discussions
with immigrant organizations and in-depth interviews with immigrants, Richard
and Daniel (2015) found that the immigrant business zones operate differently
and vary in the degree to which they are connected to urban and national
economic grids that retained stronger ties to transnational networks.

In reference to immigrant entrepreneurs, businesses do not target exclusively

members of the relevant ethnic community, but instead define the market by other
demand dimensions and the business location is determined by the nature of the
business rather than by the location of the ethnic community (Radha and Patricia,
2002). According to David (2001), ethnic minority enterprise can be restricted
both by powerful indigenous interest groups, by a strong welfare state, and by a
strong culture of business regulation. In assessing how ethnic enclaves and
networks affect the self-employment decisions of immigrants in the U.S., Maude
(2008) found that the ethnic networks play a positive role in the likelihood that
immigrants choose self-employment as an alternative to wage employment and it

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was also revealed that there was no clear impact of ethnic geographical
concentrations on the self-employment decision.

According to Radhaand Patricia (2002), the four main questions used to gage the
degree of ethnic involvement were: (a) Are his/her friends primarily from within
the ethnic community? (b) Are her/his neighbors primarily from within the
community? (c) How many times did the entrepreneur attend meetings of ethnic
community organizations during the last year? And (d) How important for this
individual is the goal of contribution to the ethnic community. The study further
showed that the most involved ethnic entrepreneurs are those who socialize
largely with co-ethnics, live within an identifiable ethnic neighborhood that
actively participates in ethnically-based organizations or institutions, and feel a
strong sense of responsibility to contribute to this community.

Yinger (1985) and Aldrich and Waldinger (1990) cited in Min Zhou(2004)
defined Ethnic entrepreneurs as those persons who are simultaneously owners and
managers (or operators) of their own businesses, whose group membership is tied
to a common cultural heritage or origin and is known to out-group members as
having such traits; more importantly, they are intrinsically intertwined in
particular social structures in which individual behavior, social relations, and
economic transactions are constrained.

Inspired by the question ‘why Asian and European minorities in Africa seem to be
more successful in business than are people of indigenous ethnicity’, Taye (1999)
conducted a study to investigate any significant differences in business ownership
and performance that exist among African ethnic groups and to explore the
microeconomic footings of the association between ethnic diversity and the poor
growth performance in Sub-Saharan Africa. Having analyzed randomly selected
small to medium-size manufacturers in Ethiopia, the researcher found that
establishments owned by an indigenous minority ethnic group, the Gurage,
typically perform better than those owned by other (major or minority) groups
regardless of educational level. The study suggested that the observed effect of

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ethnicity could be indicative of intergroup differences in their entrepreneurial
ability.

In Ethiopia, an ethnically diverse society, entrepreneurs have had the tradition of

doing business regardless of their ancestors’ hometown or ethnic geography.
However, recently, the ethnic consciousness is starting to be one of the factors for
the success of entrepreneurs as those entrepreneurs and businesses operated by the
‘outsider’ entrepreneurs are becoming targets for violence with an ethnic motive.
Motivated by this kind of phenomenon, entrepreneurs might want to withdraw
their investment, abandon their operation, or divert the expansion strategy to some
other places due to the ‘perceived’ lack of safety for their business and property
(Tesfaye, 2016).

Taking this recent phenomenon into account and other relevant factors, the
present study aims at exploring the perception of owner managers regarding the
ethnic factor and premises concomitant as a success factor for Small and Medium
enterprises.

1.14[2.5] Entrepreneurs’ Perception of Success

As the overall objective of the study is to understand the relationship between
environmental factors and business success in Small and Medium Enterprises
(SMEs) in Ethiopia, the perception of entrepreneurs in regard to these success
factors must be explored. Thus, it is important to point here that this study also
aimed at exploring entrepreneurs’ perceptions of success factors, internal or
external. In addressing the question ‘what entrepreneurs consider as indicators for
achieving entrepreneurial success’, Rosemary, et al.(2014) conducted a study and
found out that entrepreneurs perceive entrepreneurial success as the presence of
both controllable and uncontrollable variables. Emphasizing non-financial
measures of success and their interaction with the financial indicators of a firm's
performance, Helen and Reija (2007) have also witnessed that non-financial
measures of success that are affected by the entrepreneur's motivations and goals
influence the financial performance of the small firm. In a study investigating the

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perceived success factors of operating small and medium enterprises amongst
Malaysian entrepreneurs, Wei (2012) found that the perceived success factors
across different ethnic groups were ‘reputation of honesty, good customer service,
and hard work’.

Every entrepreneur has his/her own perception of business success and success of
SMEs that involves an implicit assumption of the links between success and an
associated set of causal variables (Yassine, 2013). Taking random sample of 105
firms, Terrence and Titikorn (2010) studied the influence of external and internal
factors on the idea creation, risk taking, and reactiveness perceptions of upper
managers. And found that managers' ideas were influenced by the type of product
produced, the size of the company, and the extent of firm support for individual
entrepreneurship.

According to Yassine (2013) examining the perceptions of entrepreneurs in

relation to success factors is important for three reasons; (1) not all business
owners are profit motivated and have the intention of growing. This is especially
true when the entrepreneurs desire the benefit of the society most. (2) the success
criteria embraced by policy makers who put emphasis on job creation may not
accord with those envisaged by SME owners. In this case, it is important to
highlight that unless there is congruence between the goals of public policy and
those of business owners, government initiatives may be misdirected or
ineffective. (3) the definition of ‘success’ is conceived to vary across cultures,
gender, or other relevant dimensions.

1.15[2.6] Development of Conceptual Framework and the

Research Gap
After exploring the literature, developing a conceptual framework for the study is
important. To this end, factors that are considered to be influential for the success
of Small and Medium Enterprises are explored and reviewed critically in the
above sections. From the review, a conceptual framework that supports the
research is developed. In the subsequent conceptual framework, there are two

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different types of variables presented as independent and dependent variables. All
factors in the model are independent variables and the business success of SMEs
is treated as a dependent variable.

Because the internal and external environmental dimensions as the success factors
of SMEs in Ethiopia are not fully explored, this study made a comprehensive
analysis of the factors thus contributing its part in minimizing the evidence
availability gap in Ethiopia. The empirical work involving the factors is based on
the conceptual framework developed and demonstrated in the following figure
(figure 2.1).

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Figure 2.1: Conceptual Framework
Source: (Author, 2017)

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1.16[2.7] Hypotheses of the Study
Based on the intensive literature review and the conceptual framework developed
regarding the factors influencing the success of small and medium enterprises,
fourteen hypotheses stated in an alternative form were developed to test the link
between those factors and the success of SMEs. These hypotheses are;

No. Hypotheses
H1: Firm characteristics has a significant effect on the business success of
SMEs
H2: Personality characteristics of entrepreneurs has a significant effect on the
business success of SMEs
H3: Entrepreneur competencies has a significant effect on the business
success of SMEs
H4: The effect of socio-demographic characteristics on business success is
significant
H5: Economic factor has a significant effect on the business success of SMEs
H6: Political-Legal factor has a significant effect on the business success of
SMEs
H7: Socio-cultural factor has a significant effect on the business success of
SMEs
H8: Technological factor has a significant effect on the business success of
SMEs
H9: Customer relationship has a significant effect on the business success of
SMEs
H10: Supplier relationships has a significant effect on the business
success of SMEs
H11: Competition has a significant effect on the business success of
SMEs
H12: Concomitance of ethnic membership and business premises have a
significant effect on the business success of SMEs
H13: The combined effect of external and internal environmental factors
has a significant effect on the business success of SMEs

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 H14: The effect of the internal factor on business success is different
from that of the external factor as perceived by owners/managers of
SMEs

1.17[2.8] System of Literature Review used

A literature review is an objective, thorough summary and critical analysis of the
relevant available research and non-research literature on the topic being studied
(Hart, 1998) cited in Patricia, et al. (2008). This section explains the systematic
literature review methods and processes carried out in order to inform the research
questions and objectives stated in chapter one.

In the literature review, the author passed through a number of steps that ranged
from identifying key words related to the research questions formulated to the
more critical reviewing of the sources found. Accordingly, a systematic review,
focused on research questions that tried to identify, appraise, and synthesize high
quality research evidence applicable to the research questions at hand, was
employed.

In this method of reviewing, appropriate electronic databases including, Emerald,

Science Direct, JSTOR, Springer, Sage Journals, and South Asian archive were
used. In addition to the above databases, additional resources from other sources
found on the internet through the use of keywords on the search engine ‘www.
google.scholar.com’ were incorporated. During the online search, the titles and
sometimes the abstracts were read in order to exclude any relatively irrelevant
references. The screening process was undertaken in order to select publications,
found using the search terms, which met the pre-determined key words related to
the research questions. To ensure a cross cultural view of the success factors and
gain a wide picture of the factors that influence the success of SMEs, available
literature for all industries and sectors from all countries based on the key words
were considered.

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After assessing the results of each search to ensure whether the documents are
likely useful for the research objectives at hand, the bibliographic information for
those that met the purpose were entered as MS word references based on the
dialogue box requirement. In this way, a total of 172 references including journal
articles, books, book chapters, websites, organization reports, strategic and
operational plans, and other relevant documents were used for this chapter.

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 CHAPTER THREE
RESEARCH METHODOLOGY

1.18[3.1] Introduction
This chapter presented details of the methodology used including its relevance to
this study. Research methodology is often referred to as a “framework for the
collection and analysis of data” (Bryman, 2012, p. 46). The choice of research
method reflects the decisions about the priority being given to a range of
dimensions of the research process. Each research study is guided by the choice of
methodology, which in turn is driven by the research paradigm concerning the
nature of reality (ontology), how the knowledge about reality is understood
(epistemology) and the role of values (axiology). This chapter first discussed the
research philosophy, approaches and strategies employed as well as the reasons
for their selection. In satisfying this requirement, this chapter explored appropriate
philosophical positions from which the methods should be derived. Secondly, the
chapter presented the research design, including research phases and process,
together with a discussion of data collection instruments and analysis. Thus, this
chapter discussed the quantitative and qualitative methodologies adopted,
allowing the researcher to view the role, focus and relationships and their effect
within and across the SME environment. A questionnaire and an interview with a
sample population were also used to collect the data. Finally, the chapter
discussed the ethical considerations associated with data collection and analysis.
The previous chapters provided a detailed overview of entrepreneurship and
SMEs’ definitions and characteristics, nature of support for SMEs and pursuit of
success for SMEs as perceived by owner managers. This chapter uses the
conceptual frameworks laid in conjunction with the SME literature covered in
Chapters 2 to explore the stated research aims and objectives. Several gaps in the
literature were identified, with principal areas concerning the relationship between
the research questions. Thus, the main concern of this chapter dealt with the

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methodological issues of how this study could address the objectives as recalled
below:

1. To identify relevant internal environmental factors which influence the

business success as perceived by owner-managers of SMEs in Ethiopia,
2. To identify the major external environmental factors that influence the SMEs
business success in the opinion of owner-managers,
3. To determine the combined effect of the external and internal environmental
factors on the performance of SMEs in Ethiopia as perceived by owner-
managers,
4. To examine which environmental factors contribute more to the success of
SMEs,
5. To examine the effect of concomitance of firm premises and entrepreneur
ethnic membership on the business success of SMEs.

In any research, it is important for the researcher to be aware of all elements of

the research process, including the theoretical and philosophical issues
underpinning management methodologies (Sadler-Smith et al., 2000).

1.19[3.2] Understanding Research Philosophies

A research philosophy is the basis to understand the phenomenon constructed.
According to Saunders et al. (2007:101) research philosophy (Figure 3.1, depicted
in the research onion) can be seen as the overarching term which relates to the
development of knowledge. This development may not be dramatic but modest in
responding to a specific problem. It is still developing knowledge. It is important
to align the researcher, the thesis statement, and the manner in which knowledge
will be acquired, developed or attained. Despite this, acquiring knowledge within
the business research environment can rarely be categorized into one
philosophical domain. The research philosophies adopted contained important
assumptions about the way in which the world was viewed (Saunders et al.
2007:102).

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There are three major ways of thinking about research philosophy as depicted in
Figure 3.1; namely epistemology, ontology and axiology. According to Remenyi
et al. (1998:282) epistemology is “The study of theory of the nature and grounds
of knowledge especially with reference to its limits and validity”. Saunders et al.
(2007:102) also expand on this foundation of epistemology as “the concern that
constitutes acceptable knowledge in a field of study”. Thus, a study’s contribution
may be understood as adding acceptable knowledge, thus making epistemology a
crucial consideration. There is also the dimension of ontology (Remenyi et al.,
1998:286) which is “a branch of philosophy or metaphysics concerned with the
nature and relations of being” and the “concern with the nature of reality”
(Saunders et al., 2007:108). Axiology as “a branch of philosophy that studies
judgments about value”(Saunders et al. ,2007:110) is also an important
philosophical dimension relating to issues of methodology. Further details about
epistemology, ontology and axiology are presented below that help demonstrate
the important distinctions.

3.2.1. Ontology
Ontology is concerned with the nature of reality. The key point is to examine
whether social entities can be considered as objective entities. The consideration
of “ontology is fundamental, not optional” (Delbridge, 2006, p. 1210). Burrell and
Morgan (1979) suggest that the philosophies of social science are either
`subjectivist' or `objectivist' in orientation. Objectivism refers to the position that
social entities exist in reality external and independent of social actors. On the
other hand, subjectivism suggests social phenomena are created from the
perceptions and actions of the social actors. Both pragmatism and positivism,
along with objectivist orientation, view social entities as external factors.

Pragmatists claim that no single point of view can ever give the entire picture and
there maybe multiple realities. Positivists on the other hand posit that reality is
independent of the social actors. Realists are situated at a point between
subjectivist and objectivist orientations, thus share aspects of both orientation
types. They believe that reality is objective and independent of human thoughts

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and beliefs. Unlike positivists they believe reality can be interpreted through
social conditioning. The last paradigm, Interpretivists, believe reality can be
socially constructed; could be changed and may have multiple interpretations.

The literature on environmental factors draws upon a number of disciplines. Most

of the studies on SMEs have been dominated by the positivist paradigm, with a
strong focus on cause-effect relationships, statistical tests and predominantly
linear thinking (Brewster, 1999; Watson, 2004; Legge, 2005; Hesketh and
Fleetwood, 2006; Delbridge and Keenoy, 2010).

The key ontological debates in this area are those by Karen Legge (Legge, 2001,
2005) and David Guest (Guest, 1999, 2011). Both scholars have focused on the
gap between the rhetoric and reality in SMEs and have called for more empirical
work (Harley and Hardy, 2004). Guest increasingly advocates more positivistic
research in line with his arguments. His position has implications for the present
investigation.

3.2.2. Epistemology
Epistemology considers what makes acceptable knowledge i.e., the nature of
knowledge principles and procedures governing that knowledge (Bryman, 2012).
As noted in Table 3.1, Pragmatists focus primarily on practical applied research
and use different perspectives to interpret the data. While positivism is an
epistemological position that applies a natural science, hypothetic-deductive,
approach to phenomenon of interest (Cook and Reichardt, 1979). Realists on the
other hand argue that observable phenomena provide credible data and facts. In
contrast, interpretivists emphasize subjective meanings and social phenomena.

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 Table 3.1: Ontology and epistemology of research paradigms
Pragmatism Positivism Realism Interpreti
vism
External, External, Is objective. Socially
multiple, objective and Exists constructe
view chosen independent of independently of d,
to best enable social actors human thoughts subjective,
answering of and beliefs or may
research knowledge of change,
question their existence multiple
(realist), but is
interpreted
Ontology

through social
conditioning
(critical realist)
Either or both Only Observable Subjective
observable observable phenomena meanings
phenomena phenomena can provide credible and social
and provide credible data, facts. phenomen
subjective data, facts. Insufficient data a. Focus
meanings can Focus on means upon the
provide causality and inaccuracies in details of
acceptable law like sensations (direct situation,
knowledge generalizations, realism). Focus on a reality
dependent reducing explaining within behind
upon the phenomena to a context or these
research simplest contexts. details,
question. elements subjective
Focus on meanings
practical motivatin
applied g actions
research,
integrating
Epistemology

different
perspectives
to help
interpret the
data
Source: Saunders et al., 2012

In connection with the above description about each philosophical thoughts and
approach, it is possible to make a case for the position of this study. Thus, this
study is positioned in the positivistic paradigm. It is argued that quantitative
researchers within a positivist paradigm are using increasingly sophisticated data
analysis techniques which provide key insights into the debates relevant to this
field (Truss, Shantz, Soane, Alfes and Delbridge, 2013). Studies adopting the
positivistic view also extend prior quantitative research, and are able to shed a

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more nuanced light on the antecedents and outcomes, thus advancing the
understanding of this concept.

Epistemology

Ontology

Axiology

Figure 3.2 Research Onion

Source: Saunders et al., 2017

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3.2.3. Axiology
This set of assumptions describes the degree of influence of a researcher’s values
on the outcome of social inquiry (Bahm, 1993). Axiological assumptions explain
to what extent researchers give a personal seal to the whole research process and
interpret findings based on their own values. These assumptions can range from
the belief that inquiry can be value-free (positivistic axiology) to the belief that
every research is biased by the values held by researcher (constructivist
axiology).In this study the axiology is more of the positivistic type.

3.2.4. Applicable Research Philosophy

This research supports epistemology, since the two most influential philosophical
positions are positivism (also referred to as quantitative, objective, scientific,
experimentalist, traditionalist or functionalist) and interpretivism (also known as
qualitative, subjective, phenomenological, constructivist, post-modern or
humanistic) philosophies. Although they can be used in tandem, the research
question determines the selection of the most suitable, thus necessitating further
discussion.

The basic position of positivist and interpretivist philosophies is based on the

nature of society and nature of science and how each of these relate to ontology
(how reality is construed), epistemology (how knowledge is acquired), human
nature (whether it is predetermined or not) and methodology of gaining
knowledge (Burrell and Morgan, 1979).

3.2.5 The Positivist Paradigm

The researcher within the positivism realm is regarded as an objective,
independent analyst of an observable social reality “that it neither affects nor is
affected by the research subject” (Remenyi et al. 1998:73). In addressing potential
personal bias, the positivist researcher follows methodological rules that are
independent of the content and context of the enquiry. Proponents of this view
would argue that alternative philosophical viewpoints support the reductionist
approach by simplifying the real world (Remenyi et al. 1998:35), without

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considering the human and social situations, which will limit its ability for deep
understanding of complex, social or individual problems. This would require
something else, inclining towards the interpretivism.

The positivists assume (i) a single tangible reality consisting of discrete elements,
(ii) a division of discrete elements into causes and effects, (iii) independence
between researcher and the research phenomenon (iv) the possibility and
desirability of developing statements of truth that are generalizable across time
and context and (iv) the possibility and desirability of a value free objective
knowledge discovery (Holden and Lynch, 2004).

1.20[3.3] The Interpretivist Paradigm

The heritage of this interpretivist research comes from the phenomenological
approach which refers to the way humans make sense of the world (Remenyiet al.
1998:94). In addition interpretivists are sometimes described as non-positivist,
post-positivist or qualitative, which provides a holistic understanding of numerous
variables within the context of the study, thereby making context a critical
element (Saunders et al. 2007:106). Furthermore, according to Saunders et al.
(2007:107), central to the interpretivist epistemology is “that the researcher has to
adopt an empathetic stance”. The challenge here is to enter the social world of the
research subject and understand it from their point of view. Several authors
(Lacityand Janson, 1994:137; Perry, 2001:309) would argue that an interpretivist
perspective is highly appropriate in the case of business and management research
particularly in fields such as strategy, organizational behavior, human resources
and marketing. Within interpretivism a single objective reality does not exist,
necessitating the consideration of multiple realities (Saunders et al. 2007:106).
These realities are made up of external realities based on happenings in the
physical world and internal realities, subjective and unique to each individual
(Remenyi et al. 1998:36). In order for the researcher to derive meaning they will
have to tunnel below the surface to understand these realties, therefore making

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“the researcher’s best tool for analysis his own mind supplemented by the minds
of others”.

Positivist and interpretivist philosophies assume the opposite on each of these

axioms as summarized in Table 3.2.

Table 3.2 Axioms of the two research philosophies

Positivist philosophy Interpretivist philosophy

There is a single reality made of Human beings construct multiple

discrete elements realities

The researcher and the phenomenon Researcher and phenomenon are

are independent mutually interactive

Elements of reality can be integrated Phenomenon aspects cannot be

into causes and effect integrated into causes and effects

It is possible and desirable to discover Inquiry is inherently value laden

value-free objective knowledge

It is possible and desirable to develop Research inquiry is directed to the

statement of truth that agree with development of idiographic
generalization across time and context knowledge

Source: Remenyi et al., 1998

In the past, debates by the two research camps remained so heated to the extent
that each questioned not only the results of the studies conducted from each camp
but also their legitimacy in the world of research (Remenyi et al., 1998). The
positivists were so adamant that their philosophy is the only way to research
because they contend that their results are provable, replicable and generalizable.
However, as time went on and on account of the positivist approach’s failure to
explain numerous social phenomena, it became clear, that the interpretivist
method had a place in the world of research.

The unresolved debates between the two camps led to a position that is midway
resulting in only a few scholars today holding extreme views of the assumptions
espoused by the classic philosophies (see Table 3.2). Holden and Lynch (2004)

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noted that a midway philosophy (also known as realists or pragmatists) accepts
the existence of a reality independent of human beliefs and behavior (positivist)
yet it also concedes that understanding behavior requires acknowledgement of the
subjectivity inherent in humans (interpretivist).

Furthermore, this pragmatic view reckons that reality is tangible yet humans have
input in forming its context and texture. Though knowledge is not absolute, it can
be accumulated, tested and either retained or discarded (Holden and Lynch,
2004). Such a discourse is reinforced by Gordon’s (Gordon, 1991) assertion that
the research community can qualify the research findings as contextually
exploratory and perhaps generalizable rather than insisting that findings are
absolutely certain. Blumberg et al., (2005) are more emphatic in embracing the
two paradigms by asserting that one cannot decide whether qualitative or
quantitative studies are better or more useful than the other. This implies there are
no predetermined criteria or standards for the appropriateness for the methods.

Moreover, Poggenpoel et al., (2001) noted that the two philosophies are most
often not in opposition but rather complement each other. They base their
argument on the basis of both positions being on the path to scientific research
and knowledge. In other words, each is used to form a building block for
scientific inquiry because research is about observing a phenomenon and drawing
conclusions as to what is happening (interpretivist). This is followed by
hypothesizing and testing the hypothesis to accept or reject the relationships that
may have been developed following the observations (positivist). Both Blumberg
et al., (2005) and Holden and Lynch (2004) attempted to explain why scholars
stick so much to their position to defend each paradigm by noting that the strong
preferences for either type of study may have arisen most probably because of
their previous training and hence their capability in applying the methods.

Another aspect arising from the pragmatic view is that neither philosophy is
wrong and that the issue is about how each philosophy is applied to the problem.
Thus, inappropriate matching of the philosophy and the problem is what
pragmatists consider a recipe for invalid results (Holden and Lynch, 2004).

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Against that background, a pragmatic approach was considered to be a more
suitable approach to solving problems.

1.21[3.4] Philosophical Context of the Study

Putting the two philosophies in a practical context requires an appreciation of the
nature of the research problem. The nature of the problem provides a template on
which basic questions (or assumptions) of ontology, epistemology, human nature
and thus methodology are based. The ontological question relates to what
constitutes reality. Reality cannot be construed as a single unit or point. Multiple
realties exist in a given situation especially in behavioral based research problems.
Creswell (1994) noted that reality may be construed differently by those
investigating, being investigated and those who read the investigation.

The first aspect is the epistemological question which simply stated is: what is the
relationship of (or distance between) the knower (or would-be knower) and what
can be known? (Kenley, 2003:5). The greatest stance of positivists is the issue of
bias which they believe should be solved by the researcher maintaining a distance
from those being researched. However, the need to understand the phenomenon in
its natural and contextual setting requires that the researcher has to maintain an
appreciable distance with the subjects of his/her study, which in this case are the
effect of the owner-manager perception on the pursuit of success. The researcher
needs to interact with the study subjects (for example, the owner) who are
relevant to the management of SMEs. Essentially the study was skewed towards a
quantitative approach through the use of a questionnaire meant that some
‘distance’ was created between the knower and what can be known.

The axiom of the philosophies relates to methodology and methods. Kenly

(2003:4) phrased the axiom in form of a question: how can the inquirer (or would-
be knower) go about investigating whatever she believes he or she can know? The
answer to the question is embedded in the selection of an appropriate
methodology for solving the problem. The choice must be determined by the
ontological and epistemological positions of a study and this will be achieved if

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the research horizon is brought into focus. Thus, next section discusses the
methodology to be utilized in the research process with a view to selecting and
justifying the most appropriate research strategy and data collection method.

1.22[3.5] Methodological Choice

According to Creswell (2003), quantitative methodology is based on objectivism
ontology, positivism epistemology, voluntarism/unbiased axiology, and deductive
methodology. Whereas Bryman and Bell (2007) state that quantitative research strategy is
a deductive approach that typically uses scientific procedures and numerical analysis to
illustrate the relationship(s) among the factors in the phenomena of studies. The
methodological choice is driven by the research philosophy and approach. As discussed
in the previous sections, this study takes a positivist view and thus is deductive in nature.
Studies could either be quantitative, qualitative or mixed. Management and
organizational research has seen a long debate regarding the strengths and weaknesses of
qualitative or phenomenological versus quantitative or positivistic research
methodologies. At times, competing, often polemic arguments for either one or the other
approach seem to take more energy than the actual research.

Bryman (1993) proposes that quantitative and qualitative methodologies are ‘competing
views about the ways in which social reality ought to be studied, and as such are
essentially divergent clusters of epistemological assumptions.’ However, Bryman (2008)
concedes that, although these two methodologies are perceived as rivals, they may
nevertheless be integrated for the purposes of research, as well as being viewed as
sometimes being more appropriate for answering certain types of research questions than
others. Denzin and Lincoln (2000) state that the quantitative approach seeks to measure
or quantify results in order to explain phenomena rather than understand them, avoiding
focusing on meanings, ideas and practices. While qualitative research is concerned with
qualities, processes and meanings, which are not experimentally examined or measured
in terms which are associated with the quantitative approach; that is, in terms of quantity,
amount, intensity or frequency (Alvesson and Deetz, 2000).Based upon Saunders et al.
(2012), Table 3.3 distinguishes between quantitative and qualitative research.

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Table 3.3: Differences between quantitative and qualitative research
Quantitative Qualitative
Research Positivism. May be used Interpretivism. May be used within
philosophy within the realist and the realist and pragmatist
pragmatist philosophies. philosophies.
Research Predominantly deductive Predominantly inductive
approach
Research Examines relationships Studies participants’ meanings and
objective between variables. relationships between them.
Position of Seen as independent Plays a more active role
Researche from respondents
r
Research Principally associated Key strategies used include case
strategy with experimental and study, ethnography, action
survey research research, grounded theory and
narrative inquiry.

Source: Adapted from Saunders et al., 2012

The first difference between these two types of research design is based on
research philosophy. As quantitative research is highly structured, it usually
adopts the positivist view. In contrast, researchers make sense of the subjective
and socially constructed meanings expressed about the phenomenon being
explored. Thus, most qualitative research falls into the interpretivist paradigm.
Second, quantitative approach is generally linked to a deductive approach as the
key aim is to test theory. The foundation underlying the majority of qualitative
research is inductive approach. There may be some exceptions where the
objective is to test an existing theoretical perspective using qualitative procedures.

The key objective of quantitative research is to examine the relationships between

variables measured numerically and analyzed using statistical techniques, while
qualitative research focuses on studying the interpretations of the respondents and
relationships between them. In the case of quantitative research, the role of the
researcher is usually limited to data collection instruments. As qualitative research
involves data collection using methods like interviews and observations; the role
of the researcher is more active. Quantitative research is mainly conducted using
experimental and survey strategies. On the contrary, qualitative research uses a
variety of strategies like case study, ethnography, action research, grounded
theory and narrative inquiry.

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Employing either quantitative or qualitative research is usually referred to as
mono method. Studies could also follow a multiple methods research design,
which refers to using more than one method for collecting and analyzing data.
The multiple methods research design is further classified into multimethod and
mixed methods research. Multimethod research refers to use of more than one
data collection method, but is restricted to either qualitative or quantitative
research. For instance, use of survey and archival data for quantitative research
would be termed as multimethod quantitative research. On the other hand, mixed
methods research combines both quantitative and qualitative research in one
research design. The methodology adapted for this thesis is a mix of quantitative
and qualitative research as it is more appropriate for answering the research
questions posed by the current study.

Horna (1994) explains that quantitative research designs are characterized by the
assumption that human behavior can be explained by what may be termed “social
facts”, which can be investigated by methodologies that utilize “the deductive
logic of the natural sciences”. What distinguishes quantitative methods from other
analytic methods is the use of systematic scientific methods in exploring
quantitative properties and phenomena and the link between them. The
applications of mathematical approaches (model, theories and hypotheses) are
widely used in this method. Slattery (1986) argues that quantitative methods
present a manageable selection of statistical material relating to social policies,
which provides a picture of some of the ways a society is changing. Thus, this
study followed the ontology of the critical realist and objectivist epistemological
perspective and hence the selection of the quantitative methodology based on the
research questions raised and hypotheses formulated.

1.23[3.6] Research Strategy

The selection of an appropriate research strategy and data collection methods is
based on a systematic appraisal of the research process. The framework chosen
here is based on the combined work of Saunders et al., (2003) and Yin (1994)

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illustrated in Figure 3.1. The taxonomy is in the form of the analogy of an ‘onion’.
The different layers of the onion represent the different facets of the research
process. The first outer layer of the onion shows the two philosophies already
discussed in the previous section. The other facets (layers) of the research process
include the (i) research description or classification (ii) research strategies; (iii)
research time lines; (iv) data collection methods and (v) classification of analysis.

Research strategy is the linchpin aimed at converging the discussion of

philosophy with the consequent choice of data collection and analysis methods
(Denzin and Lincoln, 2005). Research strategy is thus dependent upon the nature
of the particular study which could be exploratory, descriptive or explanatory.
Some examples of research strategies include experiment, survey, archival
research, case study, ethnography, action research, grounded theory and narrative
inquiry. Within the survey method, data are generally collected from a single
source and are usually cross-sectional. This is also true about performance
research which has been dominated by quantitative studies.

Apart from being appropriate to answer the research questions, this study uses
quantitative survey for collecting data for the following reasons. First, researchers
argue that quantitative methods like survey help in collecting data that can be
used to test hypotheses proposed after reviewing the extant literature. For
instance, Conway et al., 2014) stated that quantitative methods often involve
rigorous testing of theoretical claims using survey data. Second, survey method is
seen as being easy to explain and to understand (Saunders et al., 2012). Third,
results obtained using a survey instrument, if based on appropriate sampling
techniques, usually exhibit high generalizability that is representative of the whole
sample at a lower cost as compared to attempting to collect data from the entire
population. This strategy also has wide-ranging limitations. There is a limit to the
constructs that can be measured using one questionnaire. As the questionnaire is
pre-structured, it is not possible to change the order/ content of items for each
respondent.

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Carter (1999) noted that a research strategy is a mix of research intentions,
opportunities, accidents, actions, philosophies, analysis and choices for solving a
research problem. There are several research strategies available for use in the
various disciplines, for example, Remenyi et al., (1998) provided nine. However,
the major approaches may be identified as being the case study (Yin, 1994),
action research (Gummesson, 1991; Webb, 1989), grounded theory (Strauss and
Corbin, 1990), ethnography (Creswell, 1994), survey (Leedy and Ormrod, 2005),
archival or historical studies (Hussey and Hussey, 1997) and modelling and
simulation as indicated in the third layer of the onion of Figure 3.1.

It would not be very useful to describe each of them here as they are well
described in most of the research books (e.g. Leedy and Ormrod, 2005; Hussey
and Hussey, 1997) but a few points are worth noting in the context of the study.
The research strategy provides a researcher with specific procedures to: i) Identify
the study subjects; enumerate the population; ii) Design a systematic method of
obtaining a study sample; iii) Determine the data required, its source, how to
collect it (data colleting instrument design), and interpret it (Blumberg et al.,
2005; Hussey and Hussey, 1997).

In this study, the nature of the research problem fitted the survey research
strategy, since the study required investigating the nature and practices of a
representative sample of owner managers’ perception of environmental factors as
being the major contributor to performance of SMEs in Ethiopia.

1.24[3.7] Research Logic: Inductive versus Deductive

Saunders et al. (2007) raise the important point of the usefulness of making the
distinction between deductive and inductive logical approaches. This thesis
implemented a hypothetical deductive approach. The process of deduction (as
explained in Bryman, 2012) is that a researcher deduces hypotheses on the basis
of what is known about a particular domain (i.e. the environmental factors and
success of SMEs in the context of this research) and then translate them into
operational terms. This translation process can be referred to as

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 operationalization; the task in other words is to devise measures of the concept
that the researcher is interested in. Data are then collected and analyzed in order
to test the hypotheses. The researcher’s findings are finally fed back into the body
of the knowledge (or theory in the domain).

Table 3.4 displayed the major differences between the two approaches. The
present research tends toward the deductive approach as the investigation
addresses the relationship between environmental factors and SME success.
Therefore, what research design would be most appropriate?

Table 3.4: Major Differences between Deductive and Inductive Logic

S. No Deductive Reasoning Logic Inductive Reasoning Logic
1 Scientific principles Gaining an understanding of the
meanings that humans attach to events
2 Moving from theory to data A close understanding of the research
context
3 The need to explain causal The collection of qualitative data
relationship between variables
4 The collection of quantitative A more flexible structure to permit
data changes of research emphasis as the
research progresses
5 The application of control to A realization that the researcher is part
ensure validity of data of the research process
6 The operationalization of Less concern with the need to generalize
concepts to ensure clarity of
definition
7 A highly structured approach Unstructured
8 Researcher independent of Researcher subjectively involved in the
what is being researched research
9 The necessity to select The difficulty to generalize in a manner
samples of sufficient size in that would reduce subjectivity
order to generalize
conclusions
Source: Saunders et al. 2007

1.25[3.8] Research Approach

It is important that the research methodology chosen is considered appropriate to
the task in hand (Adams and Schvaneveldt, 1985). Having provided an overview
of the strengths and weaknesses of using quantitative and qualitative methods, the
next step is to provide an explanation of the methodology chosen for this research.

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Hussey and Hussey (1997) provide a useful plan to help distinguish between
research approaches based on four criteria: purpose, process, logic and outcome.
Saunders et al. (2000) coined the umbrella term in this approach as the ‘research
onion’, whereby the researcher peels away various layers of research orientation
and philosophy. Whilst not exhaustive, these two frameworks nevertheless follow
a simple dichotomy, which provides a clear pathway for a coherent overall
research methodology, thereby helping to conceptualize the different orientations
within social science research.

The purpose of research may be classified as exploratory, descriptive, explanatory

or predictive (Hussey and Hussey, 1997). Descriptive research ‘describes
phenomena as they exist’ (Hussey and Hussey, 1997). This type of research can
be applied to particular problems or issues and is carried out using quantitative or
statistical techniques.

Explanatory research is used to explain why or how something is happening in a

particular given situation. Researchers seek to understand phenomena by ‘…
measuring causal relations among them’ (Collis and Hussey, 2003). Exploratory
research is adopted when there is little theory available in the way of literature or
studies from which to gather the appropriate information needed in order to
answer the research questions. In the case of an exploratory study, the researcher
looks for patterns, ideas or hypotheses, rather than testing or confirming
hypotheses (Collis and Hussey, 2003). This approach aims to gather as much
information as possible, although it rarely provides ‘...conclusive answers to
problems or issues, but gives guidance on what future research, if any, should be
conducted’ (Hussey and Hussey, 1997).

The logic element refers to whether or not the research is to be deductive or

inductive. Deductive research, which is positivistic or quantitative in nature,
allows researchers to test and develop theories or hypotheses through empirical
observation and the measurement of general inferences. The deductive method is
often referred to as ‘... moving from the general to the particular’ (Hussey and
Hussey, 1997:13). Inductive research, a phenomenological approach, is the

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reverse of deductive research in that it seeks to draw general inferences from
particular instances. It involves ‘moving from individual observations to
statements of general patterns or laws, commonly it is referred to as moving from
the specific to the general’ (Hussey and Hussey, 1997:13).

Moreover, according to Hussey and Hussey (1997), applied research is research

which has been designed to produce findings applicable to solving specific,
existing problems or to clarify research problems of a less specific nature,
contributing to knowledge on general issues. In the case of basic research, the
researcher is less concerned with the application of the study, and its outcome is
subsequently considered to be more academic than applied research, contributing,
as it does, to the general rather than the individual good.

Generally, after defining clear theories at the beginning of the research, it is then
deemed necessary to select a research approach which clearly focuses on the
selection of different methods to solve the research gap or thesis concerns.
Establishing a research approach is an important task to be completed during any
research study. However, there are many factors to be considered when selecting
an appropriate research methodology. For instance, Remenyiet al. (1998) point
out that the topic to be researched and the specific research question are among
the main drivers in the choice of research methodology. They also argue that the
literature review should reveal not only a suitable problem to be researched but
also a suitable research methodology.

Having stated the aforementioned basics of research approaches, this research

aimed to investigate the pursuit of success in the context of SMEs, which should
subsequently lead the researcher to use the descriptive approach to define
phenomena as they exist. The researcher then moved towards a deductive
approach so as to transfer the general ideas/theories to specific situations.

Given that there is some amount of literature available, the purpose of this study
was therefore explanatory, allowing the researcher to seek out patterns and
emerging trends in the gathered data, rather than having to test or confirm a
previously defined hypothesis (Hussey and Hussey, 1997). Owing to the dearth of

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literature, a descriptive or explanatory piece of research would be considered as
appropriate to the stated research aims. Therefore, the researcher used descriptive,
explanatory research. The intention was to use explanatory, quantitative and
qualitative research in order to gain insight and accordingly to better understand,
thereby providing a basis for more detailed explanation. The qualitative aspect
was used so as to explain the findings from the quantitative data and explain
patterns.

1.26[3.9] Research Process

The researcher employed a common research process involving the main stages as
described in (see Figure 3.2). To begin with, the researcher conducted a literature
review and developed the problem statements, research objectives, and research
questions by identifying gaps and issues in the literature. Secondly, he identified
relevant theories from the literature that served as the basis for developing the
theoretical framework and hypotheses for this research.

At the third stage, the researcher determined a suitable research design for the
study and accordingly adopted a quantitative approach. Fourth, for the
quantitative strategy in the measurement phase, the researcher used different sets
of questionnaires (Likert scale questions) as the research instruments to determine
the environmental effects on business performance as perceived by owner-
managers of SMEs. Before the questionnaires were finalized, several experts were
sought to review and validate the questionnaires’ content. At the fifth and sixth
stages, the questionnaires were distributed to MSE owner managers in Ethiopia by
trained data collectors. Subsequently, the gathered quantitative data were
analyzed once a test for outliers and normality was conducted and an overall view
of the respondents was obtained. The researcher used SPSS version 23 for
analysis.

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Figure 3.3 Research Process

1.27[3.10] Time Horizon

The time horizon of a study was based upon the research questions it sought to
address. Differentiating on the basis of time horizon, studies can be classified
into: cross-sectional and longitudinal. Cross sectional research involves collecting
data on one occasion only from the participants while longitudinal studies gather
data at multiple time points. Thus, cross sectional designs only allow for
examining relationships between variables, because there is no time ordering to
the variables and data is collected simultaneously. This creates a problem in
establishing the direction of causal relationships between variables. This research
design (the environmental factors affecting success of SMEs) did not imply
causality between the relationships tested, which could be taken as a serious
limitation (Paauwe, 2009; Guest, 2011; Jiang et al., 2013).

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Though this study recognizes the strengths of longitudinal research, a cross-
sectional data collection method was employed. This choice was governed by
time, data access and resource constraints. It takes a longer period of time to
gather data for longitudinal studies. In addition, since access to participants was
approved by the owner-managers of participant organizations, to reduce
uncertainty over future access, data were collected at a given point in time. Also,
since data were collected from 400 owner managers, it would incur a significant
time and monetary investment to collect data at future time points.

1.28[3.11] Research Study Descriptions

Research studies may be described in many ways. The major description is related
to a hierarchy of inquiry. It categorizes research studies in a manner which
develops a hierarchy of understanding the phenomenon, for example, an
exploratory study suggests that the phenomenon is little known, perhaps novel,
with very little information on the subject in the literature. Blumberg et al. (2005)
noted that in such studies there is lack of a clear idea of the problems to be
encountered during the study.

However, it is through an exploratory study that themes or patterns are identified

and developed. Thus, an explanatory research helps to clarify concepts and issues
in order to aid a push to the next stage.

Research may also be viewed as being descriptive in nature, which is a higher

level of understanding the phenomenon than an exploratory study would make
possible. In a descriptive study the nature of the existence of a phenomenon is
described in clearer terms, for example, in terms of size, form or distribution of
some variable. Thus, a descriptive study attempts to answer the questions: what,
when, who/which and where (but not how and why).

Then there is a relational study which attempts to identify variables in the

phenomena and the relationship between them. The studies attempt to answer the
two questions: how and why. The study assumed a relationship between the

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identified variables in the study. Relational studies are of two kinds: correlational
and causal.

Correlational studies merely state that the variables occur together in some
specified manner without implying that one causes the other (Gay and Airasian,
2003). Blumberg et al., (2005) noted that such weak claims occur when we
believe that there are more basic causal forces that affect the variables or when we
have not developed enough evidence to claim a stronger linkage.

On the other hand, a causal study asserts the existence of a relationship and that a
change in one variable causes or leads to a change in the other variable (Blumberg
et al., 2005). In other words, there exists a cause and effect relationship where the
variable that causes the change is called the independent and the other the
dependent variable. Once a causal relationship has been established and is proven
for a number of times (replicated) the understanding in form of a theory or model
can be used in other instances to predict the outcome of a situation
(generalization). A research study involving this kind of situation is called a
predictive study.

1.29[3.12] Target Population, Sampling Technique and Sample

Selection
As defined by many scholars, sampling is the selection of some part of an
aggregate or totality on the basis of which a judgment or inference about the
aggregate or totality is made. In taking a sample, there are a number of sampling
methods that are broadly categorized in to two as; probability and nonprobability
sampling techniques. Under probability sampling design, every item of the
population has an equal chance of inclusion in the sample. However, the major
disadvantage of this technique is that for this technique we need the complete
sampling frame that is, the list of the complete items or population which is not
always available. Therefore, another technique, nonprobability sampling could be
an option. In nonprobability sampling technique, items for the sample are selected
deliberately by the researcher instead of using the techniques of random sampling.

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For this reason, a probability sampling strategy known as systematic random
sampling is used based on the target population list obtained from FEMSEDA.

For the present study the researcher predominantly used probability sampling.
That is, the entire list of businesses in the study area was obtained from Ministry
of Trade and FeMSEDA. Based on the list, the researcher selected businesses that
qualify the Central Statistical Agency’s definition of SMEs and approached
selected owner managers for data collection. Therefore, the process followed to
reach the target sampling unit started from the Ministry of trade and FeMSEDA
and with the sampling frame once in possession, the final stage in the process was
picking the actual sampling units of owner/managers.

3.12.1. Target Population

The target population for a study is the entire set of units for which the survey
data are to be used to make inferences. Thus, the target population defines those
units to which the findings of the survey are meant to generalize. A target
population is specifically defined, as the definition determines whether sampled
cases are eligible or ineligible for participation in the survey

In this study, the target population selected was Small and Medium Enterprises of
the manufacturing sector operating in Ethiopia. The manufacturing sector was
selected because of its contribution to the sustainable development as it accounts
for a large part of the world’s consumption of resources and generation of waste
(IEA 2007). Furthermore, this sector is the priority area of the Ethiopian
Government as indicated in the GTP I and II. Since Omer, et al. (2015) have
found that the majority of SMEs in Ethiopia are concentrated in and around the
capital city of Addis Ababa, the target population of this study was SMEs
concentrated within 100 km radius of Addis Ababa as a center.

3.12.2. Sample Frame

Sample frame is a list of all those within a population who can be sampled, and
may include individuals, households or institutions depending on the type of
study. It is a complete list of everyone or everything the researchers want to focus.

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 The difference between a population and a sampling frame therefore is that the
population is general and the frame is specific. For the present study, the
researcher selected a sampling frame based on the information obtained from
prior studies and Ministries of Trade and FeMSEDA and presented in Table 3.5.
After identifying, classifying and listing the enterprises, the next step was to
determine an appropriate sampling strategy to identify the specific firms in terms
of number and identities (sample) to be studied. A background to the sampling
concept is deemed important in order to justify the selection of an efficient and
appropriate sampling method as discussed next.

Leedy and Ormrod (2005) noted that data is dynamic because the subjects are
dynamic. What is here today may not be there tomorrow, for example, people
may move to another location, they could have died and so on. Enterprises follow
a similar sort of pattern, some are registered after a list is compiled, while others
cease trading for a number of reasons including death of a shareholder, relocation,
insolvency or being blacklisted. Therefore, in some situations, it is difficult to
ever know the exact population of the subjects being studied.

This is when a researcher resorts to the concept of a sampling frame, a population

which approximates the real entire population. Therefore, the numbers given
provided a sampling frame for the study, implying that the population can never
be exactly known with accuracy at the time of data collection. Sampling
procedures however, require determining the sample sizes, that is, the minimum
number of enterprises to be studied in each group (small and medium).

Table 3.5: Sample Frame for SMEs

Total SME Target Sectors of N of SMEs N of Ss n of Ss N of n of n of
this study Ms Ms SMEs

Textile and garment, Leather

and leather products, Agro- 10,078 7470 285 2608 100 385
processing, Metal and Wood
works, pharmaceutical and
chemical processing

70% of population is 7055 5220 28 18 99 37

concentrated within 100 km 0 35 9
radius of Addis Ababa, which

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is equals to 7055 SMEs

Source: FeMSEDA Database 2017 on Manufacturing SMEs and own calculation

3.12.3. Sampling Methods

When resources and time are available, the entire population should be studied as
it provides the most accurate results possible. Thus, the concept is used in a
national census. However, resources are never abundant and time is never infinite.
A strategy that can help achieve a significant level of accuracy without studying
the entire population is then called for- sampling then provides an appropriate
solution.

Sampling is a technique of selecting willing members of the population and

involving them in a study helping ensure the results are representative of the
entire population. It is a convenient and cost saving approach to a research study
(Asraf and Brewer, 2004). To obtain a representative sample that truly reflects the
population; a researcher has to look carefully at the nature and characteristics of
the population (Leedy and Ormrod, 2005) to determine the type, method and
procedure for sampling.

Two sampling categories exist, non-probability and probability. The former is

subjectively carried out, with each member of the population having no known
chance of being included in the selection (Blumberg et al., 2005). On the other
hand, probability sampling allows each member to have an equal chance or
probability of being selected. It is for this reason that probability sampling was
chosen over non-probability sampling because of its precision and reduction of
researcher bias.

Probability sampling can be carried out in a number of ways, with each method
solving a particular problem related to the characteristics of the population. Leedy
and Ormrod (2005) provide five probability sampling methods and indicate their
suitability to the different research situations. They include simple random,
systematic, simple stratified, proportional stratified and cluster sampling.

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In order to choose the best sampling method, there is need to bring to mind that
the study deals with small and medium enterprises of varying sizes. A review of
the literature indicated that firms of varying sizes differ in their profiles regarding
their competencies and endowments. It would be useful therefore, to employ a
sampling method that acknowledges the fact that there is heterogeneity due to size
differences and perhaps homogeneity within a class. Thus, systematic random
sampling seemed to be the most suitable method.

3.12.4. Sample Size

A study sample consists of two attributes- the size and the identity of the study
subjects. Krejcie and Morgan (1970) compiled a table for determining the sample
size based on a confidence level (95%) needed from a given population. If a
population or sampling frame (N) is known, the sample size (n) is simply read off
from the table. For example, a population of 100, requires a minimum sample size
of 81 at 5% levels of precision. For this research purpose, Slovin’s formula is
used in sample size determination. Slovin (1960), cited in Amare and
Raghurama(2017) noted that this formula is used when the population is large and
known or nearly estimated. Considering the population stated above, the formula
considering a 5% significance level is used.

n = N/ (1+N*e2)

Where: N = Population size, n = sample size, e = significance level,

Taking the significance level of 5%, the sample will be calculated as follows:

Population = 10078 (70% of population is concentrated within 100 km radius of

Addis Ababa, which is equal to 7055 SMEs)

Significance level estimated = 5%

n = 7055/ (1+7055*0.052)

= 7055/18.195

= 378.7299≈ 379

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Therefore, the study collected data from 379 owner-managers using systematic
random sampling techniques.

However, one may note that some population sizes are missing from the table,
and hence size may not be determined directly. Trochim (2006) noted that there is
no need for wasting time trying to calculate the sample size using the formula,
because the exact population figure is missing in the table. Instead some
interpolation may be used by taking two numbers in which the population falls for
example, 105 falls within figures 100 and 125 which are given in the table. The
sample size therefore lies between 81 and 96 (for 5% level of precision) and the
average of the two numbers may be taken as the sample size appropriate. Better
still the size which is the larger of the two (e.g. 96) may also be taken as the
sample size since the table is for the minimum required sample.

The actual sampling frame of the SMEs was 7055. Systematic random sampling
requires that a sample size be determined first and then distributed in accordance
with the proportion in which the strata exist in the natural population. From the
table with 5% degree of accuracy, the sample size was determined as 379
enterprises. However, in a questionnaire survey, there is never a guarantee that the
response rate would be 100%.

1.30[3.13] Catering for the non- response

According to Lynn (1996) non-response generates a problem of reducing the
sample size and increasing sampling errors and hence the standard errors of
estimation. Lynn (1996) argues that if the response rate is known, the sampling
size can be increased by the response rate factor. Considering the non-response
rate, a total set of 379 questionnaires was distributed.

1.31[3.14] Data Collection Methods and Procedures

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In decisions involved in employing the quantitative and/or qualitative methods, it
is important to focus on and be guided by what the study wants to achieve. As
argued earlier, the choice of methods rests on the assumptions regarding the
nature of knowledge and the method used to obtain that knowledge (Bryman,
2012).As elsewhere indicated one commonly used method is survey.

Survey is defined as a method of data collection that utilizes questionnaires

(Ghauri and Gronhaug, 2005). It is an effective tool to get opinions and attitudes.
The steps in conducting a survey include: a) sampling frame, b) mode of
administration, c) develop questions, d) review questions and face validity, e)
pilot and revise questions, f) finalize questionnaire, g) sample from population, h)
administer questionnaire to sample, i) data entry of completed questionnaires, and
j) analyze and interpret findings (Bryman, 2012).

There are several data collecting methods available for a researcher some of
which are indicated in the fifth layer of Figure 3.1. The methods are well
described in many research methodology text books (e.g. Blumberg et al., 2005;
Leedy and Ormrod, 2005) and only their salient features are presented in Table
3.6.

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 Table 3.6 Summary of characteristics of the major research strategies
Strategy Characteristics
Ethnography: Ethnography involves researchers immersing themselves in the
environment of the subjects to study particular phenomena by participating
in the rituals on a continuous period of time. Although the strategy was
used to study ‘native tribes’, it is possible to use these days in studying
organizational phenomena
Historical The strategy involves studying past events through the use of documents,
Research: interviews, artifacts to provide insights or conclusions about past persons
or events. It therefore requires collecting and interpreting information
Case study: Method is used to make in-depth review of selected cases from one up to
six to fully understand the phenomenon of investigation in the case. Unlike
the survey it represents depth of information, rather than breadth. Thus the
results suffer from not being generalizable to other situations
Survey: The strategy is used to collect and interpret information relating to
preferences, attitudes, practices, concerns, or interests of some group of
people.
Action Action research is more practically oriented, in that the research study is
Research: conducted to solve an actual problem in any human endeavor, be it social
or work related. It aims at immediately changing or improving practices
and mindsets in the human endeavor.
Experiment: The strategy aims at testing cause-effect relationships with a view to
explaining how or why a phenomenon occurs. Experimental studies allow
controlling of the environment through standard procedures.
Source: Blumberg et al. (2005); Saunders et al. (2003)
Each of the methods can be used to investigate and obtain a solution to a research
problem. However, there is a current trend that advocates the use of multiple
methods in a single research project. A number of authors (e.g. Brannick and
Roche, 1997; Carter, 1999 and Hill and MacGowan, 1999) have argued that
research studies could employ multiple methods in a technique called
triangulation. They argue that the use of more than one method leads to a higher
validation of results helpful to understand the influence of both situational and
voluntary factors while accounting for human activities. Walker (1997) further
noted that the quantitative approach may be employed in a situation requiring the
testing of a hypothesis. However, when it comes to explaining the causal factors,
a qualitative approach may be relied on to interpret and deduce the relationships.
Carter (1991) noted that studies that use triangulation avoid bias through seeking
data from at least more than one source and thus requiring the use of multiple
methods.

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3.14.1. Primary and secondary Data Source and Tools
The primary data was collected from 379 owner managers through structured
questionnaires. The study used a questionnaire which was tested for reliability and
validity.

Questionnaire

To get the data required, the researcher used mainly questionnaire as a tool for
data collection. The success of any questionnaire survey and the accuracy of data
collected largely depend on the careful design of the questionnaire’s contents,
structure and form of response (Akintoye et al., 2000). In this study, a structured
questionnaire was adapted from Yassin (2013) and Benzing et al. (2009).

A cover letter was attached to the questionnaire to explain the purpose and the
importance of the study as well as to give instructions on how to complete the
questionnaire and to emphasize the confidentiality of the response. The cover
letter also contained some consent issues that would allow the research
participants to voluntarily take part in the study. Self-administered questionnaire
was constructed based on a thorough review of the literature and analysis of
previously used and tested instruments. The questions focused on constructs and
variables that have been identified in the literature. However, some of the
questions were developed specifically for the present context of the study based
on an examination of the real situation of the SMEs and literatures reviewed.

The questionnaire was prepared in English and the questions were designed to be
precise, simple and comprehensible and expected to avoid ambiguity, vagueness,
estimation, generalization, bias, double-meaning, and presumption. Clear
instructions were also provided for each question. Some of the questions were
expressed positively and some negatively in order to encourage respondents not to
respond automatically, but to think about every item.

The process of development and validation of questionnaire was based on the

approach recommended by Churchill and Iacobucci (2002). The first step was to
determine the questions which would most clearly elucidate the situation.
Questions were derived from the constructs of interest explicated in the
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conceptual framework for this study, and presented in Chapter 2. Furthermore, to
encapsulate and gain a greater understanding of the respondents’ profile,
demographic questions were also included with the understanding that they might
have a role as control variables. Also, a structured questionnaire with a majority
of closed ended questions was thought to be most appropriate. Key benefits of the
structured questionnaire include, first, the length of each questionnaire could be
better controlled in comparison to the unstructured questionnaire approach.
Second, the structured approach would ensure that all informants were subjected
to the same stimulus and questions in the same order, thus ensuring a degree of
uniformity (Saunders et al., 2012).

Three types of response format: dichotomous closed-ended, multiple choice

closed-ended and open-ended were used. Also, the 5-point Likert scale was used
as a method of scoring a survey that is appropriate to determine indicators of
particular attitudes.

Regarding the sequence of questions, the questionnaire began with less complex
and less sensitive questions and progressed to opinion-based questions. It
consisted of seven sections:

 Achievements of the enterprise: In this section, the concept of success among

SMEs was explored. Two probing questions were constructed in order to
assess the concept of successful SMEs in Ethiopia.
 Meta data: This part of the questionnaire requested the respondent data on
how owners interact with the formal operation of the business.
 Success constraints: The aim of this section was to explore which problems
most seriously inhibited business success as perceived by the owner manager.
Seven questions were set to investigate the correlation between the SMEs’
success and the constraints of the external environment.
 Success factors: This section aimed to understand the perceptions of the
owner managers with regard to the factors that influence the success of SMEs
in Ethiopia.

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 Personal Information: In this part, socio-demographic data about owner-
managers were required in order to assess whether the variables had effect on
the success of SMEs or not. These factors included age, gender, level of
education, and previous related business management experience. This section
is important since statistical significance variance could be checked for all
demographic variables that impact business performance (Kangasharju, 2000;
Stewart et al., 2003). These demographic factors were measured using mainly
closed multiple choice single response questions.
 Ethnicity and premises related data: In this segment, ethnic affiliation and
business premises related questions were administered. Here questions that
asked the owner/managers’ ethnic affiliation to the area where the business
was operated were presented, in addition to the opinion questions directed at
the owner manager asking if he/she perceived the non-concomitance of ethnic
group and business premises could affect business success.
 Business Information: This section asked general characteristics of the firm.
The firm factors included: number of employees, age of the business, form of
business, location and the type of activity of the firm. This section culminated
in a free response open-ended question that invited respondents to provide
additional unstructured suggestions or comments/perceptions regarding the
success of small and medium enterprises in Ethiopia

Interview Questions

To address ambiguity in responses obtained from the structured questionnaire, the

researcher used interview questions as a data collection tool. Thus, questions were
raised to the randomly selected owners/managers on issues like business strategy
and concomitance of ethnic membership. The interview questions were focused to
assess the concept and implementation of business strategy and the effect of
ethnic membership and business premises disparities.

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Secondary Data

Secondary data refers to data that was collected by someone other than the
researcher for some other purposes. It can save time that would otherwise be spent
collecting data and, particularly in the case of quantitative data, can provide larger
and higher-quality databases that would be unfeasible for any individual
researcher to collect on their own. In the present study, secondary data was used
to strengthen the primary data and address initial stages during gap identification.
In addition to journal articles and books used, the study employed secondary data
from Ethiopian official reports on the performance of SEMs. Therefore, the
secondary data sources used in this research were journal articles, magazines,
books, reports and other relevant resources.

3.14.2. Data Collection Procedure

Recruited quantitative data collectors for this undertaking had at least a basico
degree and three years survey experiences in quantitative data collection and in
related studies. They were given comprehensive training on both the data
collection instrument and the methodology of data collection. During the training
simulation and close discussion were conducted to make sure the data collectors
were clear about the whole procedure.

Pre-testing of tools and methods:

Piloting of methods and tools of data collection was conducted to see the
applicability and feasibility of the methods and to test coherence, clarity and
comprehensibility of the questions to the intended respondents. The piloting was
done before conducting the actual data collection in a non-study town nearby
Addis Ababa in a similar study population to avoid contaminating the study
population ahead of the study implementation. All trained data collectors were
involved in the pretest and a debriefing session was conducted soon after the
completion of the pretest. Revision of the tools and strategies for data collection
was made based on findings of the pretest. Subsequently a debriefing session was
held and the gaps on the tools and strategies were discussed to maintain similarity
among participants.

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Field work

Data collectors were assigned in to each study site based on their route and
convenience for data collection. Trained data collectors and supervisors were
grouped for convenience to coordinate the whole field management.

The number of days for data collection process was decided contextually. All the
teams’ members were provided sufficient logistics including questionnaires, per
diem, support letters, field guide manuals, maps on the geographical setup of each
site and key personnel address from the Woreda officials before they were to be
deployed to study sites. Data collectors were advised to clarify the purpose of the
study to target respondents and responsible government bodies during the data
administration.

Data Management

Appropriate data management procedures were developed and implemented.

Data collectors were expected to handover all completed and signed
questionnaires to the supervisor on daily basis. Then, supervisors would check the
consistency and completeness of each questionnaire and sign approval.

1.32[3.15] Validity and Reliability of Instruments

Fundamental to the integrity of the data generated is the quality of data (Judge and
Schechter, 2007). Hence, before proceeding to the analysis, evidence for the
reliability and validity was sought.

Validity

According to Leedy and Ormrod (2005), validity is the ability of an instrument to

measure what it is designed to measure. The authors further ask two basic
questions: “does the study have sufficient control to ensure that the conclusions
the researcher draws are truly warranted by the data”? And “can the researcher
use what he has observed in the research situation to make generalization to the

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population beyond that specific situation”? The answers to these two questions
address the issues of the content validity, internal validity and external validity.

Content validity

In order to check the content validity of the descriptive survey studies, Leedy and
Ormrod (2005) suggest three tactics: using multiple sources of evidence,
establishing chain evidence and having key informants reviewing draft of the
study report. By taking these tactics into account, the researcher constructed the
main research framework based upon published and accredited theories.

Internal validity

The internal validity of a research study is the extent to which its design and the
data it yields allow the researcher to draw accurate conclusions about the
relationships within the data. In this case, the Hawthorne effect may be in
evidence since the respondents reported different backgrounds, experience and
knowledge in management practices and they might have changed their normal
behavior when they realized they were participating in a research study. To
prevent artificial behavior and enhance cooperation confidence, the respondents
were adequately informed via a cover letter about the research objectives and
given assurances about the confidentiality of the information they provide. Their
participation consent was fully and ethically secured and there was no
manipulation involved. The questionnaires themselves were free from any
ambiguous words/phrases, which may be taken as an ethical step in its own right
since there was no potential to mislead or confuse.

External validity

External validity is related to the extent to which the findings from one research
can be applied to other similar situations. In other words, it pertains to the degree
of how the conclusions drawn can be generalized to other contexts (Leedy and
Ormrod, 2005). To increase the external validity and the generalizability of the
results of the study, the researcher adopted the three commonly used techniques
that enhance the external validity of research. In reference to standard survey

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questionnaires, these three strategies are: a real life setting, a representative
sample and replication in different settings (Leedy et al, 2005).

Theoretical Validity

This validity can only be established by ensuring that the measures of variables
are from a well-grounded theory. The entrepreneurial orientation, leadership
practices and business performance have strong literature bases supporting the
theoretical validity of these variables. The instruments were developed to
incorporate a variety of multi-item measures and indicators of the conceptual
framework.

Reliability

According to Cameron et al (2007), reliability is a measure of the extent to which

the result of the research can be obtained similarly if the research is repeated in a
similar context. Cameron et al (2007) state that in order to increase reliability, the
researcher should use the same template as far as possible and use statistical
methods. Reliability, which is occasionally known as internal consistency, also
refers to the extent to which the measurement instrument precisely and repeatedly
measures the intended construct (Churchill, 1979; Peter, 1979).

The researcher was convinced that the data was reliable since the owner/managers
were selected based on their knowledge of the particulars of all practices in their
firms. In ways that would demonstrate reliability, it was expected that they would
give the same answers to another independent researcher asking the same
questions. Furthermore, there were no ambiguities in the questionnaires, which
were standardized, repeatedly validated measures with reliabilities of 0.70 or
above reported by several previous researchers.

Normality Test

A normality test was performed to determine whether the population data was
normally distributed. The test used was the normal probability plot as suggested
by Coakes and Steed (2003).

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1.33[3.16] Data Processing and Analysis Procedure
Data Processing

The method of data processing in this study was both manual and computerized.
In the data processing procedure editing, coding, classification and tabulation of
the collected data were used. Data processing has two phases namely: data clean-
up and data reduction. During data clean-up the collected raw data was edited to
detect anomalies, errors and omissions in responses and to check that the
questions were answered accurately and uniformly. The process of assigning
numerical or other symbols came next was used to reduce responses into a limited
number of categories or classes. Next, the processes of classification or arranging
large volumes of raw data into classes or groups on the basis of common
characteristics were followed. Data having common characteristics was placed
together and in this way the entered data were divided into a number of groups.
Finally, tabulation and pie charts were used to summarize the raw data and
display it in the form of tabulation for further analysis.

Data Analysis

There are basically five broad categories of data analysis namely descriptive,
difference, inferential associative and predictive analysis (Bush and Burns, 2006)
as shown in the sixth layer of Figure 3.1. There are also several statistical
techniques associated with each category. While the statistical techniques are
often discussed in many statistical books and software manuals, the former are
less described. This section therefore, highlights the data analysis categories with
a view to providing an insight and justification for the selected data analysis
technique in the study.

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1.34[3.17] Role, Nature and Attributes of Hypothesis
A hypothesis is a testable proposition. In other words, it is a statement that may be
judged as supported or not supported through testing in relation to an observed
phenomenon (Blumberg et al., 2005). Leedy and Ormrod (2005) further noted that
a hypothesis guides a research study in seeking direction based upon a supposition
(or a reasonable guess or educated conjecture). In this way, a hypothesis (i) serves
to guide the direction of a study, (ii) facilitates identifying the facts that are
relevant to the study from a mass information, (iii) facilitates the selection of an
appropriate form of research design that might solve the problem and (iv) finally
provides a basis for making conclusions (Blumberg et al., 2005). Leedy and
Ormrod (2005) however, provided a useful distinction between a hypothesis and
an assumption by noting that assumptions are self-evident conditions taken for
granted that are embedded in a hypothesis.

There are three major types of hypotheses namely descriptive, correlational and
explanatory (also called causal). These are related to research descriptions and
statistical analyses already mentioned. A descriptive hypothesis is posited to test
the existence of the nature or intensity of a variable in a phenomenon. It is thus
tested to confirm the existence, size, form or distribution of a variable in a
phenomenon.

The second type of hypothesis, correlational, tests the existence of a relationship

between two or more variables in a phenomenon. The hypothesis merely states
the strength or direction but does not fully explain whether one variable causes
the other.

Thus, the third type of hypothesis, the explanatory or causal asserts the existence
of a relationship between two variables. It further indicates that change in one
variable, causes or leads to a change in the other by a certain magnitude or factor
of change (Blumberg et al., 2005). For explanatory hypotheses, the researcher
needs to be able to identify which of the variables is the dependent or independent
variable and the direction of the relationship (proportional or inverse).
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All hypotheses require statistical testing of a null hypothesis in order to support or
disconfirm the proposition posited at the beginning of the study (Brewer and
Asraf, 2004).

Secondly, an effective hypothesis must have certain attributes to guide the

research study.

These include being adequate for the purpose; for example, a descriptive
hypothesis must clearly state the phenomenon (condition, size or distribution of
some variable in terms of value) in order for the research to be operational. If it is
an explanatory hypothesis, it should explain the facts that gave rise to the need for
the explanation. Secondly, the hypothesis must be testable, that is, a technique
must be available for testing it (Blumberg et al., 2005).

In this study, various combinations of primary and secondary data were used.
Primary data collection techniques involved the use of questionnaires and
personal interviews completed by owner managers. Secondary data was obtained
from the existing literature from libraries, internet searches, magazines, and
reports from the Ministry of Trade and Ministry of Industry, and journals articles.
The researcher administered data gathering by hand delivery to the target
respondent based on the convenience sampling technique through personal
interviews with government officials. Likert scale questions were used to measure
the respondent perception of the SMEs success factors identified in the study.
Through convenience sampling, the researcher administered questionnaires to
owner managers in Addis Ababa, Debrezeit/Bishoftu-Dukem, Alemgena-Sebeta,
and Taffo, whereby the respondents were contacted in their business to handover
the questionnaire and collect it based on the appointment given.

After the data were collected, it was necessary to utilize statistical techniques to
analyze the information. This is the further transformation of the processed data to
look for patterns and relationship between and/or among data groups by using
descriptive and inferential (statistical) analysis.

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1.35[3.18] Descriptive Analysis
Descriptive analysis was used to reduce the data in to a summary format by
tabulation (the data arranged in a table format) and measures of central tendency
(mean and standard deviation). Moreover, pie charts were used to describe the
general characteristics of enterprises. The reason for using descriptive statistics
was to compare the different factors. Descriptive analysis helps the researcher to
have a feel of the data, and to guide the selection of variables and techniques to be
used in the inferential analysis. Therefore, the survey data was processed using an
SPSS (version 23). First the relevant data were coded, summarized and then
transferred to SPSS to be analyzed and presented.

Frequency tables were used to summarize the respondent profiles in the form of
frequencies and percentages and descriptive statistics such as means and standard
deviations of entrepreneurial orientation, leadership styles and business
performance scales were also computed.

Besides, the interview questions were analyzed using descriptive narrations

through a concurrent triangulation strategy.

1.36[3.19] Inferential Analysis

According to Sekaran (2000:401), inferential statistics allows the researcher to
infer from the data through analysis of the relationship between two or more
variables and how several independent variables might explain the variance in a
dependent variable. For inferential purposes, the researcher used statistical
techniques such as correlation and regression analyses.

Pearson’s Correlation Analysis

According to Phyllis and his associates (2007:18-55), inferences have a very

important place in management research. This is so because conclusions are
normally established on the bases of results. They state that the Pearson Product
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Moment Correlation Coefficient is a widely used statistical method for obtaining
an index of the relationships between two variables when the relationships
between the variables is linear and when the two variables correlation are
continuous. In this study, to determine whether a statistically significant
relationship exists between environmental factors and business success, the
Product Moment Correlation Coefficient was used. According to Duncan and
Dennis (2004:38-41), a correlation coefficient can range from -1 to +1. The value
of -1 represents a perfect negative correlation while a value of +1 represents a
perfect positive correlation. A value of 0 correlations represents no relationship.

In the present study, a correlation analysis was more specifically performed

among the variables in each hypothesis to ascertain the scope, direction and
importance of any relationships.

A null hypothesis is rejected when the probability of a test statistic is less than a
pre-set level of significance, Alpha; otherwise, fail to reject it. As a rule, the
Alpha is set at 0.05. The following inferential statistical methods were used in this
study.

Regression Analysis

Regression analysis is the most suitable technique for this research to determine
whether the hypotheses set are true or not (Zikmund, 2003). To observe how a
group of metric independent variables affects the metric dependent variable, the
researcher applied a multiple regression statistical technique. The technique can
help to show the implications of each independent variable and the related effects
on the dependent variable.

Linear regression is a method of estimating or predicting a value on some

dependent variable given the values of one or more independent variables. Like
correlations, regression examines the association or relationship between
variables. Unlike correlations, however, the primary purpose of regression is
prediction (Geoffrey et al., 2005:224-225). In this study multiple regression was
employed which takes into account the inter-correlations among all variables
involved. This method also considers the correlations among the predictor scores

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(Adams, et al., 2007:198). They further mention that multiple regression analysis
suggests more than one predictor is jointly regressed against the criterion variable.
This method was used to determine whether the independent variables explain
and how much of the variance in the dependent variable.

The equation of regressions in this study was generally built around two sets of
variables, namely dependent variable (business success) and independent
variables (environmental factors as depicted in the framework of this study). The
basic objective of using regression in this study was to make the study more
effective at describing, explaining and predicting the stated variables.
Accordingly, this statistical technique was used to explain the following
relationships: Regress business success (as dependent variable) on the selected
linear combination of the independent variables using multiple regressions.

1.37[3.20] Ethical Issues in the Study

Ethical issues in research refer to the moral principles, standards, or norms of
behaviour that guide our choices of behaviour and our relationships with others
during a research study (Blumberg et al., 2005). The major cornerstone of
research ethics is centred on avoiding causing harm, physically or
psychologically, to the subjects of study or any other persons involved in the
process. Generally, research ethics relates to the appropriateness of the
researcher’s behaviour in relation to the rights of those being studied or those who
consume the findings of the study (Saunders et al., 2007). Saunders et al. (2007)
identified several interrelated issues regarding research ethics which must be
addressed by the research process in order for it to pass as being ethically
constituted. The issues span the entire life span of the research process and are
summarized in Table 3.7.

The study process addressed the issues in Table 3.7 in two ways namely through
following the national research regulatory regime and through observing ethical
guidelines.

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 Table 3.7: Summary of ethical issues that need addressing in a research
process
Phase of research Ethical issue to address
process
Throughout To acknowledge the work of others when used in the research
the process process*
Pursuing an objective principle in the research process
Solicitation of Respect to the right to privacy for would-be and actual
access participants
Right to know and hence consent to the process without any
deception
Respect the right to voluntary participation; and right to
withdraw from the process
Data Respect through the maintenance of confidentiality for the
collection data provided by individuals or identifiable participants and
their anonymity.
Avoiding harming participants through physical pain or
through psychological effects such as embarrassment, stress
or discomfort when collecting data.
Data analysis Avoiding the effects that could eventually harm the
and participants arising from the way data is used analysed and
Interpretatio reported.
n

Source: adapted from Saunders et al. (2007)

In applying the ethical principles, the researcher first informed participants about
the nature of the study and requested their consent to participate. One common
practice suggested by Leedy and Ormrod (2005) is to present a written informed
consent form describing the nature of the research project and the purpose of
one’s participation in it. The study protocol was maintained and the procedures
followed during the study were in line with rules governing research work in the
country.

Obtaining informed consent: The study participants were asked their consent to
participate in this study. A verbal consent was obtained prior to all data collection
activities by the data collectors. Accordingly, the respondents were informed
about the potential impact of the study by means of a cover letter attached to the

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questionnaire. The cover letter contained information about the research, the
objectives of the study, and the voluntary participation of respondents, assurances
regarding confidentiality and anonymity, as well as the contact details of the
researcher. The researcher also gave assurances that the names of respondents
would not be revealed in the study. As yet another ethical requirement, giving
appropriate credit to the use of another person’s ideas is mandatory (Leedy and
Ormrod, 2005). In this regard, all materials belonging to another person or
organization were duly acknowledged. The researcher adhered to the ethical
guidelines regarding data collection and analysis throughout the various stages of
the research project.

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 CHAPTER FOUR
RESULTS AND ANALYSIS

4.1 Introduction
The methodology employed to collect data for this research was described in the
previous chapter. This chapter aimed to report the empirical research results of the
quantitative and qualitative data analysis. The analysis of data for both
quantitative and qualitative was intended to address the research objectives of this
study. The chapter began with a preliminary examination of the data by
describing the process involved in data cleaning and screening, data classification,
response rate, the reliability and validity of the survey instrument. The chapter
then proceeded to address the first research objective by reporting descriptive
statistical analysis. Subsequently, the chapter applied inferential statistical
techniques to test the aforementioned hypotheses and discuss the research
findings using correlation and regression techniques.

4.2 Data Analysis

The quantitative data analysis was carried out by using the Statistical Package for
the Social Sciences (SPSS), version 23.0. Initially, a preliminary analysis process
that included data preparation, data classification, response rate analysis, and
reliability and validity checking of the research instrument was undertaken.
Secondly, descriptive statistical analysis was made to describe each of the
variables of this study. Once a descriptive analysis was made, the researcher then
applied inferential statistical tools like Pearson Product Moment Correlation and
regression analysis techniques to test the hypotheses formulated.

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4.3 Data Preparation
Data preparation was undertaken prior to the data analysis. It consisted of editing,
coding, capturing, and cleaning the data. During this phase, a frequency test was
run for every variable to detect any illegal and missing responses. Tabachnick and
Fidell (2001:59) suggested that ‘if only a few data points, say, 5% or less are
missing in a random pattern from a large set, the problems are less serious and
almost any procedure for handling missing values yields similar results’.
According to Avolio and Bass (2004:109) ‘if an item is left blank, it is possible to
get the value by dividing the total for that scale by the number of items answered’.
In line with this recommendation, mean substitution was used to deal with
missing data in this study.

4.4 Return Rate

To address the research objectives, 379 questionnaires were distributed to target
respondents and 369 participants properly filled the questionnaire and returned it
for analysis. Therefore, the return rate was computed as 92.2%. Once the 369
questionnaires were collected through interviewer-administered survey, the data
were entered into SPSS version 23. The quality of the data entered into SPSS was
critically examined to make it ready for statistical analysis. The dataset was
rechecked to ensure the accuracy of the data entry. The minimum and maximum
data values on each variable related to each case were checked to detect any
irregular or unusual data values.

4.5 Reliability
The reliability of an instrument refers to the consistency with which it measures a
construct. Since Cronbach’s Alpha can be used to test the internal consistency of
an instrument (Cronbach, 1951), the reliability of the questionnaire was evaluated
by calculating the Cronbach’s alpha scores for all the variables. The higher the
Alpha is, the more reliable the test. Though there is no generally agreed cutoff

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point for cronbach’s Alpha, Nunnally (1978) argued that 0.7 and above is
acceptable. In calculating Cronbach’s Alpha, items deleted were also calculated to
improve the overall reliability of the test. Table 4-1 shows the Cronbach’s Alpha
for each of the variables after refinement of the items. The findings showed that
the success variables were reliable with internal consistency values ranging from
0.574 to 0.841.

Table 4.1: Internal consistency of the survey instrument

Variables No. of Cronbach’s
items Alpha
Personality characteristics 8 0.784
Competencies of the 10 0.841
entrepreneur
Economic factors 5 0.702
Political-legal factors 22 0.779
Technological factors 15 0.615
Socio-cultural factors 4 0.574
Micro-environmental factors 9 0.606
Ethnicity 10 0.726
Business Success 16 0.874
Source: Survey result, 2017

4.6 Descriptive and Inferential analysis

4.1.1[4.6.1] Descriptive Analysis
Parasuraman et al. (2004) stated that before analyzing a dataset using
sophisticated statistical techniques, a researcher should get a feeling for what the
data is like. In this phase of the study, descriptive statistical techniques were used
to inspect the data before testing formal research questions. Descriptive analysis
refers to the transformation of raw data into a form that would provide
information to describe a set of factors in a situation that will make them easy to
understand and interpret (Zikmund, 2003; Sekaran and Bougie, 2010). It involves
examining the characteristics of individual variables by enabling the researcher to
obtain a better understanding of each of the variables as they are, without
manipulation or attempt to establish causality. In light of this, descriptive
characteristics of the sample were presented in terms of demographic

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characteristics of respondents, demographic characteristics of the businesses,
business success, and success factors of SMEs (see also Appendices B and C).

4.1.1.1[4.6.1.1] Demographic Characteristics of the Respondents

The questions in section 1 of the questionnaire requested participants to provide
general background information about their profile including gender, age,
education, previous experience, and family background. To analyze the
respondents’ profile data, frequency distributions were calculated for all cases in
this research and were summarized in the following sections.
As observed from picture 1 below, out of the entire 369 respondents, 315
respondents (85.4%) were between the ages of 25-45, while 40 respondents
(10.8%) were more than 45 years old. Moreover, 3.8% of the respondents were
between the ages 18 - 24. This demographic observation revealed the Ethiopian
population is dominated by the youth.

Figure 4.1: Age group of owners/managers

Regarding the gender composition, male entrepreneurs outnumbered females at
84.3%; female entrepreneurs were under-represented at 15.7%. In this study, the

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empirical evidence did not mirror the social structure of Ethiopian society in the
SMEs business as the demographic composition showed 99.7 males per 100
females (Anon., 2015).

Figure 4.2: sex composition of owners/managers

As one of the variables of interest, the educational status of respondents was also
studied. The evidence showed the highest concentration of educational
achievement of the respondents was found to be diploma or certificate accounting
for 27.4%. As the data showed, 1.9, 1.6, 15.2, 22.8, 24.1 percent of respondents
had educational achievement of nil, grades 1-4, grades 5-8, grades 9-10, and grade
10+1 up to grade 10+2, respectively. In this research, it was also found that only
25 respondents (6.8%) possessed bachelor’s degree and one respondent (0.3%)
has a PhD qualification. From this information, it is possible to claim that the
Small and Medium Enterprises in Ethiopia are run predominantly by operators
with educational achievement of less than a college diploma.

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Figure 4.3: Educational Status of owners/managers
As figure 4.4 below shows, 72.1% of the respondents were employees/managers
and 27.9% owner/managers. These figures indicated that, most of the SME
managers were hired managers that worked for other owners.

Figure 4.4: Work Status of Respondents (hired/not)

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 With regard to the work experience of respondents, the data showed that 48.5% of
the respondents had a relevant track record of between 2 and 5 years, 16% had
experience of less than 2 years and 3% reported a much longer experience of
more than 21 years. From the work experience relevance perspective, 330
respondents (89.4%) affirmed that their work experience was highly relevant to
the work they were doing in the SMEs. To elucidate the figures in more concrete
terms, the following cross tabulation for work experience and the relevance of
work experience to the current business activities is presented.

As shown in Table 4.2, of the total of 59 respondents who had experience of up to 2

years, 48 claimed that their work experience was relevant to the work they were
doing. In the same way, of 330 respondents who had relevant work experience, 150
reported work experience of 2 – 5 years. As shown in the table (Table 4.2), most of
the respondents reported relevant work experience and the most related work
experience owners/managers had was 2 to 5 years long.

Table 4.2: Cross tabulation of work experience and relevant experiences.

PREVIOUS WORK EXPERIENCE * RELEVANT EXPERIENCE Cross tabulation
Count
RELEVANT EXPERIENCE
YES NO 5.00 Total
PREVIOUS WORK 0-2 YEARS 48a 9a, b 2b 59
EXPERIENCE 2-5 YEARS 158a 20a 1a 179
6-10YEARS 83a 5a 0a 88
11-20 YEARS 30a 2a 0a 32
ABOVE 21 YEARS 11a 0a 0a 11
Total 330 36 3 369
Each subscript letter denotes a subset of RELEVANT EXPERIENCE categories whose column proportions do not differ
significantly from each other at the 0.05 level.

As noted in the literature review chapter, the business ownership and experience
of parents are also other factors that could influence the success of business for
SMEs. However in this regard, the study showed that 83.2% of the current

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 business owner parents did not own a business suggesting that business owners
did not take their business from their parents.

Figure 4.5: Parents Business ownership

Regarding education of parents, 57.7% of the respondents’ fathers never went to
school and only about 3% completed a university qualification (Bachelor\s and
Master’s degrees) and, further 66.9% of mothers of the study participants did not
go to school and only 2.5% had a college diploma or a university degree.

Table 4.3: Cross tabulation of owners’/managers’ parents Education

of Father
Education None 1-4 5-8 9-10 10+1- Diploma BA MA PhD
Grade Grade Grade 10+2 Degree Degree Degree
Count Count Count Count Count Count Count Count Count
o NONE 198 17 18 4 4 5 1 0 0
f 1-4 GRADE 3 11 11 12 0 1 0 0 0
5-8 GRADE 9 6 13 7 2 3 1 0 0
M 9-10 GRADE 3 2 5 4 2 3 0 0 0
o 10+1-10+2 0 0 4 0 5 2 4 0 0
t Diploma 0 0 0 0 0 2 2 0 0
h BA Degree 0 1 0 0 0 1 1 1 1
e MA Degree 0 0 0 0 0 0 0 0 0
r PhD Degree 0 0 0 0 0 0 0 0 0

Source: Survey Result (2017)

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Of the respondents participating in the study, 78.0% were actively engaged in the
management of their SMEs while 10.9% were totally uninvolved in the day to day
management activities. The remaining 11.1% of the respondents did not own the
business they were managing as shown in the following picture (Figure 4.6).

Figure4.6: Involvement in Day-to- Day Operation

4.6.1.2 Demographic Characteristics of the Businesses

The survey also captured information about the demographic characteristics of
businesses. The variables for which data was obtained were: legal status, size of
the business, age of the business, location of the business, activity of the business,
and description of the business. The demographic characteristics of the businesses
were analyzed by calculating the frequency distributions for all cases in this
research study and are summarized in the subsequent sections:

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As can be observed from figure 4.7 below, 161 businesses (43.6%) were
constituted as sole proprietorship, 88 (23.9%) as cooperatives, 72 (19.5%) as
partnership, 44 (11.8%) as private limited companies and the remaining 4
enterprises (1.1%) as a share company or another form of business organization.

Figure 4.7: Legal form of Business Formation

In the following graph, (Figure 4.8), the types of activities the businesses are
engaged in are shown. Accordingly, 206 enterprises (55.8%) were engaged in
metal and wood work, 78 (21.1%) in textile and garment activities, 19 (5.1%) in
agro and food processing undertakings, 13 (3.5%) in chemical and pharmaceutical
related activities, and 9 (2.4 %) in leather and leather products. Further, 44
businesses (11.9%) were engaged in other activities that are not mentioned in the
list. As some of the respondents mentioned, these activities are hotel and tourism
industry related. From the relevant figures, it is possible to conclude that the
majority of the enterprises are engaged in metal and wood works.

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Figure 4.8: Business Areas of Enterprises
With regard to business ownership, the majority of the businesses (85.9%) were
privately owned enterprises and 8.9% and 5.1% represented partially family
owned and wholly family owned businesses, respectively. As shown in Figure 4.9
below, most of the enterprises studied were privately operated enterprises
reflecting the limited participation of family owned businesses in the sector.

Figure 4.9: Business Ownership Type

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From the enterprises considered in the study, 88.9% of the businesses had an
annual turnover of less than 1,500,000 as reported by owners/managers while
only 11.1% countersigned that their businesses annual turnover was greater than
1,500,000. Though annual turnover is one of the attributes to consider in
measuring the success of a business, getting fully factual information regarding
annual turnover is always a challenge in SMEs as it may be directly linked to
concerns of heavy taxes and consequently be underreported. In the present study,
the researcher endeavored to convince owners and managers that the data
collection was merely for an academic purpose and that the outcomes of the study
would not be notified to tax authorities prior to analysis. These assurances are
hoped to have eased the concerns of respondents and helped them to be more
frank and sincere in their data supply.

Table 4.4: Annual Turnover of enterprises as reported by owners/managers

Frequency Percent Valid Percent Cumulative

Percent
<1500,000.00 birr 328 88.9 88.9 88.9
>1,500,000.00 birr 41 11.1 11.1 100.0
Total 369 100.0 100.0

Source: Survey Result(2017)

With regard to the age of the business, 53.6% of the businesses considered in the
study had been in the business of their current operation for more than five years,
41.7% were in operation from 3 years to 5 years and; 4.6% of the businesses had
an operation experience of 1-2 years in the same business category.

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Figure 4.10: Operational Age of Enterprises

With regard to the enterprise workforce, it is shown that 90.8 % of the businesses
have employed less than 20 workers. The enterprises that were able to hire more
than 20 but less than 100 persons are only 9.2 %.

Table 4.5: Size of enterprises (In terms of Employee numbers)

Size: How many staff has the firm under employment
5-20 335 90.8 90.8
21-100 34 9.2 100.0
Source: Survey Result (2017)

One of the variables included in the demographic characteristics of businesses

pertained to proximity of a business to the main road. As reported by
owners/managers, 57.5% of the enterprises were located within less than half a
kilometer; while 21.7% were within a radius of more than 1 kilometer. The
remaining 20.9% of the businesses were to be found within a distance of 0.5 to 1
kilometer from the main road.

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Figure 4.11: Location of the Enterprise from the Main road

4.6.1.3 Business Success

Before analyzing the critical factors that influence the success of SMEs in
Ethiopia, it is necessary to determine the empirical demonstrations of success.
Accordingly, the success of SMEs is based on the responses of 16 financial and
nonfinancial related questions. A number of questions, incorporating financial and
non-financial measures, were used to measure the success of SMEs. The financial
measures included profit and turnover while number of employees and personal
satisfaction variables were used as non-financial success indicators. The
respondents were asked to rate their agreement with 16 items/statements relating
to the success of their business on a rating scale from 1 to 5, with 1 representing
strongly disagree and 5 strongly agree.

Based on the responses from the entrepreneurs/owners/managers, all items related

to internal and external factors were found to have influence on the success of
businesses as perceived by the study participants. For the items mentioned to
demonstrate the level of agreement, the descriptive statistics of business success is
depicted in table 4.4 below.

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4.6.1.4 Success Factors
This section investigated the factors that influence the success of SMEs in
Ethiopia as perceived by owners/managers. Several internal and external factors
were identified from the systematic literature review as influencers of business
success.

4.6.1.4.1 Internal Factors

As discussed in the review of literature, the success of Small and Medium
Enterprises is influenced by internal and external factors. The internal
environmental factors that influence the success of SMEs were considered in
terms of business characteristics, entrepreneurs’ characteristics, and business
strategy.

4.6.1.4.1.1 Firm Characteristics

Taking the number of employees as one of the attributes to measure the size of an
enterprise, the survey showed that about 90% of SMEs (335) had less than 20
employees. It is also shown that the majority of the enterprises had been in
operation for more than 5 years.
With respect to location of the business, the study found that the majority of the
enterprises were located within a distance of half a kilometer from the main road
implying that the location of most businesses in the study was not far from the
main road.

4.6.1.4.1.2 Entrepreneur Characteristics

Entrepreneurs characteristics was expressed in terms of socio-demographic
characteristics (like age, gender and education), personality characteristics of
entrepreneurs (like need for achievement, locus of control, and propensity for risk
taking), and competencies of the entrepreneur (like managerial, entrepreneurial
and functional competencies). The descriptive statistics also showed that
entrepreneur characteristics had different effects on the success of small and
medium enterprises. However, as an element of entrepreneur characteristics, the
socio-demographic variable had no relation with the business success of SMEs.

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From the evidence relating to internal environmental factors of SMEs,
owners/managers seemed to understand the effects of business characteristics and
characteristics of entrepreneurs on the business success of their enterprises.
However, the interview data pertaining to firm strategy showed that
owners/managers could not take business strategy as an internal environmental
factor that influences business success.
As the interview questions probed demonstrated, owners/managers of small and
medium enterprises did not know what business strategy is, what importance the
business strategy could have to their business and related questions. This
knowledge deficiency is contrary to the evidence in the extant literature and the
anticipation of the researcher. For example, John and Richard (2011) argued that
the performance of enterprises is determined by the business strategy adopted.
From the interviews, it was clear that owners/managers did not adopt their own
business strategy, which could result in them facing business failure. Surprisingly,
some of the owners/ managers in the interview had the perception that having a
business strategy for their enterprise would introduce tedium and negatively affect
the performance of their business. The reaction was an indication that government
offices like the Federal Micro and Small Enterprises Development Agency
(FEMSEDA) have much work to do in providing awareness training on areas
related to the essence, importance, and implications of business strategy.

4.6.1.4.2. External Factors

In addition to the internal factors revealed from the entrepreneur and business
characteristics perspective, there were external factors that influence the success
of a business. These external factors were broadly categorized into macro
environmental factors, and micro environmental factors.

4.6.1.4.2.1. Macro Environmental Factors

The macro-environmental factors related to the business success of SMEs

included economic, political-legal, technological and socio-cultural factors. To
rigorously conduct the data analysis and get a thorough understanding of the

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macro-environmental factors that could impact the success of SMEs in Ethiopia,
items related to each factor were divided into sub-themes whenever desirable and
possible.
Economic factors, from the macro-environmental factors category, were further
divided into financial resource and taxation related items. The mean score relating
to financial resource was2.97 (SD= 0.50) and taxation had a mean score of 3.50
(SD=0.62). The descriptive statistics implied that entrepreneurs perceived that the
taxation system in Ethiopia was a very powerful element able to influence the
success of SMEs. As demonstrated by the multiple regression tests, economic
factors were indeed related with the business success of SMEs.

Table 4.6: Economic Factor

No. of Mean Std.
items Devn
Economic Factors 9 2.33 0.42
 Financial 6 2.97 0.50
resources
 Taxation 3 3.51 0.62
Source: Survey result, 2017

In the second set of factors, government support and regulatory environment are
taken as sub-parts of political-legal factors. Eight items were used to collect data
about government support while evidence about the regulatory environment was
collected using 15 items. The mean score for government support as perceived by
entrepreneurs was 3.18 and the regulatory environment as a factor for the success
of small and medium enterprises had a mean score of 2.92. This perceptual data
clearly indicated that government support and regulatory environment were
considered important for business success with the former proving to be is even
far more important.

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Table 4.7: Political-legal factors
No. of Mean Std.
items Devn
Political-Legal 23 3.01 0.37
Factors
 Government 8 3.18 0.38
Support
 Regulatory 15 2.92 0.45
environment
Source: Survey result, 2017

As shown in the descriptive statistics, technological factors comprised three

variables: access to technology, access to information, and access to
infrastructure. Access to technology was considered as an important factor for
business success with a mean score of 3.72 and the mean score of access to
information as produced from the descriptive statistics was 3.65 while the mean
score of access to infrastructure was 3.21. From the descriptive statistics, it is
possible to understand that access to technology, information, and infrastructure
are perceived as determinants of the business success of small and medium
enterprises in Ethiopia. Taking all the three variables in aggregate as shown in the
multiple regression test, technological factors were significantly related to the
business success of small and medium enterprises.

Table 4.8: Technological Factors

No. of Mean Std.
items Devn
Technological 15 3.46 0.33
Factors
 Access to technology 3 3.72 0.51
 Access to information 5 3.65 0.44
 Access to 7 3.21 0.47
infrastructure
Source: Survey result, 2017

For ease of understanding, the third block-the socio-cultural factor is discussed in

terms of the variable access to social networking. As shown in the descriptive
statistics, access to networks is important for the business success of small and

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medium enterprises with a mean score of 3.65. In the socio-cultural factor, access
to networks is expressed in family and friendship connections, and professional
affiliation. In both of the categories, respondents perceived the socio-cultural
factor to be one of the factors that contribute to the business success of SMEs.

Table 4.9: Socio-cultural Factors

No. of Mean Std.
items Devn
Access to 4 3.65 0.35
networking
Source: Survey result, 2017

4.6.1.4.2.2. Micro-Environmental Factors

The micro-environmental factors, also referred to as external micro environmental
factors, comprise important elements like customer relationships, supplier
relationships, and intensity of competition.
Customer relationship is about approaches and technologies that firms use to manage
their customer relations to enhance business relationships with customers. As micro-
environmental factor, customer relationship is one of the important factors that
contribute for the business success of SMEs. As shown in the descriptive statistical
results, the mean score for customer relationships was 4.08. This average indicated the
importance of customer relationships for the success of their business as perceived by
entrepreneurs.
To be effective in its operation, an enterprise usually integrates itself with the supplier
or buyer of products. In the survey, it was shown that entrepreneurs strongly believed
that having a good supplier relationship is important for the business success of
enterprises. The mean score relating to the perceived importance of supplier
relationship for business success as depicted in the descriptive statistics was 4.03,
showing the significance of this dimension for the business success of Small and
Medium Enterprises as perceived by owners/managers.
As discussed in different prior studies, the intensity of competition has a mixed effect
on the business success of SMEs based on a firm’s readiness to neutralize the pressure
and effect of intense competitions. As shown in the descriptive statistics, owners and
managers viewed the existence of competitive pressure as an important variable in
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ensuring the success of their businesses. The mean score for the importance of
competition pressure was 3.21. This indicated that entrepreneurs considered the
presence of competition as important for the success of small and medium enterprises.

Table 4.10: The Micro-environmental factors variables:

No. of Mean Std.
items Devn
Micro-Environmental 9 3.77 0.63
Factors
 Customer 2 4.08 0.58
relationships
 Supplier relationships 2 4.03 0.52
 Competition 5 3.21 0.78
Source: Survey result, 2017

4.1.2[4.6.2] Inferential Analysis

In addition to the descriptive analysis, the researcher also employed inferential
analysis in handling the variables identified in the study. Thus, Pearson Product
Moment Correlation analysis and regression analysis were used to determine the
effect of environmental factors on business success. As a recommended practice,
preliminary data test procedures to determine the presence of any
multicollinearity and normality issues were employed.

4.6.2.1 Multicollinearity
As an important data test the researcher checked multicollinearity using Tolerance
and Variable Inflation Factor (VIF) statistics. Andy (2006) suggested that a
tolerance value less than 0.1 almost certainly indicates a serious collinearity
problem. Liu (2010) also suggested that a VIF value greater than 10 is a
significant concern and, in the present research the VIF values are below 10 for
all predictors indicating there is no serious concern of collinearity between the
predictor variables. This means that the derived model is likely to be unchanged
by small changes in the measured variables.

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Table 4.11 Multicollinearity test
Coefficientsa
Model Collinearity Statistics
Tolerance VIF
(Constant)
Business characteristics .839 1.192
Socio-demographic characteristics .944 1.060
Personality characteristics .505 1.980
Competences of the entrepreneur .645 1.552
Economic factors .516 1.939
Technological factors .413 2.419
Access to networking .634 1.578
Customer relationships .852 1.173
Supplier relationships .729 1.371
Competition .550 1.817
Ethnic characteristics .776 1.289
Ext and Int environment .184 5.435
Source: Survey 2017 - Dependent Variable: Business Success

4.6.2.2 Normality Test

As explained in the methodology chapter, a normality test was made to determine
whether the population data was normally distributed. In particular the normal
probability plot as suggested by Coakes and Steed (2003) was employed for the
purpose as follows;
A visual inspection showed all the variables of internal environmental factors,
external environmental factors, and business success variables were normally
distributed and thus met the assumption of normality (Field, 2011). From the
normal probability plots, the reasonably straight lines denoted a normal
distribution. The following three figures present the normal probability plot of
each of the main variables in this study (See Appendix D).

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Figure 4.12: Normal P-P Plot of Regression Standardized Residual: Internal
Environmental Factor
Source: Survey Result (2017)
As demonstrated in Fig 4.12 above an examination of the normal probability plot
of the internal environmental factor data suggested that there was no significant
deviation from normality. As can be seen in Figure 4.12, a reasonably straight line
indicates a normal distribution.

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Figure 4.13: Normal P-P Plot of Regression Standardized Residual: External
environmental factor
Source: Survey Result (2017)
As shown in Fig 4.13 the normal probability plot of the external environmental
factor suggested there was no significant deviation from normality. As can be
seen in the Figure, the straight line could be taken as indicative of a normal
distribution.

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Figure 4.14: Normal P-P Plot of Regression Standardized Residual: Business
Success
Source: Survey Result (2017)
Similarly, an examination of the normal probability plot of business success
suggested there was no significant deviation from normality. As Figure 4.14
showed, the reasonably straight line would indicate a normal distribution.

4.6.2.3 Correlation Analysis

As a method to determine the relationships between dependent and independent
variables, correlation analysis was employed. A correlation coefficient has a value
ranging from -1 to 1. Values that are closer to the absolute value of 1 indicate that
there is a strong relationship between the variables being correlated whereas
values closer to 0 indicate that there is little or no linear relationship. As Andy
(2006) stated, correlation is a commonly used measure of the size of an effect:
According to guidelines, values of ± 0.1 represent a small effect, ± 0.3 a medium
effect and ± 0.5 a large effect. Therefore, correlations are a measure of the linear

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 relationship between two variables. In this part, correlation analysis was
conducted in regard to all research objectives and hypotheses developed as a
stepping stone for regression analysis. Correlation analysis involving different
variables provided coefficients which indicated the strength and direction of
relationships.

4.6.2.3.1 Correlation Analysis between the Independent and Dependent

Variables

Table 4.12 Correlations (Pearson Correlation) Sig. (2-tailed)

1 2 3 4 5 6 7 8 9 10 11 12 13 14
1. Business 1
characteristi
cs
2. Socio- -.114* 1
demograp.
Cxs. .034

3. Personality -.136* -.070 1

characteris
tics .011 .193

4. Competenc -.096 .026 .370 1

**
es of the
entreprene
ur .074 .628 .000

5. Economic .226** -.056 -.11 .001 1

factors 0*
.000 .298 .039 .978

6. Political- .053 -.016 .231 .099 .31 1

**
legal 7**
factors
.323 .770 .000 .066 .00
0
7. Technologi -.084 .010 .014 .158 .30 .335 1
**
cal factors 4** **

.119 .853 .794 .003 .00 .000

0
8. Access to -.113* -.082 .298 .144 .11 .293 .38 1
** **
networking 7* **
5**
.035 .127 .000 .007 .02 .000 .00
9 0
9. Customer .020 -.145** -.03 .122 -.0 -.04 .15 .16 1
*
relationships 4 14 1 3** 1**
.707 .007 .523 .023 .79 .450 .00 .00
1 4 3
10. Supplier -.144* -.024 .141 .345 .14 .093 .33 .24 .27 1
* ** **
relationships 3** 9** 4** 2**
.007 .653 .008 .000 .00 .082 .00 .00 .00
7 0 0 0
11. Competiti .268** .031 -.23 .064 .31 .067 .01 -.1 .09 .05 1
on 1** 1** 9 46 7 7

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 **

.000 .568 .000 .233 .00 .211 .72 .00 .07 .28
0 4 6 1 9
12. Ethnic -.103 -.096 .236 -.06 .01 .081 -.0 .18 .05 .05 -.347 1
**
Cxs 4 9 74 1** 8 3 **

.055 .072 .000 .233 .72 .130 .16 .00 .28 .32 .00
1 6 1 4 0 0
13. Ext and .051 -.046 .368 .431 .52 .777 .63 .49 .15 .38 .29 .016 1
** **
Int 1** **
5** 2** 8** 3** 9**
environme
nt .348 .399 .000 .000 .00 .000 .00 .00 .00 .00 .00 .771
0 0 0 3 0 0
1. Business -.160* -.030 .240 .242 .16 .43 .48 .42 .05 .34 -.1 .011 .509** 1
success * ** **
3** 1** 1** 0** 1 4** 77*
*

.003 .575 .000 .000 .00 .00 .00 .00 .34 .00 .00 .837 .000
2 0 0 0 3 0 1

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).
Source: survey Result, 2017

4.6.2.3.1.1 Correlation between Firm Characteristic and Business Success

Based on the results of the correlation test (Table 4.12), which examined the
correlation between firm characteristics and business success, it could be deduced
that there was a negative correlation between firm characteristics and business
success given the correlation coefficient of 0.164 at a significance level of 0.003
(<0.05) . In the descriptive analysis made in the prior section, the characteristics
of a firm were considered in terms of firm age, firm size and firm location. In this
correlation analysis, the aggregate result of firm characteristics against the success
of business was found to have negative but significant relations. The findings
disagreed with the arguments of Sumit (1997), Ruth and Willy (2016), and
Tresphory and Parameswar (2016) that larger firms are more profitable and less
productive indicating significant but positive correlation. However, they were
consistent with Donald and Carl’s (1998) assertion that younger small firms
would be more likely to show high rates of growth compared with small firms that
had been in existence for longer timespan, indicating negative correlation between
firm age and business success. In terms of location, the findings of the study
agreed with the findings of Habtamu , Aregawi , and Nigus (2013). That is,
location has a negative correlation with the success of business as perceived by

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owners/managers. However, as perceived by owners/managers, the enterprise
characteristics explained in terms of size, age and location were negatively
correlated with the success of Small and Medium Enterprises, a point that fairly
deviated from reports in some prior studies. The justification given during the
second phase interview sessions for the noted divergence was that owners and
managers in the study believed that the size and the age of firms could negatively
influence the success of businesses as the years go by. However, Habtamu et al
(2013) noted that the size of a firm initially has negative relationship with
enterprise growth.

4.6.2.3.1.2 Correlation between Socio-Demographic Characteristics and

Business success
A correlation analysis was made to discover any association between socio-
demographic characteristics of owners/managers expressed in terms of age,
gender and family background and business success. Based on the results of the
correlation test, which produced a correlation coefficient of 0.30 (see Table 4.12)
at a significance value of 0.575 (which is greater than 0.05), the researcher found
that there was no significant correlation between socio- demographic
characteristics and business success. Though a significant number of studies
(Evripidis, et al., 2017; Moses, 2007; Geroskil, et al. 2010,) claimed a positive
and significant relation between demographic characteristics of owners/managers
and business success, the present findings showed that there was no significant
correlation between socio-demographic characteristics and business success of
SMEs. From this point, it was possible to infer that demographic characteristics of
business owners/managers could not be a factor influencing the success of
business as perceived by owners/managers themselves.

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4.6.2.3.1.3 Correlation between personality characteristics and business
success
The personality variables that included the need for achievement, locus of control,
and propensity for risk taking were taken in aggregate to determine the
relationship between personality characteristics and business success. Based on
the results of the correlation test (Table 4.12), the researcher found that there was
a significant and positive correlation between personality characteristics and
business success with a coefficient of correlation of 0.240 at a significance level
of 0.000 (<0.05). Thus, the test showed a significant positive correlation between
personality characteristics and business success in the SMEs. Moreover, the
descriptive analysis in the prior section indicated that personality characteristics
had relatively greater mean scores and thus higher significance. The present
findings supported the research by Yonca & Nuray (2006), Thomas & David
(1987), and Thomas et al. (2006) but were inconsistent with those of Ove (2003)
who reported that need for achievement had no predictive validity in regard to
entrepreneurial activity.

4.6.2.3.1.4 Correlation between Competencies of the Entrepreneur and

Business success
The correlation analysis addressed the competencies variables that comprised
managerial, entrepreneurial and functional competencies and business success.
Based on the results of the correlation test (Table 4.12), which tested the
correlation between competencies of the entrepreneur and business success, the
researcher found that there was a significant positive association with a
correlation coefficient of 0.242 and a significance value of 0.000 (<0.05). The
descriptive analysis also showed that entrepreneurs’ competencies had a greater
mean score showing how owner/managers perceived their influence on business
success. The present findings agreed with reports in some previous studies. For
example, they were consistent with Nair and Anu (2006) that showed a positive
association between competencies and the business success of Small and Medium
Enterprises. The present findings confirmed that entrepreneurial competencies
portray the skills required to play the entrepreneurial role that enables various

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tasks to be performed, like developing a challenging but achievable vision,
formulating strategies, recognizing unmet consumer needs, scanning the
environment, spotting high quality opportunities, and producing superior products
or services that in turn have positive effect on business success. The present
findings also supported studies by Yassine (2013) and Siwan and Jennifer (2013).

4.6.2.3.1.5 Correlation between Economic Factors and Business Success

To determine the relationship between economic factors and business success, a
correlation analysis was made. Based on the results of the correlation test (Table
4.12), the researcher found a positive correlation between economic factors and
business success with a coefficient of correlation of0.163 at a significance level of
0.002 (<0.05). Thus, the result of the test showed that there was a significant
correlation between economic factors and business success in the SMEs. As
additionally shown in the descriptive analysis, economic factors had sizeable
mean scores indicating the level of owners’ agreement on the factor’s impact. The
present study validated previous studies of Louis, et al. (2008), Yassine (2013),
Ethiopian Economics Association (2015),Thitapha (2003),Iraj (2001), and the
World Bank (2009).

4.6.2.3.1.6 Correlation between Political-legal Factors and Business Success

The political and legal factor, one of the major macro environmental factors
identified as independent variables, was tested for any effect on the business
success of SMEs in Ethiopia. Based on the results of the correlation test (Table
4.12), the researcher found a significant positive correlation between the political-
legal factor and business success with a coefficient of correlation of 0.431 at a
significance level of 0.000 (<0.05). As shown in the descriptive analysis section,
the political-legal environment, expressed in terms of government support and
regulatory environment, had a significant mean score. Thus, the result of the test
showed a significant correlation between the political-legal factor and business
success in the SMEs, which was in agreement with most previous studies
(Yassine (2013),Yusuf (1995),Javed, Muhammad, et al (2011), and Liu (2008).

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The study was inconsistent with Mambula (2004) which documented the effect of
political legal environment as being unimportant to the success of SMEs.

4.6.2.3.1.7 Correlation between Technological Factors and Business success

A correlation test was conducted to determine the relationship between
technological factors and the business success of SMEs in Ethiopia. Based on the
results of the correlation test (Table 4.12), the researcher found a significant
positive correlation between technological factors and business success with a
coefficient of correlation of 0.481 at a significance value of 0.000 (<0.05). As also
shown in the descriptive analysis, the technological factor was decomposed into
access to technology, access to information, and access to infrastructure and all of
the sub-dimensions had significant mean values that strengthened the inferential
outcome. The findings of the present study supported those reported in previous
studies (Paul, 2004; James, 2005; andYassine, 2013).

4.6.2.3.1.8 Correlation between Access to Networking and Business Success

The effect of access to social networking, which pertained to the socio-cultural
factors of the macro environment, was investigated in relation to the outcome
variable of business success. Based on the results of the correlation test (Table
4.12) there was a positive correlation between access to networking and business
success with a coefficient of correlation of 0.420 at a significance level of 0.000
(<0.05). Thus, the result of the test shows that there is a significant correlation
between access to networking and business success in the SMEs. Also from the
descriptive analysis, it was possible to gather additional evidence regarding the
predictive effect of access to social networking on business success. The present
findings supported the previous studies of Halkos and Tzeremes (2013), and
Anderson and Jack (2002).

4.6.2.3.1.9 Correlation between Customer Relationship and Business

Success
To decide the significance and direction of the association between customer
relationship and business success, a correlation analysis was made. The results of

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the correlation test (Table 4.12), showed no significant correlation (r=0.051,
p=0.343). However, the two variables showed a positive but statistically
insignificant association. The present findings supported the study of Oliver and
Jacquelyn (2010) that reported that customer relationship management failed to
affect firm performance directly. However, to some degree the study disagreed
with Werner, Manfred, and Wayne (2004) that reported that customer relationship
management process had a moderate positive association with company
performance.

4.6.2.3.1.10 Correlation between Suppliers’ Relationship and Business

Success
To be effective in its operation, an enterprise generally integrates itself with the
supplier of raw materials and other inputs. Based on the results of the correlation
test (Table 4.12) there was a positive significant correlation between suppliers’
relationship and business success (r= 0.344, p= 0.000 ). The findings were
consistent with those documented in several studies (Chin-Chun, et al, 2008;
Vijay R. and Chin‐Chun, 2006; Joseph P. and Christian, 2001; René and Yvon,
2004).

4.6.2.3.1.11 Correlation between Competition and Business Success

In the descriptive analysis, owners and managers of SMEs viewed the existence
of competitive pressure as an important variable in ensuring the success of their
businesses due to its motivational pressure on the success of their enterprises.
However, to further determine the correlation between competition and business
success of SMEs, a correlation analysis was made. Based on the results of the
correlation test (Table 4.12) there was a significant but negative correlation
between the two factors (r= -0.177, p= 0.001 (<0.05). However, in the descriptive
analysis, some owners indicated that the intensity of competition had a mixed
effect on the business success of SMEs often depending on a firm’s readiness to
neutralize the pressure. However, the majority perceived the effect of competition
on business success negatively. Theoretically, this finding agreed with the finding
of Shigang (2010).

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4.6.2.3.1.12 Correlation between coexistence of ethnic membership and
business premises and business success
When the local community’s perception is different from the entrepreneurs’
understanding of relevant issues, those ethnic outsiders who run a business
outside of their ethnic territory may feel excluded and may not be successful. To
determine the relationship between business success and the concomitance of
ethnic group and business premises, a correlation analysis was made. Based on
the results of the correlation test (Table 4.12), the researcher found a positive but
insignificant correlation between the concomitance of ethnic group and business
premises and business success (r=0.011, p=0.837). As the variable was looked at
from ethnic membership and workers’ ethnic composition perspective, these sub-
variables were aggregated along with the main one but the result did not change.
The findings were in agreement with those of Sander and Mirjam (2012) who
reported that ethnic diversity showed no effect on performance in terms of
business outcomes (sales, profits and profits per share) but were inconsistent with
those of Tesfaye (2016) and David (2001).

4.6.2.3.1.13 Correlation between External and Internal Factors and

Business success
To determine the perceived combined link between external and internal
environmental factors with business success, a correlation analysis was
conducted. Based on the results of the correlation test (Table 4.12), the researcher
found a significant positive correlation between a combination of external and
internal environmental factors and business success (r= 0.509, p= 0.000 (<0.05).

4.6.2.4 Regression Analysis

Regression is a flexible method of data analysis that may be appropriate whenever
a quantitative variable (the dependent) is to be examined in relationship to any
other factors expressed as independent or predictor variables (Gujarati, 2004).
Upon the completion of the correlation analysis, linear and multiple regression
analyses using SPSS version 23.0 were performed to find out any influence the
independent variables (environmental factors) could have on the dependent
variable (business success). The coefficient of determination explains the

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proportion of variability between business performance and the independent
variables of environmental factors. Ordinary Least Squares method, regarded as
the Best Linear Unbiased Estimator (BLUE) was used in evaluating models of
this nature (Damodar, 2002). The highest beta represents the strongest unique
contribution explaining the dependent variable. The ANOVA tests the null
hypothesis that multiple-R in the population equals 0. If the significance (in the
coefficient column) value is less than 0.05, the independent variable contributes
significantly to the dependent variable (Pallant, 2007).
From the regression test results, the researcher obtained an R square value of
0.439, F Calculating at 21.473, with a p-value of 0.000(less than 0.05). This value
showed that 43.90% of business success could be explained by the thirteen
independent variables. According to Hair et al. (2011), R2 values of 0.75, 0.50 or
0.25 for endogenous latent variables in the structural model can be described as
substantial, moderate, or weak, respectively. Thus, the value of R2 in this study
was considered to be satisfactory in reference to examining the impact of the
independent variables on the truly dependent variable of business success.

Table 4.13: Regression Model summary

Model Summaryb

Model R R Square Adjusted R Std. Error of

Square the Estimate
1 .663a .439 .419 5.57927
a. Predictors: (Constant), Ext and Int environment, Ethnic xcs, Socio-demographic
characteristics, Business characteristics, Customer relationships, Competences of the
entrepreneur, Supplier relationships, Competition, Personality characteristics, Access to
networking, Economic factors, Technological factors
b. Dependent Variable: Business success/Achievements

To determine the effect of the individual independent variables on the business

success of SMEs, regression analysis was performed as explained in the
subsequent sections.

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 4.6.2.4.1 Firm Characteristics as a predictor of business success
A standard linear regression was performed to find any influence of
owner/managers state of firm characteristics as a predictor of the business success
of SMEs. Table 4.14 showed the variables, unstandardized regression coefficient
(B), and the standardized regression coefficient (B). The regression test output
showed a negative significant effect of the independent variable (firm
characteristics) on the business success of SMEs (B=-0.160, p=0.003, <.05). In
other words, firm characteristics had a significant effect on the business success
of SMEs as perceived by owner-managers.

Table 4.14: Coefficients of firm characteristics

Coefficientsa

Model Unstandardized Standardized t Sig.

Coefficients Coefficients
B Std. Error Beta
1 (Constant) 64.712 3.018 21.441 .000
Firm -.609 .201 -.160 -3.025 .003
characteristics
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

4.6.2.4.2 Socio-demographic Characteristics as Predictor of Business

Success
As shown in the regression analysis output (in table 4.15), there is a negative and
insignificant effect of socio-demographic characteristics on the business
performance of SMEs (p= 0.575, > 0.05) and a coefficient of regression of -0.030.

Table 4.15: Coefficient of socio-demographic characteristics

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
1 (Constant) 56.779 2.028 27.996 .000
Socio- -.029 .052 -.030 -.561 .575
demographic
characteristics

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 a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017:

4.6.2.4.3 Personality Characteristics as Predictor of Business success

A standard linear regression was performed to find any influence of
owner/managers’ state of personality characteristics as a predictor of business
success of SMEs. From the regression test output shown in table 4.16, it could be
understood that there was a positive significant effect of personality
characteristics on the business success of SMEs (B=0.240,p=0.000 < 0.05). In
other words, the dimension of independent Personality Characteristics influenced
business success as perceived by owners/managers.

Table 4.16: Coefficient of Personality characteristics

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
1 (Constant) 38.22 3.810 10.033 .000
9
Personality .521 .113 .240 4.601 .000
characteristics
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

4.6.2.4.4 Competences of the entrepreneur as predictor of Business success

The standardized linear regression output shown in Table 4.17 indicated a positive
significant effect of entrepreneurs’ competencies on business success (B=.264,
t=5.068, p<0.05). This magnitude of effect suggested competencies of the
entrepreneur could significantly influence the business success of SMEs.

Table 4.17: Coefficient of Entrepreneurs competences

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Beta
Error
1 (Constant) 30.022 5.107 5.879 .000
Competences .593 .117 .264 5.068 .000

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 of the
entrepreneur
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

4.6.2.4.5 Economic Factor as predictor of Business success

Based on the standard linear regression model performed to determine the effect
of the economic factor on the business success of SMEs, it was indicated that the
economic factor had a significant positive effect (B=.163, p=0.002, <0.05). In
other words, the economic factor influenced the business success of SMEs as
perceived by owners/managers.

Table 4.18: Coefficient of Economic Factor

Coefficientsa
Model Unstandardized Standardize t Sig.
Coefficients d
Coefficients
B Std. Error Beta
1 (Constant) 48.722 2.289 21.281 .000
Economic factors .332 .108 .163 3.082 .002
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

4.6.2.4.6 Political-legal factor as predictor of Business success

In a standard linear regression analysis (table 4.19), it was shown that the
political-legal factor had a positive significant effect on the business success of
SMEs (B=0.431,p=0.000,< 0.05). Hence, the political-legal factor had a
significant effect on the business success of SMEs as perceived by owner/
managers.

Table 4.19: Coefficient of Political-legal factor

Coefficientsa
Model Unstandardized Standardized T Sig.
Coefficients Coefficients
B Std. Error Beta
1 (Constant) 29.042 3.017 9.626 .000
Political-legal .385 .043 .431 8.892 .000
factors
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017
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 4.6.2.4.7 Technological Factor as predictor of Business success
A question of interest also was to find out the effect of technological factors on
business success. As shown in table 4.20, business success was indeed predicted
by the technological factor (B=0.478, p=0.000, < 0.05).

Table 4.20: Coefficient of technological factor

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Beta
Error
1 (Constant) 19.364 3.640 5.320 .000
Technological factors 0.703 .070 .478 10.065 .000
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017
4.6.2.4.8 Access to Networking as Predictor of Business Success
The multiple regression also involved establishing whether networking was a
predictor of the business success of SMEs. As shown in table 4.21, access to
networking did indeed contribute to business success (B=.437, p=0.000, <0.05).

Table 4.21: Coefficient of Access to Networking

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Beta
Error
1 (Constant) 33.546 2.513 13.350 .000
Access to 1.533 .171 .437 8.982 .000
networking
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

4.6.2.4.9 Customer Relationships as Predictor of Business Success

The relationship between customer relationship and the business success of small
and medium enterprises was also subjected to regression analysis as shown in
table 4.22. From the regression analysis one could infer that customer relationship
had no significant effect on the business success of SMEs as perceived by

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 owners/managers (B=0.051, p=0.343>0.05). In other words, the independent
customer relationships variable didn’t influence the business success of SMEs as
perceived by owners/managers.

Table 4.22: Coefficient of Regression for Customer Relationships

Coefficientsa
Model Unstandardized Standar t Sig.
Coefficients dized
Coeffici
ents
B Std. Beta
Error
1 (Constant) 52.881 2.958 17.874 .000
Customer .341 .359 .051 .950 .343
relationships
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

4.6.2.4.10 Supplier Relationships as Predictor of Business Success

As in other pairs of related variables, determining the effect of supplier
relationships on the business success of SMEs also involved a regression analysis.
From the regression output, shown in table 4.23, it could be concluded that
supplier relationships did indeed predict the business outcome of SMEs as
perceived by owner/managers of SMEs (B=0.344, p=0.000 <0.05).

Table 4.23: Coefficient of correlation for Supplier Relations

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Beta
Error
1 (Constant) 35.040 3.045 11.509 .000
Supplier 2.567 .376 .344 6.830 .000
relationships
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

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 4.6.2.4.11 Competition as Predictor of Business Success
The role of competition in business success was also investigated using
regression. Table 4.24 showed the effect of competition on business success was
significant but negative (B=-0.177, p=0.001,<0.05). In other words, competition
negatively influenced business success as perceived by owner managers.

Table 4.24: Regression Coefficient of Competition

Coefficientsa
Model Unstandardized Coefficients Standardize T Sig.
d
Coefficients
B Std. Error Beta
1 (Constant) 61.402 1.763 34.828 .000
Competition -.354 .106 -.177 -3.345 .001
a. Dependent Variable: Business success
Source: Survey result, 2017

4.6.2.4.12 Coexistence of Ethnic group & Business premises as Predictor of

Business success

Table 4.25: Coefficient of coexistence of ethnic group and business premises

Coefficientsa
Model Unstandardized Coefficients Standardized T Sig.
Coefficients
B Std. Error Beta
(Constant) 55.218 2.204 25.049 .000
.015 .072 .011 .206 .837
Concomitant of
Ethnic group and
business premises
a. Dependent Variable: Business success/Achievements
Source: Survey result, 2017

The contribution of the coexistence of ethnic group and business premises to

business success was shown in table 4.25. It could be deduced that the
concomitance of ethnic group and business premises had no effect on business
success (B=0.011, p= 0.837>0.05).

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Because of the absence of predictive power in this particular regression, which
contradicted the Ethiopian study of Tesfaye (2016), the researcher resorted to an
interview to further support the above finding related to doing business as an
ethnic outsider and business success.
From the interview, the researcher learned that there were owners/managers who
strongly believed that the co-presence of ethnic group membership and business
premises was far more conducive for the success of a business compared with
doing business out of one’s ethnic territory. These participants further said that
the character of competition was essentially distorted by ethnic issues. In view of
the compelling narrative, the researcher had detailed interviews with those who
blamed ethnicity as a factor making fair business competition impossible.
Interviewees disclosed that ethnic outsiders would not be treated in the same
manner as natives in matters of business opportunities related to the state as a
result of the regional constitutions favoring natives. The participants mentioned
this as an unfair policy and practice which could harm healthy competition and
distort business success. In addition, participants mentioned that shoppers are also
ethnically oriented and would typically do business within group business people
unless the type of product or service being sought was unavailable except
elsewhere. That is, buyers would prefer to buy a service or product from
ethnically similar business owners. This could influence the revenue specifically
and the business success in general of outsiders. For this reason, there were
owners/managers who would not even think of doing business out of their ethnic
territory except perhaps in the two city administrations (Addis Ababa and Dire
Dawa).
In the interview, the idea of employee ethnic diversity and its importance for
business success were perceived from two perspectives. The first one was positive
and the second one the opposite. But the crux of the arguments was the position
that in a diverse society, it is not an issue of rights but a subject beyond rights.
Thus the idea of diversity comes with the corresponding duty of a responsibility
for every member of a firm to cherish the differences and make every place
welcoming irrespective of ethnic and geographic attributes.

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 4.6.2.4.13 External and Internal Environmental Factors as Predictor of
Business Success
It was also necessary to determine the combined effect of internal and external
environmental factors on business success\As shown in table 4.26 the combined
effect of the two factors on business success as perceived by owners/managers
was significant (B=0.520, p=0.000,<0.05). In other words, as perceived by
owners/ managers, the combined effect of external and internal environmental
factors influenced business success significantly.

Table 4.26: Coefficient of external and internal environmental factors

Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
1 (Constant) -5.651 5.421 -1.042 .298
Ext and Int .231 .020 .520 11.335 .000
environment
a. Dependent Variable: Business success/Achievements
Source; Survey result, 2017

4.6.2.4.14 Environmental factor that predicts the business success more

The relative contribution of internal and external factors to business success was
investigated to determine their relative importance. In the regression analysis
output (Table 4.27), it was clearly shown that the external environmental factor
(B=.408, p=.000) accounted more for the business success of SMEs than the
internal factor (B=.246, p=.000). However, both of the factors had significant
effect on the business success of SMEs despite the fact that the external effect had
a greater role.

Table 4.27: Coefficient of external and internal environmental factors

Coefficientsa
Model Unstandardized Standardize T Sig.
Coefficients d
Coefficients

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 B Std. Error Beta
1 (Constant) -5.415 5.800 -.934 .351
External Environment .195 .023 .408 8.622 .000
factors
Internal Environment .318 .061 .246 5.208 .000
factors
a. Dependent Variable: Business success
Source; Survey result, 2017

4.2[4.7] Hypotheses Testing

The second objective of this research study was looking into the effect of
environmental factors on the business success of SMEs in terms of
owners/managers perceptions. To achieve this, a set of research hypotheses were
identified based on a systematic review of the literature. For this section, Pearson
correlation coefficient analysis and regression analysis were used to test the
correlation between environmental factors and the business success of SMEs and
the effects of environmental factors on the business success of SMEs. Though the
hypothesis was formulated in the form of alternative hypothesis in the previous
chapter, the test was made for the null hypothesis but the interpretation extended
to the alternative hypothesis. Each research hypothesis was discussed in further
details below:
Hypothesis 1
H0: Firms’ characteristics has no significant effect on the business success of
SMEs
The first hypothesis addressed the effect of business characteristics on the
business success of SMEs as perceived by owner managers. The business
characteristics were measured in terms of firm size, age, and location of the
business from the main road. At a significance level of 5%, there was evidence
that the effect of business characteristics on the business success of SMEs was
high. This could be explained by the statistically significant p value of 0.003.
Thus, it was demonstrated that business characteristics was significantly
associated with the business success of small and medium enterprises. Therefore,
the finding dictated that the null hypothesis was rejected.

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Hypothesis 2
H0: Personality characteristics of entrepreneurs has no significant effect on the
business success of SMEs
Hypothesis 2 was about the relationship and effect of entrepreneurs’ personality
and business success/achievement. Related to the personality of entrepreneurs,
three variables (need for achievement, locus of control, and propensity for risk
taking) were used. Because there is evidence regarding the significant effect of
personality characteristics on business success, hypothesis 2 was rejected at a p-
value of 0.000. This study demonstrated that the factor of personality
characteristics of entrepreneurs had a significant effect on the business success of
SMEs. Therefore, the alternative hypothesis was supported. That is, a significant
relationship existed between personality characteristics and the business success
of Small and medium Enterprises and the effect of personality characteristics was
significant.

Hypothesis 3

H0: Entrepreneurs competencies has no significant effect on the business success

of SMEs

Hypothesis 3 was developed to test the effect of entrepreneurs’ competencies on

the business success/achievement of SMEs in Ethiopia. The competence factor
was operationalized in terms of entrepreneurial competence, managerial
competence and functional competence. The relevant regression test showed the
competence of entrepreneurs significantly affected the business success of SMEs.
Based on the results, the null hypothesis 3 was rejected and the alternative
hypothesis that the effect of entrepreneur competencies is significant was
supported.

Hypothesis 4

H0: The effect of socio-demographic characteristics on business success is not

significant

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Hypothesis 4 was related to a test of the socio-demographic characteristics across
categories of business success. The socio-demographic characteristics factor was
expressed in terms of age, and gender of owners/managers. At a 5% significance
level, the results of the Pearson correlation test showed that the socio-
demographic characteristics factor was not correlated with the business success of
SMEs. Moreover, the regression analysis showed that the socio-demographic
factor had no significant effect on business success. Hence, the null hypothesis 4
was accepted at a 5% significance level. This suggested that the socio-
demographic character of entrepreneurs was not significantly related to the
business success of Small and Medium Enterprises.

Hypothesis 5

H0: Economic factor has no significant effect on the business success of SMEs

The 5th hypothesis was related to the test for the effect of the economic factor on
business success. The economic factor was looked at from the financial resource
availability and taxation systems perspective. At a 5% significance level, the
Pearson correlation test showed a significant correlation between the economic
factors and success/achievements. Moreover, the regression analysis showed that
the effect of the economic factor on the success of SMEs was significant at a p-
value of 0.002. Thus, the null hypothesis 5 was rejected and the rival hypothesis
that the economic factor has a significant effect on business success was
supported.

Hypothesis 6

H0: Political-Legal factor has no significant effect on the business success of

SMEs

Hypothesis 6 was related to the testing of the political-legal factor’s distribution

across categories of business success/achievement. Political-legal factors were
discussed as 2 variables representing government support and the regulatory
environment. Contrary to what was posited in the null hypothesis, the findings of
the Pearson correlation test showed significant correlation between the two

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variables and the effect of political-legal factor on business success of SMEs was
significant at the p-value of .000. Hence, the null hypothesis 6 was rejected at a
5% level of significance.

Hypothesis 7

H0: Socio-cultural factor has no significant effect on the business success of

SMEs

Hypothesis 7 was formulated to test the effect of the socio-cultural environment

described in terms of access to networking involving relatives, friends, or even
professional affiliations and the effect of this network on business success. The
result of the Pearson correlation test revealed that network access was
significantly correlated with business success. Further, the regression analysis
showed the significant effect of access to network on the business success of
SMEs. Therefore, the 7thnull hypothesis was rejected at a 5% significance level
and a p- value of 0.000.

Hypothesis 8

H0: Technological factor has no significant effect on the business success of

SMEs

Hypothesis 8 was related to testing the effect of technological factors on the

business success of SMEs in Ethiopia. The technological factor was subdivided
into access to technology, information, and infrastructure. At the significance
level of 5%, the null hypothesis 8 was rejected due to the observed significant
effect on business success. In other words, the effect of technological factors on
the business success of Small and Medium Enterprises was statistically significant
at a p value of 0. 000.

Hypothesis 9

H0: Customer relationship has no significant effect on the business success of

SMEs

Hypothesis 9 was formulated to test the presence of any association between

customer relations and business success. At a 5% significance level, the effect of
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customer relations on the business success of SMEs was not significant. Thus, the
null hypothesis 9 was accepted at a p-value of 0.343.

Hypothesis 10

H0: Supplier relationships has no significant effect on the business success of

SMEs

Hypothesis 10 was related to testing of effects of supplier relations on the

business success of SMEs. Supplier relationship is one of the subcategories of
micro environmental factors as discussed in the proposed theoretical framework.
The regression analysis showed that the effect of supplier relations on the
business success of SMEs was statistically significant at a 5% significance level.
Thus the null hypothesis 10 was rejected at a p-value of 0.000.

Hypothesis 11

H0: Competition has no significant effect on the business success of SMEs.

Hypothesis 11 was related to testing for the effect of competition on the business
success of small and medium enterprises. As one of the sub-categories of micro
environmental factors, competition was expressed in this study in terms of
competition pressure resulting from incumbent firms. At a 5% level of
significance, the result of the regression analysis test showed that competition had
a statistically significant effect on business success. Therefore, at a 5% level of
significance the null hypothesis 11 was rejected at a p-value of 0.001.

Hypothesis 12

H0: Concomitance of ethnic membership and business premises has no

significant effect on the business success of SMEs.

Hypothesis 12 is related to testing the effect of ethnic category and business

premises synchronicity on business success. The result of the regression analysis
showed that the synchronicity of ethnic group and business working place had no
significant effect on the business success of SMEs in Ethiopia. At a 5%
significance level and a p-value of 0.837, the null hypothesis 12 that there is no

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significant effect of ethnic group and business premises coexistence on the
success of small and Medium Enterprises was accepted.

Hypothesis 13

H0: The combined effect of external and internal environmental factors has no
significant effect on the business success of SMEs.

Hypothesis 13 was related to testing both internal and external environment

effects on the business success of SMEs. In the hypothesis the internal and
external environmental factors were understood from an aggregate perspective.
The findings revealed that both internal and external environmental factors had a
significant effect on the business success of SMEs at a 5% significance level (p=
0.000). In other words it was concluded that the business success of SMEs was
highly influenced by the combined effect of external and internal environmental
factors. Therefore, the null hypothesis 13 was rejected.

Hypothesis 14

H0: The effect of the internal factor on business success is not different from that
of the external factor as perceived by owners/managers of SMEs

Hypothesis 14 was formulated to test whether the internal factor had an effect on
business success similar to the external factor as perceived by owners/managers.
The test revealed that each of the internal and external environmental factors had
a different effect on business success at a 5% significance level and a p-value of
0.000. From the findings, it was possible to infer that the business success of
SMEs was influenced by each of the external and internal environmental factors
differently. The external factor had more effect on the business success of SMEs
as perceived by owner/managers. Therefore, the null hypothesis 14 was rejected
and the alternative hypothesis was accepted.

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4.8 Implications and Summary of Hypothesis Testing
The findings stemming from the hypothesis testing regarding the variables that
contribute to business success are very important. For the benefit of practitioners
and other stakeholders, discussing the meanings and implications of the test
results is vital. A summary of the hypotheses testing and the implications of the
findings are articulated in the subsequent section.

Implications of tested hypotheses

All hypotheses except hypotheses number 4, 9 and 12 were rejected. The rejection
of the null hypothesis indicates that the evidence that we have supports for the
alternative hypothesis. In this case, the entire alternative hypotheses except
alternative hypothesis number 4, 9, and 12 were supported based on the empirical
evidence that those factors were significantly related to the business success of
SMEs in Ethiopia.

Summary of hypothesis
The hypotheses discussed in the previous section were summarized in
straightforward ways as follows. The summarized versions of the null hypotheses
were presented in the subsequent tables.
Hypothesis 1

H0: Firms’ characteristics has no significant effect on the business success of

SMEs: Rejected

Hypothesis 2

H0: Personality characteristics of Entrepreneurs has no significant effect on the

business success of SMEs: Rejected

Hypothesis 3

H0: Entrepreneurs competences has no significant effect on the business success

of SMEs: Rejected

Hypothesis 4

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H0: The effect of socio-demographic characteristics on business success is not
significant: Supported

Hypothesis 5

H0: Economic factor has no significant effect on the business success of SMEs:
Rejected

Hypothesis 6

H0: Political-Legal factor has no significant effect on the business success of

SMEs: Rejected

Hypothesis 7

H0: Socio-cultural factor has no significant effect on the business success of

SMEs: Rejected

Hypothesis 8

H0: Technological factor has no significant effect on the business success of

SMEs: Rejected

Hypothesis 9

H0: Customer relationship has no significant effect on the business success of

SMEs: Supported

Hypothesis 10

H0: Supplier relationships has no significant effect on the business success

SMEs: Rejected

Hypothesis 11

H0: Competition has no significant effect on the business success of SMEs:

Rejected

Hypothesis 12

H0: Concomitance of ethnic membership and business premises has no

significant effect on the business success of SMEs: Supported

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Hypothesis 13

H0: The combined effect of external and internal environmental factors has no
significant effect on the business success of SMEs: Rejected

Hypothesis 14

H0: The effect of the internal factor on business success is not different from that
of the external factor as perceived by owners/managers of SMEs: Rejected

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 CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction
The purpose of the study was to examine the effect of environmental factors on
determining the business success of SMEs in Ethiopia. The fresh insights gained
from this study will increase understanding of internal and external factors in
explaining the success of businesses.
The main objective of this chapter was to wrap up the findings presented in
chapter four in relation to the research questions and hypotheses developed for
this study and forward theoretical and practical recommendations. The first
section of this chapter provided several demographic results that were palpably
suitable for further elaboration and the next part on the main research variables
and the third one was about recommendations.

5.2 Conclusion of Main Variables

5.2.1 Internal Factors

The quantitative phase of the research found that age, education, experience,
family background, need for achievement, risk-taking propensity, managerial
competencies, and functional competencies of the entrepreneur had significant
effect on business success as perceived by owners/managers. These factors were
grouped under the category of ‘owner-manager attributes’.
The study findings related to business characteristics, namely the
geographic/location and demographic characteristics of the sample firms were
basic factors for the success of SMEs as perceived by owners/managers. The
issues discussed here were the location, age, and size of the business. One of the
most significant findings that emerged from this study was that owner/manager’s
location was a salient factor as an influencer of the success of SMEs in the study
area far more than other business characteristics.

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5.2.2 External Factors
Based on the analysis of the external factors, it was found that the majority of the
factors had influence on the success of a SME business. These external factors
were broadly categorized into macro environmental factors (including economic
factors, political and legal factors, technological factors, and socio-cultural
factors), and micro environmental factors (including customer relationships,
supplier relationships, and intensity of competition). The macro factors had
comparatively more positive impact on the success of a business than micro
environmental factors as perceived by owner/managers of SMEs.

Furthermore, the combined effect of the external and internal factors on SMEs
success was analyzed and the result showed a significant positive effect of the
combined influence on SMEs with external factors explaining more of the success
of firms compared to internal environmental factors.

Business strategies of the SMEs, as perceived by owner mangers, did not have
relationship with their growth. Both that had grown over the years of operation
and those that did not, did not have any business strategy and concepts. Thus, it
was not possible to generalize that business strategy had contribution to the
growth of businesses covered by the study.

From a theoretical perspective having a business strategy is important for

competitive advantage and growth. The reality on the ground, however, revealed
that those businesses that have grown did not have any articulated business
strategy. This particular anomaly indicated that business strategy and growth did
not have a positive relation. Although SMEs would have grown more than what
their present position would indicate, if they had developed and implemented a
strong and applicable business strategy; it could be said that owner/managers of
SMEs had negative perception about business strategy and its contribution to
business growth.

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Table 5.1: Summary of hypotheses results
No. Hypotheses Results
H1 Firms’ characteristics has a significant effect on business Supported
success of SMEs
H2 Personality characteristics of entrepreneurs has a significant Supported
effect on business success of SMEs
H3 Entrepreneurs competencies has a significant effect on Supported
business success of SMEs
H4 The effect of socio-demographic characteristics on business Rejected
success is significant
H5 Economic factor has significant effect on the business success Supported
of SMEs
H6 Political-Legal factor has a significant effect on the business Supported
success of SMEs
H7 Socio-cultural factor has a significant effect on the business Supported
success of SMEs
H8 Technological factor has a significant effect on the business Supported
success of SMEs
H9 Customer relationship has a significant effect on the business Rejected
success of SMEs
H10 Supplier relationships has a significant effect on the Supported
business success of SMEs
H11 Competition has a significant effect on business success of Supported
SMEs
H12 Concomitance of ethnic membership and business premises Rejected
has a significant effect on the business success of SMEs
H13 The combined effect of external and internal environmental Supported
factors has a significant effect on the business success of SMEs
H14 The effect of internal factor on business success is different Supported
from that of external factor as perceived by owners/managers
of SMEs
Source: Survey Result (2017)

5.3 Contributions and Recommendation of the Research

Findings
5.3.1 The contributions of the Research
The majority of studies investigating the success of SMEs, particularly those
based in developing economies, tended to respond to the interests of policy
makers and practitioners. These studies explored in depth the dynamics of small
business engagement in the economy attributable to the economic development

~ 178 ~
approach. Often, these studies were based on the collection of accessible data.
This study is significant because it is among very few studies in Ethiopia that
explored the success of SMEs based on the perceptions of owner/managers
themselves and not using aggregate or economic data. This research study made a
number of theoretical contributions to the literature. In terms of theory building, it
integrated and extended well-accepted studies about business success and then
introduced a model, based on the entrepreneurs’ perceptions and experiences, that
offered new insights into factors that tended to be associated with business
success in a complex economic and cultural context.

5.4 Recommendations of the Research

The present research study has generated a number of findings and conclusions
that may have relevant implications for practice, policy, and research. The
implications discussed here are by no means exhaustive but are intended to
stimulate thinking on how the insights from this study might be impactful, in a
very broad way, in regard to practice, policy and research with respect to
entrepreneurial activities in the context of Ethiopia.

5.4.1 Recommendations for Practitioners

The core objective motivating this study was to come up with environmental
factors, which might be beneficial to and practical for MSEs in Ethiopia as
perceived by owners/managers. The findings led to the important conclusion that
the environmental factors and business of owners/managers are important
variables that affect a firm’s business success.
One important fact to consider based on this research is that the dimension of a
firm’s environmental factors was positively related to the firm‘s performance.
This suggested that the firm and its managers may benefit from implementing a
strategy to encourage and increase the firm‘s level of perception regarding
environmental factors. One practical implication drawn from these findings was

~ 179 ~
that managers may want to actively search out ways to encourage and promote
innovation within their organizations.

The findings deriving from this study regarding the interplay of factors that
contribute to business success may be very important for practitioners because
they could provide owner/managers with an enhanced understanding of the ways
in which they could manage the performance of their businesses. In broad terms,
the study underlined the importance of skills and functional competencies,
highlighting the value of management training and development. This study
suggests that, of the internal and external environmental factors, the former is less
powerful in explaining the success of firms in the study area as perceived by
owner/managers.

5.4.2 Recommendations for Policy

The successful operation of SMEs in the study context is considered to be crucial
for a balanced development of the country’s economy. For this reason, some of
the study’s findings have potentially important policy implications, which are
discussed below.
At a more practical level, the outcomes from this study have significant
implications for the development of entrepreneurs in Ethiopia. The Federal Micro
and Small Enterprises Development Agency (FeMSEDA) of Ethiopia, which is
the governing body that oversees entrepreneurial development in Ethiopia, should
provide more environmental awareness trainings and development programs for
entrepreneurs. The training should focus on developing and nurturing the external
and internal environmental factor dimensions of owner/manager to positively
construct their perception.
To further improve the performance of SMEs, they need to develop their
environmental factors by securing continuing support from government
organizations, NGOs, and financial institutions, which would help these
enterprises to fully engage in innovation and other proactive external
environmental activities.

~ 180 ~
Another practical implication for Ethiopian entrepreneurs is that the results of this
study provide a clear indication that their perceptions are not much different from
those of their counterparts in Western countries. These results should be taken as
a motivational revelation for Ethiopian entrepreneurs to have self-trust that they
can compete locally and globally, on par with competitors from across the world.

5.5 Future Research Directions

Good research tends to generate more questions than it answers. The conclusions
as well as the limitations of this research study suggest some fruitful and
interesting possible directions for future research to harness the success of SMEs
in Ethiopia.
1. It has been argued that the dynamics of SME development can only be fully
understood in the light of longitudinal studies that seek to monitor the
condition of SME’s economy over a period of time (MacMahon & Murphy,
1999; Erikson, 2002). To generate richer findings, longitudinal studies of firm
performance could be conducted to investigate the factors contributing to the
success of SMEs over time. As discussed above, such research could also
enrich understanding of stages of growth as a variable.
2. Further research using cross-sectoral studies could shed light on how sectoral
characteristics influence the success of SMEs in the study area. Furthermore,
they could be useful in facilitating cross-sectoral research. The findings of this
study provide several opportunities for future research. It is hoped that despite
their limitations, the findings of this study will indicate directions for further
research.
First, to improve the model, the element of culture could be incorporated. House
et al. (1999) suggested that cultural differences might influence the way people
perceive their environment and success of business. Thus, the inclusion of culture
could further explain the relationship between environmental factors and business
success. Finally, it is also recommended that future research should consider
exploring the environmental factors of SME from employees’ perspective. A

~ 181 ~
study comparing environmental factors using self-ratings of SME owner/mangers
and employees’ relevant perceptions might produce a better understanding of how
performance of SMEs could be further improved.

5.6 Research Limitations

All researches have their own limitations. The ability of a study to acknowledge
its limitations is part of the strength of the research undertaking (Dolen, Ruyter,
and Lemmink, 2004). In common with any research, the present study has its
limitations and it is important to discuss these here. These limitations spring
mainly from the systematic literature review, issues in the research methodology,
and the interpretation of the findings. Consequently, although the findings of this
study are interesting and valuable, they should be viewed in the light of the
limitations and therefore caution should be exercised when interpreting such
findings. Intrinsic limitations of the present research study could be summarized
as follows:

a. This study adopted subjective measures. However, Moers (2000) argued that
the use of subjective performance measures might encourage performance
evaluation bias. This potential bias is acknowledged as a methodological
consequence. As Zulkiffli and Parera (2011) indicated in the context of
measuring the business success of SMEs that subjective measures tend to be
used since many SMEs refuse to publicly reveal their actual financial
performance. Besides, Dess and Robinson (1984) mentioned that objective
data might not fully represent an organization’s actual performance, even if
they are available, since the managers may manipulate the data in order to
avoid personal or corporate taxes. Song et al. (2005) also suggested that
subjective measures could be an effective approach to evaluate business
success as they allow comparisons to be made across firms and contexts, such
as industry types and economic conditions.
b. The cross-sectional design used in this study only provides a snapshot view of
the researched phenomena where data from all measures were collected at the

~ 182 ~
 same time. As the data collection for the qualitative phase involved semi-
structured face-to-face interviews, all data were still subject to memory and
recall bias (Alwin, 1977). Thus, causal inferences could not be drawn from
this research. The use of longitudinal data would provide a remedy for this
limitation when data on independent variables and dependent variables are
measured at two or more points in time. Therefore, in view of the
acknowledged potential limitations, the reader is recommended to approach
the findings with some caution. This bias notwithstanding, it is considered that
the mixed methods used in this research study helped in mitigating this
limitation.
c. Another limitation of this present study is that the SMEs studied were selected
from the manufacturing sector. Some of the findings may therefore be sector-
specific and therefore generalization of such findings to other sectors is
inappropriate. In broad terms, while cultural issues are more likely to be
pervasive across all sectors, those that relate to regulatory, financial and
competitive issues are more likely to be sector-specific.
d. The reliance on self-reported business success of SMEs could be similarly
open to bias. Where possible, however, future research should consider the
utilization of objective methods for the operationalization of business success;
include accessing profit and loss statements of SMEs if they are available.
e. The sample was confined to owner/managers who are actively involved in the
management of SMEs in the manufacturing sector and the research was
designed to explore their personal perceptions of the factors that influence
successful performance. It must be acknowledged that this approach may
induce bias, since data could be subject to response distortions, such as those
surrounding the social desirability of responses. In particular, the qualitative
interviews could suffer from concealment or exaggeration in the construction
of their narrative by the interviewees. In future studies, this bias could be
reduced through triangulation by using multiple informants, such as
government officials and employees, to minimize the possibility of response

~ 183 ~
bias. Hence, the generalization of such findings to other stakeholders beyond
this kind of personal engagement is limited.

~ 184 ~
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 Appendices

Appendix A

Survey Questionnaire on the “Success factors of Small and Medium

Enterprises /SME /and Business Environment as perceived by the Owner-
Managers”

Questionnaire ID: ________________

Dear Owner-Manager,

Understanding the development of small and medium enterprises (SMEs) in Ethiopia,

your efforts and perception play an important role. We are very eager to learn about your
own experiences and perception of the environment. In particular, we seek information
on what you consider to be key factors of the success of SMEs. Your contribution in this
survey is therefore very important to identify these factors. By completing this
questionnaire, the data you provide will lead us to a series of recommendations to ensure
the success of SMEs in Ethiopia.
This questionnaire is designed to assess the success factors of small and Medium
Enterprises/ SME and Business Environment as perceived by the owner-managers. The
purpose of this questionnaire is therefore to gather credible data about the indicated
issues as perceived by you. The information that you will give us is very critical to
analyze the current situation owners-managers’ perception about the environment.

Most questions can be answered simply by ticking a box. All of the answers you provide
in this questionnaire WILL BE KEPT CONFIDENTIAL. All information given will be
used for the purpose of this research only. Therefore you are kindly requested to provide
genuine information to all the questions asked by data collectors. If you are not volunteer
to participate in this survey, you will not be forced. You can quit at any phase of the
interview and still you can ask any question to the data collector or the study coordinator
via 0911183170.

If you are interested, we can start now! Thank you for your cooperation to be part of this
study again!

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 INSTRUCTIONS
1. Please complete this questionnaire accurately and objectively. In the absence of an option
that accurately reflects your views, please choose the answer that seems relevant, and add
any comment or explanation that you think useful to illustrate your answer.

2. The questionnaire should take ABOUT 20 MINUTES to complete.

3. The results of this research will be presented in the thesis to be submitted to the ABMS
University of Switzerland as required by the doctoral degree in Business Administration.

Name of the Data collector_______________________________

Supervisor Name: ______________________________________

SECTION ONE: DEMOGRAPHIC INFORMATION

Here are some questions to seek socio-demographic information of the entrepreneur.
Circle all the answers given by the respondent.
SECTION ONE: DEMOGRAPHIC
INFORMATION
1 Age In Number: ____________
.
2 Sex 1. Male 2. Female
3 What is the highest level of 1. None
education you have completed? 2. Some primary (1st – 4th grade)
3. Completed primary (5th – 8th grade)
4. Some secondary (9th – 10th grade)
5. Completed secondary (10+1 – 10+2)
6. Diploma or certificate
7. University (Bachelor)
8. University (Masters)
9. University (PhD and Above)
4 Have you had any previous work 1. Yes
experience? (Worked as hired 2. No (Skip to Question 7)
employee)
5 If yes, for how long did you work 1. 0 – 2 Years
before you started up your current 2. 2 – 5 Years
business? 3. 6 – 10 Years
4. 11 – 20 Years
5. Above 21 Years
6 Was your previous work 1. Yes
experience relevant to your current 2. No
business?

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7 Did any of your parents own a 1. Yes
business? 2. No
8 What is the highest level of 1. None
education your Father has 2. Some primary (1st – 4th grade)
completed? 3. Completed primary (5th – 8th grade)
4. Some secondary (9th – 10th grade)
5. Completed secondary (10+1 – 10+2)
6. Diploma or certificate
7. University (Bachelor)
8. University (Masters)
9. University (PhD and Above)
9 What is the highest level of 1. None
education your Mother has 2. Some primary (1st – 4th grade)
completed? 3. Completed primary (5th – 8th grade)
4. Some secondary (9th – 10th grade)
5. Completed secondary (10+1 – 10+2)
6. Diploma or certificate
7. University (Bachelor)
8. University (Masters)
9. University (PhD and Above)
SECTION TWO: META DATA
Section Two. Meta Data Skip Patterns
1 Owner (active in business 1. Yes
management) 2. No

2 Owner (inactive in business 1. Yes

management) 2. No

3 Manager (not the owner) 1. Yes

2. No

SECTION THREE: THE BUSINESS ACHIEVEMENTS

This section seeks your views on the success of your business.
3.1. How would you describe the success of your business?
1. Strongly disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly agree
1. Strongly disagree
Section Three: Business Achievements 2. Disagree
3. Neutral
4. Agree
5. Strongly agree
1. The business is very successful today
2. The business has been profitable during the last
fiscal year.

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3. The profit has been increasing over the past two
years
4. The business has grown over the past two years
5. The sales of the business have increased over the
past 2 years
6. The business is not successful
7. Any others (Specify);

3.2. With reference to your business performance over the past 12 months, to what
extent are you pleased with the following achievements of your firm?
1. Very unpleased 2. Unpleased 3. Neutral 4. Pleased 5. Very pleased
Section Two. 1. Very unpleased
Business Achievements 2. Unpleased
3. Neutral
4. Pleased
5. Very pleased
1. Size of sales
2. Gained profit
3. Number of employees
4. Market share
5. Personal satisfaction
6. Customer satisfaction
7. Employee Satisfaction
8. Customer Retention
9. Relationship with suppliers
10. Business Image
11. Any others (Specify)

SECTION FOUR: SUCCESS CONSTRAINTS

This section covers some of the constraints that inhibit the success of your firm .
4.1. Based on your experience in running the business so far and the actual condition of the
business; please indicate your opinion regarding each of the following statements:
1. Strongly disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly agree

Section Four: Success Constraints 1. Strongly

disagree
2. Disagree
3. Neutral
4. Agree
5. Strongly agree
1. I have access to information on technologies to support my
business

~ 218 ~
 2. The government support is not sufficient
3. Capital is not sufficient to maintain and expand the business.
4. I have access to customers
5. I have access to information on government regulations that
are relevant to my business
6. It is possible/easy use new technology is
7. I have access to information on market
8. I have access to suppliers
9. I got business permit and other permits easily and quickly
10. The existing technology is easily maintainable
11. I have access to information on finance sources
12. I have reliable business network to run the business
13. The government does not provide assistance to the company
14. I have professional affiliation / business association that
support me
15. The existing government programs on SMEs are not helpful
16. The company struggles to get credit from banks
17. I have many helpful colleagues / friends who support the
business.
18. Any others
4.2. Based on your experience in running the business, please grade the difficulty you faced
with the following regulations:
1. Very Difficult 2. Difficult 3. Neutral 4. Easy 5. Very easy
Section Four: Success Constraints 1. Very Difficult
2. Difficult
3. Neutral
4. Easy
5. Very easy
1. Firm registration
2. Licenses to start of business
3. Customs regulations
4. Regulations on employment
5. Health & safety regulations
6. Tax regulations
7. Environmental regulations
8. Any others

4.3. How would you grade the quality of service offered to your business by the following
institutions?
1. Very unsatisfactory 2. Unsatisfactory 3. Neutral 4. Satisfactory 5. Very satisfactory
Section Four: Success Constraints 1. Very unsatisfactory
2. Unsatisfactory

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 3. Neutral
4. Satisfactory
5. Very satisfactory
1. Police
2. Chamber of Commerce
3. Court for businesses
4. Tax office
5. Electricity suppliers
6. Water suppliers
7. Telecommunication services providers
8. Any others

4.4. In your opinion, how would you rate the cost of the following services?
1. Very high 2. High 3. Medium 4. Low 5. Very low
Section Four:Success Constraints 1. Very high 2. High 3. Medium 4.
Low 5. Very low
1 Electricity Services
2 Telecommunication Services
3 Water Services
4 Any others

4.5. With reference to your business, please evaluate the extent to which the following
problems affect your business success?
1. Very challenging 2. Challenging 3. Less challenging 4. Insignificant 5. Not
challenging
Section Four: Success Constraints 1. Very challenging
2. Challenging
3. Less challenging
4. Insignificant
5. Not Challenging
1. Lack of information on market
opportunities
2. Competition in domestic market
3. Competition in foreign market
4. High interest rates on bank loans
5. Ensuring guarantees for bank loans
6. Loan application processing
7. Imperfect competition "black market"
8. Additional payments to corruption and
bribe
9. The smuggling of foreign goods
10. Any others

~ 220 ~
4.6. How do certain ways of behavior of institutions make problems when registering or
getting official documents for the firm?
1. Strongly Agree 2. Agree 3. Neutral 4. Disagree 5. Strongly Disagree
Section Four: Success Constraints 1. Strongly Agree
2. Agree
3. Neutral
4. Disagree
5. Strongly Disagree
1. Too much line up in all offices
2. Too long waiting for documents to be
prepared and sent to firms
3. Too many documents are needed for
submission
4. Corruption and bribery among officials
5. It does not work without network
6. Any others

SECTION FIVE: SUCCESS FACTORS

This section is about factors that some studies in other countries have shown to be
influential on the success of the enterprise.
5.1. Listed below are some factors that may contribute to your business’s success.
How important you believe these factors are?
1. Not important 2. Less important 3. Neutral 4. Important 5.Very important
Section Five: Success Factors 1. Not important
2. Less important
3. Neutral
4. Important
5.Very important
1. Education of the entrepreneur
2. Previous work experience
3. Location of the business
4. Structure of the business
5. Technology
6. Efficient tax system
7. Financial resources
8. Satisfactory government support
9. Market Information
10. Public infrastructure

~ 221 ~
 11. Regulatory environment
12. Business Network or relations
13. Customers
14. Functional competences
15. Competitive advantage
16. Management competences
17. Entrepreneurial competences
18. Suppliers
19. Affiliation of ethnicity and premises
20. Any others

5.2. Listed below are some skills that may contribute to your business’s success. How
important you believe these skills are?
1. Not important 2. Less important 3. Neutral 4. Important 5.Very important
Section Five: Success Factors 1. Not important
2. Less important
3. Neutral
4. Important
5.Very important
1. Plan the operations of the business
2. Identify goods or services that the customers want
3. Possess expertise in technical or functional areas
4. Scan the environment to look for opportunities
5. Organize resources
6. Use specific techniques / tools relevant to the business
7. Create a positive work climate through discussion and
problem-sharing
8. Any others

5.3. As an entrepreneur, to what extent you believe the following statements are
important in order to ensure the success of your firm?
1. Not important 2. Less important 3. Neutral 4. Important 5.Very important
Section Five: Success Factors 1. Not important
2. Less important
3. Neutral
4. Important
5.Very important
1. Experiment new ways of running the business
when existing way of running the business is not
successful.
2. Work hard
3. Accomplish a lot at work.

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 4. Make high demands upon yourself when working
5. Not to plan too far ahead since many things turn
out to be a matter of good or bad fortune
6. Opening up new directions through initiating new
ideas
7. Taking the risk of getting a new business in the
ground
8. The excitement of creating something new whose
success depends on me
9. Belonging to the local ethnic member
10. Any others

SECTION SIX: ETHNICITY AND PREMISES RELATED INFORMATION

6.1. Based on your experience in running the businesses so far, please indicate your
opinion regarding each of the following statements;
1. Strongly disagree 2. Disagree 3. Neutral 4. Agree 5. Strongly agree
Section Six: Ethnicity and Premises related Information 1. Strongly disagree
2. Disagree
3. Neutral
4. Agree
5. Strongly agree
1. You are considered as strange to the local community
where you are doing business
2. Local community’s perception is different from the your
intentions in terms of supporting the community
3. Your confidence to work out of your ethnic territory is
deteriorating due to its negative impact
4. Your ethnic background did not affect your business’s
success
5. The more workers are diversified ethnically, the more
negative impact of the success
6. You feel insecure when you do business out of your
‘ethnic territory’
7. Your friends are primarily from within the community
where you do business
8. Your Business neighbors are primarily from within the
community where you do business
9. Any others

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SECTION SEVEN: LEGAL STATUS OF THE BUSINESS
Section Seven: Legal Status of the Business

1. Legal status of the business: 1. Sole Proprietorship

2. Private Limited Company
3. Cooperatives
4. Partnership
5. Other ___________

2. Type of the activity of the business: 1. Chemical &

(Business Concentration) pharmaceuticals Industry
2. Agro and Food Processing
3. Metal &Wood Work
4. Textile and garment
5. Leather and leather
products
6. Other ____________
3. The distance of your business from 1. Less Than 500 Meters
the nearby road is 2. 500 to 1000 Meters
3. More Than 1000 Meters
4. How would you describe the 1. Wholly family owned
business? 2. Partly family owned
3. Privately owned

5. How long has the business been in 1. 1-2 years

operation? 2. 3-5 years
3. > 5 years
6. How many staff does the business 1. 5-20
employ? 2. 21-100
3. 101 and above
4. Specify_________
7. What is the 2008 EC annual turnover 1. From___________
of your business (In ETB)? to___________

SUGGESTIONS & COMMENTS

Please type any suggestions or comments you want to add regarding the topics that has
been addressed in this questionnaire or any other subjects related to the success of small
and medium enterprises.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
______________________________

~ 224 ~
 Appendix B: Descriptive statistics

N Mini Max Mean Std. Skewness Kurtosis

Dvn
Statist Statis Stati Statis Statist Statisti SE Statistic SE
ic tic stic tic ic c
Age 369 21 64 37.27 8.026 .627 .127 .763 .253
Sex 369 1.00 2.00 1.157 .3644 1.891 .127 1.586 .253
2 7
Education 369 1.00 9.00 4.764 1.349 -.331 .127 -.105 .253
2 81
Hired 369 1.00 6.00 1.308 .5961 3.636 .127 22.768 .253
employee 9 4
Previous work 369 1.00 5.00 2.341 .9483 .731 .127 .396 .253
experience 5 6
Relevant 369 1.00 5.00 1.130 .4596 5.537 .127 39.885 .253
experience 1 7
Parents bus. 369 1.00 5.00 1.861 .4602 .681 .127 9.125 .253
own 8 4
Educ. father 369 1.00 9.00 2.154 1.698 1.495 .127 1.488 .253
5 94
Educ. mother 369 1.00 7.00 1.777 1.349 1.872 .127 3.022 .253
8 09
Meta data 369 1.00 6.00 1.452 .9490 2.113 .127 3.841 .253
6 0
Success today 369 1.00 5.00 3.482 1.032 -.728 .127 -.087 .253
4 27
Profitable last 369 1.00 5.00 3.374 .9532 -.714 .127 -.319 .253
year 0 4
Profitinclast2y 369 1.00 5.00 3.300 .9830 -.667 .127 -.351 .253
ears 8 2
Bus 369 1.00 5.00 3.257 .9591 -.609 .127 -.527 .253
growpast2dec 5 4
ades
Salesinpast2y 369 1.00 5.00 3.151 .9993 -.423 .127 -.768 .253
ears 8 2
Bus. not 369 1.00 5.00 2.382 1.234 .756 .127 -.469 .253
successful 1 82
Size sales 369 1.00 5.00 3.243 .9973 -.538 .127 -.706 .253
9 5
Gained profit 369 1.00 5.00 3.203 .9942 -.433 .127 -.868 .253
3 2
Emply. number 369 1.00 5.00 3.444 .8260 -.694 .127 -.304 .253
4 6
Mkt share 369 1.00 5.00 3.257 .9215 -.282 .127 -.979 .253
5 7
Personal sat. 369 1.00 5.00 3.604 1.123 -.829 .127 -.095 .253
3 17
Customer sat. 369 1.00 5.00 3.975 .7532 -.996 .127 1.618 .253
6 2
Employee sat. 369 1.00 5.00 3.710 .7260 -.951 .127 1.210 .253
0 2
Cust.retention 369 1.00 5.00 3.796 .7330 -1.036 .127 1.394 .253
7 6
Rsp with ssiers 369 1.00 5.00 3.848 .8134 -.933 .127 .978 .253
2 4

~ 225 ~
Business 369 1.00 5.00 3.856 .7895 -.772 .127 .875 .253
image 4 2
Info access. 369 1.00 5.00 3.330 1.004 -.506 .127 -.803 .253
Info. Tec. 6 97
Govt. support 369 1.00 5.00 3.718 .9845 -.905 .127 .472 .253
2 1
I have access 369 1.00 5.00 3.718 1.027 -.909 .127 .311 .253
to customer 2 72
Capital not 369 1.00 5.00 3.636 .7322 -1.234 .127 1.527 .253
9 9
Inf. govt. 369 1.00 5.00 3.390 .8038 -.601 .127 -.520 .253
regulations 2 7
Easy to use 369 1.00 5.00 3.401 .8285 -.489 .127 -.529 .253
new tec. 1 7
Access mkt 369 1.00 5.00 3.650 .8207 -1.083 .127 .792 .253
info 4 6
Access to ssier 369 1.00 5.00 3.756 .7732 -.967 .127 .888 .253
1 8
Easy bus 369 1.00 5.00 3.504 .9839 -.459 .127 -.296 .253
permits 1 0
Tec. Easily 369 1.00 5.00 3.447 .8360 -.631 .127 -.327 .253
maintainable 2 4
Access to 369 1.00 5.00 3.493 .8941 -.771 .127 -.249 .253
finance source 2 7
Reliable bus. 369 1.00 5.00 3.425 .8788 -.580 .127 -.692 .253
network 5 0
Govt. not. 369 1.00 5.00 3.523 .8754 -.743 .127 .408 .253
assist 0 7
Professional 369 1.00 5.00 3.086 .9741 -.263 .127 -.905 .253
association 7 6
&bus
Gov. prog. on 369 1.00 5.00 3.227 1.043 -.452 .127 -.572 .253
SMEs not 6 72
helpful
Struggles to 369 1.00 5.00 3.742 .8824 -1.024 .127 1.086 .253
get bank credit 5 1
Helpful 369 1.00 5.00 3.669 .9886 -.639 .127 -.408 .253
colleagues 4 1
Firm register 369 1.00 5.00 3.422 .9780 -.597 .127 -.700 .253
8 9
Licens.to start 369 1.00 5.00 3.542 .8992 -.791 .127 -.211 .253
bus. 0 7
Toms. 369 1.00 5.00 3.439 .7712 -.867 .127 -.099 .253
regulations 0 2
taxa
Regulation 369 1.00 5.00 3.514 .7484 -1.009 .127 .188 .253
emplyt 9 9
Health safety 369 1.00 5.00 3.547 .8651 -.603 .127 -.291 .253
regulations 4 2
Tax 369 1.00 5.00 3.054 1.041 -.457 .127 -.876 .253
regulations 2 16
taxa
Envt 369 1.00 5.00 3.550 .8064 -.820 .127 .038 .253
regulations 1 3
Police 369 1.00 5.00 3.455 1.107 -.526 .127 -.590 .253
3 67
Chamber 369 1.00 5.00 2.558 .8517 .321 .127 .043 .253
commerce 3 8
Court business 369 1.00 5.00 2.485 .8343 .217 .127 -.132 .253
1 3
Gsup tax office 369 1.00 5.00 2.314 .9052 .332 .127 -.432 .253

~ 226 ~
 4 0
Electricity 369 1.00 5.00 2.487 1.204 .258 .127 -1.379 .253
8 83
Waters 369 1.00 5.00 3.105 1.116 -.481 .127 -.943 .253
7 67
Tele. service 369 1.00 5.00 3.471 .9295 -1.090 .127 .431 .253
5 1
Electricity 369 1.00 5.00 2.964 .6310 -.299 .127 1.331 .253
service 8 4
Telecom 369 1.00 5.00 2.823 .7794 -.790 .127 .932 .253
service 8 1
Water service 369 1.00 5.00 3.254 .7033 .399 .127 .743 .253
7 6
Lack infom 369 1.00 5.00 2.921 1.154 .484 .127 -.681 .253
opp 4 76
Comp dom. 369 1.00 5.00 2.436 1.059 .906 .127 .309 .253
mkt 3 06
Comp foreign 369 1.00 5.00 3.056 1.336 .136 .127 -1.234 .253
mkt 9 98
High interest 369 1.00 5.00 2.140 1.079 1.164 .127 .881 .253
on bank loan 9 29
Ensuring 369 1.00 5.00 1.940 1.022 1.301 .127 1.361 .253
guarantees 4 42
bank loan
Loan 369 1.00 5.00 2.081 1.102 1.109 .127 .679 .253
application 3 81
processing
Imperfect 369 1.00 5.00 3.143 1.259 .047 .127 -1.092 .253
comp blk mkt 6 08
Addpyt 369 1.00 5.00 2.677 1.277 .347 .127 -.945 .253
corruption 5 55
bribe
Smuggling of 369 1.00 5.00 3.187 1.264 .074 .127 -1.216 .253
foreign goods 0 16
Too much 369 1.00 5.00 2.224 .9474 .771 .127 .047 .253
lineup 9 4
Too long 369 1.00 5.00 2.246 .8885 .711 .127 .066 .253
waiting 6 7
Too many 369 1.00 5.00 2.368 .8626 .565 .127 -.121 .253
docs 6 9
Corruption 369 1.00 5.00 2.490 1.024 .262 .127 -.994 .253
officials 5 45
Does not work 369 1.00 5.00 2.536 1.083 .499 .127 -.625 .253
network 6 17
Educ 369 1.00 5.00 4.262 .7545 -1.240 .127 2.424 .253
entrepreneur 9 2
Prev work 369 1.00 5.00 4.463 .5559 -.761 .127 2.472 .253
experience 4 9
Locos of 369 2.00 5.00 4.420 .5895 -.687 .127 .833 .253
business 1 2
Structure 369 3.00 5.00 4.371 .5854 -.305 .127 -.700 .253
business 3 6
Technology 369 3.00 5.00 4.311 .6149 -.309 .127 -.645 .253
7 4
Efficient tax 369 2.00 5.00 4.024 .7604 -.414 .127 -.226 .253
sym 4 0
Financial rsrs 369 1.00 5.00 4.287 .7400 -.960 .127 1.113 .253
3 6
Sat govt 369 1.00 5.00 4.184 .7965 -1.056 .127 1.299 .253
support 3 1
Mkt info 369 1.00 5.00 4.393 .6168 -.983 .127 2.684 .253

~ 227 ~
 0 4
Public 369 2.00 5.00 4.382 .5737 -.354 .127 -.211 .253
infrastructure 1 0
Regulatory 369 3.00 5.00 4.287 .6024 -.223 .127 -.595 .253
envt. 3 2
Bus network 369 2.00 5.00 4.433 .5482 -.331 .127 -.310 .253
6 8
Customers 369 3.00 5.00 4.439 .5778 -.440 .127 -.727 .253
0 5
Functional 369 2.00 5.00 4.314 .5304 -.093 .127 .654 .253
competence 4 2
Competitive 369 2.00 5.00 4.249 .6278 -.576 .127 .967 .253
advantage 3 5
Mgt 369 2.00 5.00 4.308 .5536 -.119 .127 -.048 .253
competencies 9 0
Entrepreneuria 369 1.00 5.00 4.290 .5565 -.494 .127 2.879 .253
l competencies 0 2
Suppliers 369 1.00 5.00 4.298 .6577 -1.096 .127 3.355 .253
1 5
Affiliation of 369 1.00 5.00 3.368 1.339 -.485 .127 -.951 .253
electricity 6 08
premises
Plan opns 369 2.00 5.00 4.379 .5131 .072 .127 -.424 .253
4 0
Identify goods 369 3.00 5.00 4.417 .4992 .271 .127 -1.764 .253
service 3 6
Possess 369 3.00 5.00 4.336 .4899 .487 .127 -1.237 .253
expertise 0 3
Scan envt for 369 3.00 5.00 4.330 .5151 .236 .127 -.909 .253
opportunity 6 6
Organize rsrs 369 3.00 5.00 4.344 .5034 .335 .127 -1.134 .253
2 9
Use 369 3.00 5.00 4.382 .5137 .183 .127 -1.273 .253
techniques 1 3
Create positive 369 4.00 5.00 4.441 .4972 .236 .127 -1.955 .253
work climate 7 7
Expt new ways 369 2.00 5.00 4.181 .7087 -1.104 .127 2.237 .253
of doing bus 6 1
Work hard 369 4.00 5.00 4.561 .4969 -.247 .127 -1.950 .253
0 4
Accomplish a 369 2.00 5.00 4.398 .5478 -.238 .127 -.284 .253
lot 4 2
Make high dds 369 2.00 5.00 4.265 .5943 -.631 .127 1.905 .253
on self 6 0
Not to plan too 369 1.00 5.00 3.691 1.051 -.851 .127 .064 .253
far 1 37
Opening new 369 1.00 5.00 4.219 .6150 -1.087 .127 4.718 .253
directions 5 7
Taking the risk 369 1.00 5.00 4.140 .6356 -.893 .127 2.956 .253
of getting new 9 1
bus
tak excitement 369 1.00 5.00 4.059 .7160 -1.026 .127 2.426 .253
creating sth 6 6
new
Belonging to 369 1.00 5.00 3.181 1.331 -.350 .127 -1.098 .253
ethical 6 92
member
Consider ed 369 1.00 5.00 3.002 1.239 -.048 .127 -1.111 .253
strange 7 08
Local commty 369 1.00 5.00 2.490 .9472 .384 .127 -.396 .253
perception 5 7

~ 228 ~
Your 369 1.00 5.00 3.108 1.049 .193 .127 -.574 .253
confidence 4 93
Your ethnic 369 1.00 5.00 3.143 1.075 -.210 .127 -.488 .253
back ground 6 15
Workers 369 1.00 5.00 2.758 1.044 .136 .127 -.490 .253
diversified 8 57
ethnicity
You feel 369 1.00 5.00 3.108 1.015 .204 .127 -.348 .253
insecure 4 72
Friends from 369 1.00 5.00 3.197 .8478 -.201 .127 -.460 .253
bus area 8 8
Bus neighbors 369 1.00 5.00 3.084 .9243 -.188 .127 -.671 .253
from bus area 0 0
Legal status 369 1.00 6.00 2.227 1.234 .378 .127 -1.256 .253
6 55
Type of bus 369 1.00 6.00 3.495 1.154 .783 .127 .700 .253
activity 9 20
Dist. Of. bus 369 1.00 6.00 1.655 .8554 1.039 .127 .628 .253
from nearby road 8 3
How you 369 1.00 3.00 2.807 .5089 -2.638 .127 5.918 .253
describe the 6 9
bus
How long bus 369 1.00 5.00 2.504 .6173 -.225 .127 .615 .253
in operation 1 3
How many 369 1.00 3.00 1.103 .3381 3.433 .127 12.024 .253
staff employed 0 8
Annual 369 1.00 2.00 1.111 .3147 2.485 .127 4.198 .253
turnover of z 1 0
bus
Business 369 10.00 21.0 14.90 2.007 .686 .127 .327 .253
characteristics 0 51 92
Socio- 369 22.00 65.0 38.42 7.984 .616 .127 .762 .253
demographic 0 82 42
Xcs
Need for 369 10.00 15.0 13.00 1.309 .021 .127 -.640 .253
achievement 0 81 43
Locus of 369 5.00 10.0 8.084 1.260 -.208 .127 -.434 .253
control 0 0 17
Risk taking 369 6.00 15.0 12.42 1.631 -.270 .127 .887 .253
0 01 79
Personality 369 23.00 40.0 33.49 3.516 .160 .127 -.088 .253
characteristics 0 59 36
Managerial 369 10.00 15.0 13.03 1.087 .075 .127 -.406 .253
competences 0 25 99
Entrepr’l 369 14.00 20.0 17.47 1.433 .269 .127 -1.077 .253
competences 0 97 39
Functional 369 8.00 15.0 13.03 1.119 .076 .127 .384 .253
competences 0 25 99
Competences 369 34.00 50.0 43.54 3.320 .265 .127 -.764 .253
of entrpeur 0 47 52
Financial 369 12.00 28.0 17.82 3.024 1.044 .127 1.369 .253
resources 0 93 47
Taxation 369 5.00 15.0 10.51 1.866 -.243 .127 -.635 .253
0 76 56
Economic 369 13.00 35.0 20.96 3.753 .867 .127 .950 .253
factors 0 75 84
Government 369 13.00 34.0 25.46 3.004 -.695 .127 2.052 .253
support 0 61 45
Regulatory 369 22.00 58.0 43.72 6.736 -.213 .127 -.119 .253
environment 0 90 68
Political-legal 369 36.00 92.0 69.19 8.518 -.327 .127 .626 .253

~ 229 ~
factors 0 51 83
Access to 369 7.00 15.0 11.15 1.538 -.135 .127 -.721 .253
technology 0 99 96
Access to 369 10.00 25.0 18.25 2.204 -.261 .127 .577 .253
information 0 75 58
Access to 369 15.00 32.0 22.49 3.268 .126 .127 -.751 .253
infrastructure 0 05 85
Technological 369 39.00 72.0 51.90 5.003 -.002 .127 .113 .253
factors 0 79 50
Access to 369 8.00 20.0 14.61 2.106 -.550 .127 -.027 .253
networking 0 52 77
Customer 369 5.00 10.0 8.157 1.161 -.571 .127 .106 .253
relationships 0 2 99
Supplier 369 3.00 10.0 8.054 1.033 -.465 .127 1.036 .253
relationships 0 2 30
Competition 369 8.00 25.0 16.07 3.881 .140 .127 -.831 .253
0 32 05
Micro- 369 19.00 45.0 32.28 4.393 .129 .127 -.013 .253
environmental 0 46 40
Business 369 31.00 76.0 54.88 8.818 -.558 .127 -.205 .253
success 0 89 90
Macro- 369 113.0 207. 156.6 13.98 -.074 .127 .709 .253
environmental 0 00 85 98
External 369 139.0 252. 188.9 15.29 .342 .127 .709 .253
environment 0 00 70 26
Internal 369 60.00 90.0 77.03 5.659 .254 .127 -.319 .253
environment 0 52 87
Success of 369 10.00 30.0 18.94 3.764 -.449 .127 -.085 .253
business 0 85 11
Achievements 369 20.00 50.0 35.94 5.872 -.745 .127 .591 .253
of business 0 04 44
Ethnic 369 13.00 49.0 30.44 5.869 .165 .127 .179 .253
characters tics 0 44 30
Ext. & internal 369 208.0 336. 266.0 17.11 .309 .127 .855 .253
env’t. 0 00 05 72

Appendix C: Frequency tables

Business characteristics

Frequency Percent Valid Percent Cumulative

Percent
Valid 10.00 1 .3 .3 .3
11.00 6 1.6 1.6 1.9
12.00 19 5.1 5.1 7.0
13.00 65 17.6 17.6 24.7
14.00 90 24.4 24.4 49.1
15.00 71 19.2 19.2 68.3
16.00 43 11.7 11.7 79.9
17.00 29 7.9 7.9 87.8
18.00 24 6.5 6.5 94.3
19.00 11 3.0 3.0 97.3
20.00 6 1.6 1.6 98.9
21.00 4 1.1 1.1 100.0
Total 369 100.0 100.0

Socio-demographic characteristics
Frequency Percent Valid Percent Cumulative
Percent

~ 230 ~
Valid 22.00 2 .5 .5 .5
23.00 3 .8 .8 1.4
24.00 5 1.4 1.4 2.7
25.00 4 1.1 1.1 3.8
26.00 3 .8 .8 4.6
27.00 8 2.2 2.2 6.8
28.00 9 2.4 2.4 9.2
29.00 17 4.6 4.6 13.8
30.00 8 2.2 2.2 16.0
31.00 16 4.3 4.3 20.3
32.00 8 2.2 2.2 22.5
33.00 20 5.4 5.4 27.9
34.00 18 4.9 4.9 32.8
35.00 12 3.3 3.3 36.0
36.00 19 5.1 5.1 41.2
37.00 28 7.6 7.6 48.8
38.00 14 3.8 3.8 52.6
39.00 16 4.3 4.3 56.9
40.00 16 4.3 4.3 61.2
41.00 24 6.5 6.5 67.8
42.00 15 4.1 4.1 71.8
43.00 18 4.9 4.9 76.7
44.00 15 4.1 4.1 80.8
45.00 13 3.5 3.5 84.3
46.00 18 4.9 4.9 89.2
47.00 6 1.6 1.6 90.8
48.00 3 .8 .8 91.6
49.00 5 1.4 1.4 93.0
50.00 2 .5 .5 93.5
51.00 3 .8 .8 94.3
52.00 2 .5 .5 94.9
53.00 2 .5 .5 95.4
54.00 1 .3 .3 95.7
56.00 3 .8 .8 96.5
57.00 1 .3 .3 96.7
58.00 2 .5 .5 97.3
59.00 1 .3 .3 97.6
61.00 5 1.4 1.4 98.9
62.00 1 .3 .3 99.2
63.00 1 .3 .3 99.5
64.00 1 .3 .3 99.7
65.00 1 .3 .3 100.0
Total 369 100.0 100.0

Need For Achievement

Frequency Percent Valid Percent Cumulative
Percent
Valid 10.00 13 3.5 3.5 3.5
11.00 12 3.3 3.3 6.8
12.00 131 35.5 35.5 42.3
13.00 85 23.0 23.0 65.3
14.00 59 16.0 16.0 81.3
15.00 69 18.7 18.7 100.0
Total 369 100.0 100.0

Locus of Control
Frequency Percent Valid Percent Cumulative
Percent
Valid 5.00 7 1.9 1.9 1.9
6.00 41 11.1 11.1 13.0
7.00 50 13.6 13.6 26.6
8.00 150 40.7 40.7 67.2
9.00 58 15.7 15.7 82.9
10.00 63 17.1 17.1 100.0

~ 231 ~
 Total 369 100.0 100.0

Risk Taking
Frequency Percent Valid Percent Cumulative Percent
Valid 6.00 1 .3 .3 .3
7.00 2 .5 .5 .8
8.00 4 1.1 1.1 1.9
9.00 9 2.4 2.4 4.3
10.00 22 6.0 6.0 10.3
11.00 13 3.5 3.5 13.8
12.00 203 55.0 55.0 68.8
13.00 24 6.5 6.5 75.3
14.00 26 7.0 7.0 82.4
15.00 65 17.6 17.6 100.0
Total 369 100.0 100.0

Personality characteristics
Frequency Percent Valid Percent Cumulative
Percent
Valid 23.00 2 .5 .5 .5
24.00 2 .5 .5 1.1
26.00 4 1.1 1.1 2.2
27.00 3 .8 .8 3.0
28.00 12 3.3 3.3 6.2
29.00 11 3.0 3.0 9.2
30.00 29 7.9 7.9 17.1
31.00 24 6.5 6.5 23.6
32.00 89 24.1 24.1 47.7
33.00 32 8.7 8.7 56.4
34.00 40 10.8 10.8 67.2
35.00 28 7.6 7.6 74.8
36.00 18 4.9 4.9 79.7
37.00 12 3.3 3.3 82.9
38.00 16 4.3 4.3 87.3
39.00 12 3.3 3.3 90.5
40.00 35 9.5 9.5 100.0
Total 369 100.0 100.0

Managerial competences
Frequency Percent Valid Percent Cumulative
Percent
Valid 10.00 4 1.1 1.1 1.1
11.00 12 3.3 3.3 4.3
12.00 113 30.6 30.6 35.0
13.00 118 32.0 32.0 66.9
14.00 83 22.5 22.5 89.4
15.00 39 10.6 10.6 100.0
Total 369 100.0 100.0

Entrepreneurial competences
Frequency Percent Valid Percent Cumulative
Percent
Valid 14.00 2 .5 .5 .5
15.00 7 1.9 1.9 2.4
16.00 113 30.6 30.6 33.1
17.00 87 23.6 23.6 56.6
18.00 46 12.5 12.5 69.1
19.00 78 21.1 21.1 90.2
20.00 36 9.8 9.8 100.0
Total 369 100.0 100.0

~ 232 ~
 Functional competences
Frequency Percent Valid Percent Cumulative
Percent
Valid 8.00 1 .3 .3 .3
9.00 1 .3 .3 .5
11.00 6 1.6 1.6 2.2
12.00 134 36.3 36.3 38.5
13.00 108 29.3 29.3 67.8
14.00 71 19.2 19.2 87.0
15.00 48 13.0 13.0 100.0
Total 369 100.0 100.0

Competences of the entrepreneur

Frequency Percent Valid Percent Cumulative
Percent
Valid 34.00 1 .3 .3 .3
37.00 4 1.1 1.1 1.4
38.00 4 1.1 1.1 2.4
39.00 11 3.0 3.0 5.4
40.00 80 21.7 21.7 27.1
41.00 22 6.0 6.0 33.1
42.00 21 5.7 5.7 38.8
43.00 59 16.0 16.0 54.7
44.00 32 8.7 8.7 63.4
45.00 27 7.3 7.3 70.7
46.00 24 6.5 6.5 77.2
47.00 31 8.4 8.4 85.6
48.00 19 5.1 5.1 90.8
49.00 12 3.3 3.3 94.0
50.00 22 6.0 6.0 100.0
Total 369 100.0 100.0

Financial resources
Frequency Percent Valid Percent Cumulative
Percent
Valid 12.00 3 .8 .8 .8
13.00 16 4.3 4.3 5.1
14.00 15 4.1 4.1 9.2
15.00 31 8.4 8.4 17.6
16.00 64 17.3 17.3 35.0
17.00 60 16.3 16.3 51.2
18.00 66 17.9 17.9 69.1
19.00 46 12.5 12.5 81.6
20.00 15 4.1 4.1 85.6
21.00 10 2.7 2.7 88.3
22.00 11 3.0 3.0 91.3
23.00 4 1.1 1.1 92.4
24.00 8 2.2 2.2 94.6
25.00 11 3.0 3.0 97.6
26.00 3 .8 .8 98.4
27.00 3 .8 .8 99.2
28.00 3 .8 .8 100.0
Total 369 100.0 100.0

~ 233 ~
 Taxation
Frequency Percent Valid Percent Cumulative
Percent
Valid 5.00 1 .3 .3 .3
6.00 4 1.1 1.1 1.4
7.00 17 4.6 4.6 6.0
8.00 32 8.7 8.7 14.6
9.00 58 15.7 15.7 30.4
10.00 77 20.9 20.9 51.2
11.00 47 12.7 12.7 64.0
12.00 66 17.9 17.9 81.8
13.00 64 17.3 17.3 99.2
14.00 1 .3 .3 99.5
15.00 2 .5 .5 100.0
Total 369 100.0 100.0

Economic factors
Frequency Percent Valid Percent Cumulative
Percent
Valid 13.00 1 .3 .3 .3
14.00 1 .3 .3 .5
15.00 12 3.3 3.3 3.8
16.00 19 5.1 5.1 8.9
17.00 34 9.2 9.2 18.2
18.00 26 7.0 7.0 25.2
19.00 46 12.5 12.5 37.7
20.00 48 13.0 13.0 50.7
21.00 38 10.3 10.3 61.0
22.00 43 11.7 11.7 72.6
23.00 19 5.1 5.1 77.8
24.00 32 8.7 8.7 86.4
25.00 13 3.5 3.5 90.0
26.00 6 1.6 1.6 91.6
27.00 6 1.6 1.6 93.2
28.00 5 1.4 1.4 94.6
29.00 3 .8 .8 95.4
30.00 11 3.0 3.0 98.4
32.00 3 .8 .8 99.2
33.00 2 .5 .5 99.7
35.00 1 .3 .3 100.0
Total 369 100.0 100.0

Government Support
Frequency Percent Valid Percent Cumulative
Percent
Valid 13.00 2 .5 .5 .5
14.00 1 .3 .3 .8
15.00 1 .3 .3 1.1
16.00 1 .3 .3 1.4
17.00 1 .3 .3 1.6
18.00 1 .3 .3 1.9
19.00 4 1.1 1.1 3.0
20.00 8 2.2 2.2 5.1
21.00 15 4.1 4.1 9.2
22.00 12 3.3 3.3 12.5
23.00 25 6.8 6.8 19.2
24.00 57 15.4 15.4 34.7

~ 234 ~
 25.00 46 12.5 12.5 47.2
26.00 62 16.8 16.8 64.0
27.00 48 13.0 13.0 77.0
28.00 38 10.3 10.3 87.3
29.00 22 6.0 6.0 93.2
30.00 10 2.7 2.7 95.9
31.00 10 2.7 2.7 98.6
32.00 3 .8 .8 99.5
33.00 1 .3 .3 99.7
34.00 1 .3 .3 100.0
Total 369 100.0 100.0

Regulatory environment
Frequency Percent Valid Percent Cumulative
Percent
Valid 22.00 2 .5 .5 .5
25.00 1 .3 .3 .8
29.00 1 .3 .3 1.1
30.00 7 1.9 1.9 3.0
31.00 7 1.9 1.9 4.9
32.00 1 .3 .3 5.1
33.00 7 1.9 1.9 7.0
34.00 4 1.1 1.1 8.1
35.00 9 2.4 2.4 10.6
36.00 16 4.3 4.3 14.9
37.00 17 4.6 4.6 19.5
38.00 12 3.3 3.3 22.8
39.00 9 2.4 2.4 25.2
40.00 16 4.3 4.3 29.5
41.00 23 6.2 6.2 35.8
42.00 23 6.2 6.2 42.0
43.00 21 5.7 5.7 47.7
44.00 23 6.2 6.2 53.9
45.00 18 4.9 4.9 58.8
46.00 23 6.2 6.2 65.0
47.00 26 7.0 7.0 72.1
48.00 22 6.0 6.0 78.0
49.00 8 2.2 2.2 80.2
50.00 8 2.2 2.2 82.4
51.00 10 2.7 2.7 85.1
52.00 14 3.8 3.8 88.9
53.00 9 2.4 2.4 91.3
54.00 13 3.5 3.5 94.9
55.00 8 2.2 2.2 97.0
56.00 5 1.4 1.4 98.4
57.00 2 .5 .5 98.9
58.00 4 1.1 1.1 100.0
Total 369 100.0 100.0

Political-legal factors
Frequency Percent Valid Percent Cumulative
Percent
Valid 36.00 1 .3 .3 .3
43.00 2 .5 .5 .8
45.00 1 .3 .3 1.1
48.00 1 .3 .3 1.4
49.00 2 .5 .5 1.9
50.00 2 .5 .5 2.4
51.00 2 .5 .5 3.0
53.00 3 .8 .8 3.8
54.00 1 .3 .3 4.1
55.00 6 1.6 1.6 5.7
56.00 6 1.6 1.6 7.3

~ 235 ~
 57.00 3 .8 .8 8.1
58.00 6 1.6 1.6 9.8
59.00 6 1.6 1.6 11.4
60.00 11 3.0 3.0 14.4
61.00 11 3.0 3.0 17.3
62.00 15 4.1 4.1 21.4
63.00 9 2.4 2.4 23.8
64.00 10 2.7 2.7 26.6
65.00 15 4.1 4.1 30.6
66.00 18 4.9 4.9 35.5
67.00 12 3.3 3.3 38.8
68.00 21 5.7 5.7 44.4
69.00 14 3.8 3.8 48.2
70.00 17 4.6 4.6 52.8
71.00 24 6.5 6.5 59.3
72.00 29 7.9 7.9 67.2
73.00 11 3.0 3.0 70.2
74.00 15 4.1 4.1 74.3
75.00 18 4.9 4.9 79.1
76.00 16 4.3 4.3 83.5
77.00 9 2.4 2.4 85.9
78.00 6 1.6 1.6 87.5
79.00 5 1.4 1.4 88.9
80.00 8 2.2 2.2 91.1
81.00 4 1.1 1.1 92.1
82.00 7 1.9 1.9 94.0
83.00 2 .5 .5 94.6
84.00 5 1.4 1.4 95.9
85.00 8 2.2 2.2 98.1
86.00 3 .8 .8 98.9
87.00 1 .3 .3 99.2
88.00 1 .3 .3 99.5
91.00 1 .3 .3 99.7
92.00 1 .3 .3 100.0
Total 369 100.0 100.0

Access to technology
Frequency Percent Valid Percent Cumulative
Percent
Valid 7.00 1 .3 .3 .3
8.00 12 3.3 3.3 3.5
9.00 45 12.2 12.2 15.7
10.00 81 22.0 22.0 37.7
11.00 57 15.4 15.4 53.1
12.00 88 23.8 23.8 77.0
13.00 77 20.9 20.9 97.8
14.00 4 1.1 1.1 98.9
15.00 4 1.1 1.1 100.0
Total 369 100.0 100.0

Access to information
Frequency Percent Valid Percent Cumulative
Percent
Valid 10.00 1 .3 .3 .3
11.00 1 .3 .3 .5
12.00 1 .3 .3 .8
13.00 1 .3 .3 1.1
14.00 19 5.1 5.1 6.2
15.00 20 5.4 5.4 11.7
16.00 27 7.3 7.3 19.0
17.00 45 12.2 12.2 31.2
18.00 81 22.0 22.0 53.1

~ 236 ~
 19.00 79 21.4 21.4 74.5
20.00 39 10.6 10.6 85.1
21.00 33 8.9 8.9 94.0
22.00 14 3.8 3.8 97.8
23.00 5 1.4 1.4 99.2
24.00 2 .5 .5 99.7
25.00 1 .3 .3 100.0
Total 369 100.0 100.0

Access to infrastructure
Frequency Percent Valid Percent Cumulative
Percent
Valid 15.00 2 .5 .5 .5
16.00 3 .8 .8 1.4
17.00 13 3.5 3.5 4.9
18.00 27 7.3 7.3 12.2
19.00 24 6.5 6.5 18.7
20.00 55 14.9 14.9 33.6
21.00 32 8.7 8.7 42.3
22.00 32 8.7 8.7 50.9
23.00 34 9.2 9.2 60.2
24.00 35 9.5 9.5 69.6
25.00 35 9.5 9.5 79.1
26.00 37 10.0 10.0 89.2
27.00 9 2.4 2.4 91.6
28.00 22 6.0 6.0 97.6
29.00 8 2.2 2.2 99.7
32.00 1 .3 .3 100.0
Total 369 100.0 100.0

Technological factors
Frequency Percent Valid Percent Cumulative
Percent
Valid 39.00 1 .3 .3 .3
41.00 5 1.4 1.4 1.6
42.00 10 2.7 2.7 4.3
43.00 5 1.4 1.4 5.7
44.00 6 1.6 1.6 7.3
45.00 17 4.6 4.6 11.9
46.00 12 3.3 3.3 15.2
47.00 15 4.1 4.1 19.2
48.00 20 5.4 5.4 24.7
49.00 26 7.0 7.0 31.7
50.00 23 6.2 6.2 37.9
51.00 23 6.2 6.2 44.2
52.00 34 9.2 9.2 53.4
53.00 23 6.2 6.2 59.6
54.00 33 8.9 8.9 68.6
55.00 27 7.3 7.3 75.9
56.00 28 7.6 7.6 83.5
57.00 10 2.7 2.7 86.2
58.00 22 6.0 6.0 92.1
59.00 9 2.4 2.4 94.6
60.00 9 2.4 2.4 97.0
61.00 5 1.4 1.4 98.4
62.00 2 .5 .5 98.9
63.00 1 .3 .3 99.2
64.00 1 .3 .3 99.5
65.00 1 .3 .3 99.7
72.00 1 .3 .3 100.0
Total 369 100.0 100.0

~ 237 ~
 Access to networking
Frequency Percent Valid Percent Cumulative
Percent
Valid 8.00 1 .3 .3 .3
9.00 2 .5 .5 .8
10.00 13 3.5 3.5 4.3
11.00 26 7.0 7.0 11.4
12.00 20 5.4 5.4 16.8
13.00 35 9.5 9.5 26.3
14.00 55 14.9 14.9 41.2
15.00 67 18.2 18.2 59.3
16.00 87 23.6 23.6 82.9
17.00 53 14.4 14.4 97.3
18.00 5 1.4 1.4 98.6
19.00 2 .5 .5 99.2
20.00 3 .8 .8 100.0
Total 369 100.0 100.0

Customer relationships
Frequency Percent Valid Percent Cumulative
Percent
Valid 5.00 9 2.4 2.4 2.4
6.00 27 7.3 7.3 9.8
7.00 51 13.8 13.8 23.6
8.00 130 35.2 35.2 58.8
9.00 114 30.9 30.9 89.7
10.00 38 10.3 10.3 100.0
Total 369 100.0 100.0

Supplier relationships
Frequency Percent Valid Percent Cumulative
Percent
Valid 3.00 1 .3 .3 .3
5.00 1 .3 .3 .5
6.00 24 6.5 6.5 7.0
7.00 70 19.0 19.0 26.0
8.00 151 40.9 40.9 66.9
9.00 98 26.6 26.6 93.5
10.00 24 6.5 6.5 100.0
Total 369 100.0 100.0

Competition
Frequency Percent Valid Percent Cumulative
Percent
Valid 8.00 8 2.2 2.2 2.2
9.00 4 1.1 1.1 3.3
10.00 8 2.2 2.2 5.4
11.00 11 3.0 3.0 8.4
12.00 41 11.1 11.1 19.5
13.00 49 13.3 13.3 32.8
14.00 32 8.7 8.7 41.5
15.00 24 6.5 6.5 48.0
16.00 32 8.7 8.7 56.6
17.00 22 6.0 6.0 62.6
18.00 24 6.5 6.5 69.1
19.00 18 4.9 4.9 74.0
20.00 35 9.5 9.5 83.5

~ 238 ~
 21.00 35 9.5 9.5 93.0
22.00 13 3.5 3.5 96.5
23.00 5 1.4 1.4 97.8
24.00 3 .8 .8 98.6
25.00 5 1.4 1.4 100.0
Total 369 100.0 100.0

Micro-environmental factors
Frequency Percent Valid Percent Cumulative
Percent
Valid 19.00 1 .3 .3 .3
20.00 1 .3 .3 .5
21.00 2 .5 .5 1.1
22.00 2 .5 .5 1.6
24.00 7 1.9 1.9 3.5
26.00 13 3.5 3.5 7.0
27.00 14 3.8 3.8 10.8
28.00 32 8.7 8.7 19.5
29.00 28 7.6 7.6 27.1
30.00 42 11.4 11.4 38.5
31.00 34 9.2 9.2 47.7
32.00 30 8.1 8.1 55.8
33.00 18 4.9 4.9 60.7
34.00 24 6.5 6.5 67.2
35.00 32 8.7 8.7 75.9
36.00 27 7.3 7.3 83.2
37.00 21 5.7 5.7 88.9
38.00 7 1.9 1.9 90.8
39.00 8 2.2 2.2 93.0
40.00 15 4.1 4.1 97.0
41.00 5 1.4 1.4 98.4
42.00 2 .5 .5 98.9
43.00 1 .3 .3 99.2
44.00 2 .5 .5 99.7
45.00 1 .3 .3 100.0
Total 369 100.0 100.0

Business success/Achievements
Frequency Percent Valid Percent Cumulative
Percent
Valid 31.00 2 .5 .5 .5
34.00 7 1.9 1.9 2.4
35.00 1 .3 .3 2.7
36.00 4 1.1 1.1 3.8
37.00 4 1.1 1.1 4.9
38.00 3 .8 .8 5.7
39.00 2 .5 .5 6.2
40.00 7 1.9 1.9 8.1
41.00 8 2.2 2.2 10.3
42.00 8 2.2 2.2 12.5
43.00 1 .3 .3 12.7
44.00 5 1.4 1.4 14.1
45.00 4 1.1 1.1 15.2
46.00 8 2.2 2.2 17.3
47.00 11 3.0 3.0 20.3
48.00 13 3.5 3.5 23.8
49.00 12 3.3 3.3 27.1
50.00 7 1.9 1.9 29.0
51.00 11 3.0 3.0 32.0
52.00 9 2.4 2.4 34.4
53.00 18 4.9 4.9 39.3
54.00 13 3.5 3.5 42.8

~ 239 ~
 55.00 15 4.1 4.1 46.9
56.00 7 1.9 1.9 48.8
57.00 11 3.0 3.0 51.8
58.00 12 3.3 3.3 55.0
59.00 21 5.7 5.7 60.7
60.00 25 6.8 6.8 67.5
61.00 26 7.0 7.0 74.5
62.00 42 11.4 11.4 85.9
63.00 9 2.4 2.4 88.3
64.00 10 2.7 2.7 91.1
65.00 7 1.9 1.9 93.0
66.00 8 2.2 2.2 95.1
67.00 4 1.1 1.1 96.2
68.00 5 1.4 1.4 97.6
69.00 2 .5 .5 98.1
70.00 1 .3 .3 98.4
71.00 2 .5 .5 98.9
73.00 1 .3 .3 99.2
74.00 1 .3 .3 99.5
76.00 2 .5 .5 100.0
Total 369 100.0 100.0

Macro-environmental factors
Frequency Percent Valid Percent Cumulative Percent
qVali 113.00 1 .3 .3 .3
d 114.00 1 .3 .3 .5
117.00 1 .3 .3 .8
119.00 1 .3 .3 1.1
122.00 1 .3 .3 1.4
125.00 2 .5 .5 1.9
126.00 1 .3 .3 2.2
127.00 4 1.1 1.1 3.3
128.00 1 .3 .3 3.5
129.00 1 .3 .3 3.8
130.00 1 .3 .3 4.1
132.00 2 .5 .5 4.6
133.00 2 .5 .5 5.1
134.00 2 .5 .5 5.7
135.00 2 .5 .5 6.2
136.00 2 .5 .5 6.8
137.00 3 .8 .8 7.6
138.00 6 1.6 1.6 9.2
139.00 4 1.1 1.1 10.3
140.00 3 .8 .8 11.1
141.00 7 1.9 1.9 13.0
142.00 6 1.6 1.6 14.6
143.00 9 2.4 2.4 17.1
144.00 3 .8 .8 17.9
145.00 8 2.2 2.2 20.1
146.00 10 2.7 2.7 22.8
147.00 3 .8 .8 23.6
148.00 7 1.9 1.9 25.5
149.00 12 3.3 3.3 28.7
150.00 5 1.4 1.4 30.1
151.00 8 2.2 2.2 32.2
152.00 9 2.4 2.4 34.7
153.00 13 3.5 3.5 38.2
154.00 8 2.2 2.2 40.4
155.00 17 4.6 4.6 45.0
156.00 12 3.3 3.3 48.2
157.00 11 3.0 3.0 51.2
158.00 12 3.3 3.3 54.5
159.00 9 2.4 2.4 56.9
160.00 13 3.5 3.5 60.4

~ 240 ~
 161.00 12 3.3 3.3 63.7
162.00 14 3.8 3.8 67.5
163.00 14 3.8 3.8 71.3
164.00 10 2.7 2.7 74.0
165.00 7 1.9 1.9 75.9
166.00 9 2.4 2.4 78.3
167.00 10 2.7 2.7 81.0
168.00 1 .3 .3 81.3
169.00 5 1.4 1.4 82.7
170.00 7 1.9 1.9 84.6
171.00 13 3.5 3.5 88.1
172.00 2 .5 .5 88.6
173.00 7 1.9 1.9 90.5
174.00 5 1.4 1.4 91.9
175.00 4 1.1 1.1 93.0
176.00 1 .3 .3 93.2
178.00 5 1.4 1.4 94.6
179.00 2 .5 .5 95.1
180.00 1 .3 .3 95.4
181.00 5 1.4 1.4 96.7
182.00 3 .8 .8 97.6
184.00 1 .3 .3 97.8
186.00 1 .3 .3 98.1
188.00 1 .3 .3 98.4
189.00 1 .3 .3 98.6
190.00 1 .3 .3 98.9
191.00 1 .3 .3 99.2
195.00 1 .3 .3 99.5
198.00 1 .3 .3 99.7
207.00 1 .3 .3 100.0
Total 369 100.0 100.0

External factors to business success

Frequency Percent Valid Percent Cumulative
Percent
Valid 139.00 1 .3 .3 .3
149.00 1 .3 .3 .5
155.00 1 .3 .3 .8
157.00 2 .5 .5 1.4
159.00 2 .5 .5 1.9
160.00 2 .5 .5 2.4
162.00 1 .3 .3 2.7
163.00 1 .3 .3 3.0
164.00 4 1.1 1.1 4.1
165.00 3 .8 .8 4.9
166.00 5 1.4 1.4 6.2
167.00 2 .5 .5 6.8
168.00 3 .8 .8 7.6
169.00 4 1.1 1.1 8.7
170.00 3 .8 .8 9.5
171.00 7 1.9 1.9 11.4
172.00 8 2.2 2.2 13.6
173.00 2 .5 .5 14.1
174.00 6 1.6 1.6 15.7
175.00 12 3.3 3.3 19.0
176.00 7 1.9 1.9 20.9
177.00 10 2.7 2.7 23.6
178.00 4 1.1 1.1 24.7
179.00 5 1.4 1.4 26.0
180.00 11 3.0 3.0 29.0
181.00 16 4.3 4.3 33.3
182.00 8 2.2 2.2 35.5
183.00 9 2.4 2.4 37.9
184.00 17 4.6 4.6 42.5

~ 241 ~
 185.00 4 1.1 1.1 43.6
186.00 2 .5 .5 44.2
187.00 5 1.4 1.4 45.5
188.00 15 4.1 4.1 49.6
189.00 5 1.4 1.4 50.9
190.00 12 3.3 3.3 54.2
191.00 9 2.4 2.4 56.6
192.00 16 4.3 4.3 61.0
193.00 8 2.2 2.2 63.1
194.00 9 2.4 2.4 65.6
195.00 16 4.3 4.3 69.9
196.00 8 2.2 2.2 72.1
197.00 9 2.4 2.4 74.5
198.00 8 2.2 2.2 76.7
199.00 5 1.4 1.4 78.0
200.00 6 1.6 1.6 79.7
201.00 10 2.7 2.7 82.4
202.00 5 1.4 1.4 83.7
203.00 3 .8 .8 84.6
204.00 5 1.4 1.4 85.9
205.00 3 .8 .8 86.7
206.00 3 .8 .8 87.5
207.00 4 1.1 1.1 88.6
208.00 5 1.4 1.4 90.0
209.00 3 .8 .8 90.8
210.00 4 1.1 1.1 91.9
211.00 4 1.1 1.1 93.0
212.00 4 1.1 1.1 94.0
213.00 2 .5 .5 94.6
215.00 2 .5 .5 95.1
217.00 2 .5 .5 95.7
218.00 1 .3 .3 95.9
219.00 1 .3 .3 96.2
221.00 2 .5 .5 96.7
222.00 1 .3 .3 97.0
223.00 2 .5 .5 97.6
224.00 2 .5 .5 98.1
226.00 1 .3 .3 98.4
227.00 2 .5 .5 98.9
229.00 3 .8 .8 99.7
252.00 1 .3 .3 100.0
Total 369 100.0 100.0

INTERNALENVT
Frequency Percent Valid Percent Cumulative
Percent
Valid 60.00 1 .3 .3 .3
64.00 2 .5 .5 .8
66.00 3 .8 .8 1.6
67.00 4 1.1 1.1 2.7
68.00 7 1.9 1.9 4.6
69.00 12 3.3 3.3 7.9
70.00 13 3.5 3.5 11.4
71.00 11 3.0 3.0 14.4
72.00 37 10.0 10.0 24.4
73.00 13 3.5 3.5 27.9
74.00 25 6.8 6.8 34.7
75.00 37 10.0 10.0 44.7
76.00 20 5.4 5.4 50.1
77.00 25 6.8 6.8 56.9
78.00 19 5.1 5.1 62.1
79.00 24 6.5 6.5 68.6
80.00 19 5.1 5.1 73.7
81.00 17 4.6 4.6 78.3

~ 242 ~
 82.00 14 3.8 3.8 82.1
83.00 12 3.3 3.3 85.4
84.00 7 1.9 1.9 87.3
85.00 14 3.8 3.8 91.1
86.00 10 2.7 2.7 93.8
87.00 8 2.2 2.2 95.9
88.00 3 .8 .8 96.7
89.00 3 .8 .8 97.6
90.00 9 2.4 2.4 100.0
Total 369 100.0 100.0

SUCCESS OF BUSINESS
Frequency Percent Valid Percent Cumulative
Percent
Valid 10.00 14 3.8 3.8 3.8
11.00 2 .5 .5 4.3
12.00 7 1.9 1.9 6.2
13.00 7 1.9 1.9 8.1
14.00 27 7.3 7.3 15.4
15.00 20 5.4 5.4 20.9
16.00 9 2.4 2.4 23.3
17.00 24 6.5 6.5 29.8
18.00 43 11.7 11.7 41.5
19.00 39 10.6 10.6 52.0
20.00 13 3.5 3.5 55.6
21.00 58 15.7 15.7 71.3
22.00 63 17.1 17.1 88.3
23.00 17 4.6 4.6 93.0
24.00 14 3.8 3.8 96.7
25.00 2 .5 .5 97.3
26.00 4 1.1 1.1 98.4
27.00 5 1.4 1.4 99.7
30.00 1 .3 .3 100.0
Total 369 100.0 100.0

Achievements of business
Frequency Percent Valid Percent Cumulative
Percent
Valid 20.00 12 3.3 3.3 3.3
21.00 2 .5 .5 3.8
22.00 4 1.1 1.1 4.9
24.00 4 1.1 1.1 6.0
26.00 4 1.1 1.1 7.0
27.00 4 1.1 1.1 8.1
28.00 6 1.6 1.6 9.8
29.00 5 1.4 1.4 11.1
30.00 11 3.0 3.0 14.1
31.00 24 6.5 6.5 20.6
32.00 23 6.2 6.2 26.8
33.00 12 3.3 3.3 30.1
34.00 25 6.8 6.8 36.9
35.00 14 3.8 3.8 40.7
36.00 26 7.0 7.0 47.7
37.00 11 3.0 3.0 50.7
38.00 40 10.8 10.8 61.5
39.00 24 6.5 6.5 68.0
40.00 56 15.2 15.2 83.2
41.00 11 3.0 3.0 86.2
42.00 12 3.3 3.3 89.4
43.00 19 5.1 5.1 94.6
44.00 7 1.9 1.9 96.5
45.00 4 1.1 1.1 97.6

~ 243 ~
 46.00 4 1.1 1.1 98.6
47.00 2 .5 .5 99.2
48.00 1 .3 .3 99.5
50.00 2 .5 .5 100.0
Total 369 100.0 100.0

Ethnic characteristics
Frequency Percent Valid Percent Cumulative
Percent
Valid 13.00 1 .3 .3 .3
14.00 1 .3 .3 .5
16.00 1 .3 .3 .8
18.00 2 .5 .5 1.4
19.00 3 .8 .8 2.2
20.00 12 3.3 3.3 5.4
21.00 6 1.6 1.6 7.0
22.00 5 1.4 1.4 8.4
23.00 5 1.4 1.4 9.8
24.00 13 3.5 3.5 13.3
25.00 19 5.1 5.1 18.4
26.00 24 6.5 6.5 24.9
27.00 18 4.9 4.9 29.8
28.00 31 8.4 8.4 38.2
29.00 19 5.1 5.1 43.4
30.00 43 11.7 11.7 55.0
31.00 20 5.4 5.4 60.4
32.00 21 5.7 5.7 66.1
33.00 16 4.3 4.3 70.5
34.00 26 7.0 7.0 77.5
35.00 13 3.5 3.5 81.0
36.00 13 3.5 3.5 84.6
37.00 10 2.7 2.7 87.3
38.00 13 3.5 3.5 90.8
39.00 7 1.9 1.9 92.7
40.00 10 2.7 2.7 95.4
41.00 6 1.6 1.6 97.0
42.00 3 .8 .8 97.8
44.00 2 .5 .5 98.4
45.00 2 .5 .5 98.9
46.00 3 .8 .8 99.7
49.00 1 .3 .3 100.0
Total 369 100.0 100.0

Ext and Int environment

Freque Percent Valid Cumulative Percent
ncy Percent
Vali 208.00 1 .3 .3 .3
d 221.00 1 .3 .3 .5
227.00 1 .3 .3 .8
230.00 2 .5 .5 1.4
231.00 1 .3 .3 1.6
232.00 3 .8 .8 2.4
236.00 1 .3 .3 2.7
237.00 2 .5 .5 3.3
238.00 3 .8 .8 4.1
239.00 1 .3 .3 4.3
240.00 5 1.4 1.4 5.7
241.00 5 1.4 1.4 7.0
242.00 2 .5 .5 7.6
243.00 2 .5 .5 8.1

~ 244 ~
244.00 5 1.4 1.4 9.5
245.00 7 1.9 1.9 11.4
246.00 4 1.1 1.1 12.5
247.00 3 .8 .8 13.3
248.00 7 1.9 1.9 15.2
249.00 5 1.4 1.4 16.5
250.00 7 1.9 1.9 18.4
251.00 1 .3 .3 18.7
252.00 4 1.1 1.1 19.8
253.00 4 1.1 1.1 20.9
254.00 11 3.0 3.0 23.8
255.00 9 2.4 2.4 26.3
256.00 12 3.3 3.3 29.5
257.00 4 1.1 1.1 30.6
258.00 7 1.9 1.9 32.5
259.00 9 2.4 2.4 35.0
260.00 18 4.9 4.9 39.8
261.00 5 1.4 1.4 41.2
262.00 5 1.4 1.4 42.5
263.00 7 1.9 1.9 44.4
264.00 13 3.5 3.5 48.0
265.00 6 1.6 1.6 49.6
266.00 10 2.7 2.7 52.3
267.00 10 2.7 2.7 55.0
268.00 6 1.6 1.6 56.6
269.00 10 2.7 2.7 59.3
270.00 9 2.4 2.4 61.8
271.00 9 2.4 2.4 64.2
272.00 12 3.3 3.3 67.5
273.00 10 2.7 2.7 70.2
274.00 6 1.6 1.6 71.8
275.00 7 1.9 1.9 73.7
276.00 6 1.6 1.6 75.3
277.00 7 1.9 1.9 77.2
278.00 6 1.6 1.6 78.9
279.00 5 1.4 1.4 80.2
280.00 8 2.2 2.2 82.4
281.00 1 .3 .3 82.7
282.00 6 1.6 1.6 84.3
283.00 4 1.1 1.1 85.4
284.00 2 .5 .5 85.9
285.00 4 1.1 1.1 87.0
286.00 11 3.0 3.0 90.0
287.00 5 1.4 1.4 91.3
288.00 2 .5 .5 91.9
289.00 5 1.4 1.4 93.2
290.00 1 .3 .3 93.5
291.00 1 .3 .3 93.8
292.00 2 .5 .5 94.3
293.00 2 .5 .5 94.9
294.00 2 .5 .5 95.4
295.00 1 .3 .3 95.7
296.00 1 .3 .3 95.9
299.00 1 .3 .3 96.2
300.00 1 .3 .3 96.5
301.00 1 .3 .3 96.7
302.00 1 .3 .3 97.0
304.00 3 .8 .8 97.8
307.00 1 .3 .3 98.1

~ 245 ~
308.00 2 .5 .5 98.6
309.00 1 .3 .3 98.9
312.00 1 .3 .3 99.2
315.00 1 .3 .3 99.5
317.00 1 .3 .3 99.7
336.00 1 .3 .3 100.0
Total 369 100.0 100.0

~ 246 ~
Appendix D: Normality Tests

~ 247 ~
~ 248 ~
~ 249 ~
~ 250 ~
~ 251 ~
~ 252 ~
~ 253 ~
~ 254 ~
~ 255 ~
~ 256 ~