Factors Determining the Transformation of Micro and Small Enterprises to Medium enterprises: The case of Burayu town in Oromia Regional State, Ethiopia

Abstract

In developing countries, micro & small enterprises are informally organized commercial operations owned and operated mostly by the poor. They are mainly challenged by different factors to transformed to medium enterprises. The aim of this study to identify success factors in transforming micro and small enterprises to medium enterprises in Burayu town. Two stage random sampling technique was used to select the sample respondents. For this study, a total of 132 micro and small-scale enterprises and 116 medium enterprises with a sum of 248 sampled enterprises were selected randomly. Both primary and secondary data sources were collected for this study. Primary data were collected by direct interview of sample respondents; whereas, secondary data were also collected from published and unpublished documents. Descriptive statistics were used to summarize the explanatory variables used in the study. Logit model was employed to identify success factors in transforming micro and small enterprises to medium enterprises in the study area. The main success factors identified in the study by the model was owned capital, access to different types of infrastructural facilities, access to market for product produced, training and educational level of the manager positively and significantly influenced transforming of micro and small-scale enterprises to medium enterprises in the study area. In addition, the study identified lack of adequate finance, lack of working premises, selling at less price compared with other similar enterprises, shortage of raw material and limited access to working premise as a major bottlenecks for enterprises found in Burayu town. Therefore, the study recommended as micro and small scale enterprises are focused on the identified variables and work on it in order to easily transformed to medium enterprises and also the government bodies give special attention for micro and small scale enterprises development