Abstract:
Small and medium enterprises (SMEs) are pivotal in enabling wide-based economic growth and generating employment, especially in emerging economies. Despite the recognized importance of SMEs, existing empirical studies have not specifically explored their role in job creation or identified the factors influencing their ability to generate employment opportunities in Ambo town. This study aimed to analyze the key determinants impacting the employment generation outcomes and potential of the SME sector in Ambo town, Ethiopia. The study utilized both primary and secondary data sources. Primary data was collected through surveys, interviews, and observations from selected SMEs and relevant stakeholders in Ambo town. Secondary data was obtained from published sources such as reports, research articles, and government publications. A combination of purposive and random sampling techniques was used to select the sample of SMEs and participants for the study. The OLS multiple regression model was used for examining the relationship between SME development and employment creation The findings reveal that over 80% of sample SMEs were working in the services or trading domains. While 46.9% of units were young firms established in the last 2-5 years, 53% demonstrated higher maturity spanning 6-16 years of operations. Analysis shows that net job creation increased substantially with longevity as capabilities accumulated. Regression analysis identified rising consumer demand (+0.51) and technology adoption (+0.77) as highly significant triggers inducing SME capacity and employment expansion. Strategic planning (+0.62) and provision of supportive infrastructure (+0.42) and credit access (+0.28) also positively influenced job creation capabilities of Ambo’s SMEs. In essence, concerted efforts to nurture the business ecosystem by addressing gaps in access to markets, infrastructure, financing avenues, functional capabilities, and skills in parallel are essential for unlocking the employment promise of Ambo’s SME sector
