The Determinants Of Production Capacity Of Micro And Small Scale Enterprises: In The Case Of Lega Tafo Lega Dadi Subcity, Oromia, Ethiopia

Abstract

The contribution of micro and small Scale enterprises towards alleviation of poverty and inequalities and development of backward areas is recognized worldwide. Although, these enterprises have great role in economic development of our country, they does not benefit as their potential due to different factors that hinder their productivity. This research aimed to investigate the determinants of the production capacity of MSEs in Lega Tafo Lega Dadi sub city of Shagar city with especial emphasize on metal works. For the accomplishment of the objectives of the study, both primary and secondary data were used. The primary data was collected by questionnaire from the sample of 121 operators which is selected by systematic simple sampling technique and secondary data was collected from concerned organization in the study area. To analyze the study, both descriptive and econometric methods of data analysis were used. In the descriptive part, the study used tables and percentages to describe the given data. In the econometrics part multiple linear regression model was employed. The empirical study elicited eight major challenges which seem to affect production capacity of metal works MSEs in Lega Tafo Lega Dadi sub city which include: entrepreneurship skills, startup capital, labor force skills, financial access, technological factors, supply chains, infrastructure and network and economic collaboration. The analysis from descriptive analysis indicated that access to finance, infrastructural and technological factors largely affect the production capacity of MSEs. The analysis from regression analysis indicated that four variables i.e. Startup capital, labor force skills, supply chains and network and economic collaboration are significantly explained the independent variable at 5% level of significance. Based on the findings, recommendations to administrative bodies of the city, to operators of MSEs and for other researcher were forwarded.