Micro, Small and Medium Enterprises and Their Linkage With Key Actors in Ethiopia: Developing Entrepreneurial Ecosystem Mapping

Abate and Sheferaw Journal of Innovation and
Journal of Innovation and Entrepreneurship (2023) 12:71

https://doi.org/10.1186/s13731-023-00339-3 Entrepreneurship
RESEARCH Open Access
Micro, small and medium enterprises

and their linkage with key actors in Ethiopia:
developing entrepreneurial ecosystem mapping
Tadesse Wudu Abate1* and Henok Ezezew Sheferaw1
*Correspondence:
[email protected] Abstract
1
Department of Economics, Since micro, small, and medium enterprises (MSMEs) are a basic source of income
College of Business and employment opportunities for the least developed countries, more emphasis
and Economics, Woldia has recently been given to those enterprises, and a number of research studies have
University, Woldia, Ethiopia
been conducted. Ethiopia, as one of the Least Developed countries, could also ben-
efit from those MSMEs if the sector is supported enough. Accordingly, this research
is conducted to identify the basic determinants of the performance of MSMEs in Ethio-
pia and to try to develop an entrepreneurial ecosystem mapping to connect those
enterprises with the concerned stakeholders, which can contribute to the improve-
ment of the performance of MSMEs. Primary data from randomly selected 400 sam-
pled enterprises is analyzed using ordered logistic regression, and data collected
from stakeholder interviews is analyzed using descriptive analysis to develop the eco-
system mapping. Accordingly, academic institutions, such as universities, financial
institutions, such as banks and credit associations, non-governmental organizations,
such as GIZ and Reach for Change, and government organizations are important actors
in entrepreneurship in Ethiopia. Finally, the result of the ordered logit model indicates
that access to finance, training, and raw materials, experience, level of education,
and sectoral dummy are statistically significant factors that affect the performance
of MSMEs. Based on the results, we recommend the government of Ethiopia give more
emphasis to MSMEs in different forms, such as providing support in the form of finan-
cial, training, market, and raw material linkages.
Keywords: Ethiopia, Ordered logit model, Ecosystem mapping, Micro, small and
medium enterprises
Introduction
The world economy is strangely growing due to the contributions of small and micro
businesses because of the huge employment opportunities, wealth and income-creating
capacity of those enterprises (Aphu & Adator, 2018). In contrast to the classical gains of
multinational corporations, micro, small, and medium-sized enterprises (MSMEs) are
better suited to serve the developmental needs of poor countries in Africa, Asia, and
Latin America (Chaokromthong & Sintao, 2021). Currently, the African information on
enterprises indicates that a total of 90% of all private businesses fall within the bracket of
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Abate and Sheferaw Journal of Innovation and Entrepreneurship (2023) 12:71 Page 2 of 24
MSMEs. By this same estimate, their employment also stands at 50%, with a correspond-
ingly high contribution to the overall productivity output of most African economies.
Ethiopia is a country implementing a variety of development plans and strategies to
become a middle-income country by 2025 and taking multidimensional measures to
aggressively reduce poverty. To achieve those plans, much is done in the area of entre-
preneurship development, focusing on the youth, where more than 2 million youth are
joining the workforce per year (Endris & Kassegn, 2022). According to the Job Crea-
tion Commission report of 2021, although SMEs make a significant contribution to
the Ethiopian economy, there are about 2.2 million and 2850 employees in these enter-
prises. According to the Ethiopian Job Creation Commission report of 2020, 1.5 million
MSMEs running in the country employed 4.5 million laborers and generated 40.7 billion
birr in monthly income (Ababiya, 2018; Kassa, 2021).
The contribution of MSMEs to the Ethiopian economy has decreased compared to the
previous year due to the dismissal of workers. Millions of people lose billions of dollars
in sales each month. Another 37% have already closed. For a country with very few pri-
vate enterprises per capita and the lowest entrepreneurial activity in Africa, this poses
a major problem and needs more attention. Because of this, MSME has attracted the
attention of researchers, and a number of studies have been carried out by international
organizations and academic researchers as well (Berhanu et al., 2022).
MSMEs need business knowledge, skills, and entrepreneurial spirit to operate their
businesses sustainably and profitably within existing business dynamics (Buli, 2017).
However, personal factors such as lack of business vision, member risk aversion, and
personal business contacts make it difficult for MSME members to stay in the business
(Endris & Kasegn, 2022). Efforts to expand existing businesses and launch more new
ones have a far greater impact on the growth of small businesses than micro enterprises
(Amha, 2015).
Moreover, market linkages enable MSMEs to supply products and gain input in the
commercial value chain, creating jobs and improving business efficiency. However, the
existing vertical links between MSMEs and large firms are very limited, with limited
access to raw materials Mohammed and Beshir (2019) and high raw material costs, and
this is a major challenge for MSMEs in Ethiopia (Seifu et al., 2017). The lack of alignment
with the market has revealed a significant problem facing companies (Tamene & Daba,
2020). Besides, lack of proper guidelines for starting new businesses, lack of access to
finance, low skills and knowledge of managers, poor infrastructure, and entrepreneur-
ship are the main challenges for Ethiopian MSMEs (Endris & Kassegn, 2022).
Entrepreneurship development has the potential to change a given country’s economy
if supported enough Amha (2015), and conducting the business ecosystem in Ethiopia
is very important to know the challenges, opportunities, and areas that need greater
attention by the business community in Ethiopia. In addition, this study will identify the
key actors in the entrepreneurial ecosystem mapping that helps to create the smooth
functioning of MSMEs in addition to identifying determinants of the performance of
MSMEs. Many studies are conducted on the entrepreneurial ecosystem and they recog-
nize that it is about networking and a major way of minimizing the challenges of MSMEs
by clearly mapping the interaction between the components, such as actors and factors
(Kreuzer et al., 2018). Brydges and Pugh (2021) indicate that entrepreneurial ecosystem
mapping is then very important in the process of solving the problems of MSMEs by
identifying the challenges and key actors that can help those enterprises by providing
support through training, finance, and other pillars.
Developing an entrepreneurial ecosystem from the perspective of individual and insti-
tutional pillars to address the strengths and weaknesses of MSMEs will promote the
economic growth of a given country’s economy by creating a bridge between individ-
ual firms and intitutions that are capable of providing support in many aspects, such as
finance, human capital development, market linkage, and cultural support (Cunningham
et al., 2019).
Therefore, the contribution of this study to existing knowledge is twofold. First, previ-
ous studies stated above and others tried to identify the factors that determine the per-
formance of MSMEs, and the reasons for low performance are known, but this study
will add by identifying the key actors that can solve those problems that lead to low per-
formance by developing entrepreneurial ecosystem mapping. Second, a recent study by
Yigezu (2021) identifies the major determinants of the performance of MSMEs by apply-
ing a binary choice model, but this study will use a more appropriate model, ordered
logit models, by creating three groups of MSMEs as low, medium, and high performance
enterprises, and this will help us to identify the determinants of MSMEs performance
separately for each group.
The article contributes to the existing literature on the determinants of MSMEs, which
has been widely studied in the context of developing countries and the key actors of
the entrepreneurial ecosystem mapping in Ethiopia. The study is particularly relevant
for Ethiopia, a country that has experienced sustained decline of the contribution of the
MSMEs to the economy.
Hence, the research questions of the study are to answer: what are the determinants of
MSMEs performance? What are the key actors of entrepreneurial ecosystem mapping
in Ethiopia? Using a cross-sectional data from a sample of 400 MSMEs found in Addis
Ababa for the fiscal year of 2022 and employing the ordered logit econometrics model.
The rest of the paper follows this association: the coming section presents a skimpy
review of the theoretical and empirical literature on the determinants of MSMEs perfor-
mances and conceptual framework of the ecosystem mapping. Section “Data and meth-
odology” outlines the methodology, followed by a discussion of the estimation results in
Sect. “Conclusion and recommendation”. The last section provides the conclusion and
recommendation.
Literature review
Definition of small and micro enterprises
Businesses or enterprises are organizations (collections of two or more people who are
coming together with their own resources—knowledge, skill, abilities, and financial
assets—to achieve a stated common goal) that are established and work for profit (Esub-
alew & Raghurama, 2017).
In every country, business is regulated by a number of laws and other national or inter-
national normative documents, including European Company Law, etc. According to the
Commercial Law of the Federal Democratic Republic of Ethiopia, there are four types of
businesses: self-employed, sole traders, partnerships (general partnerships and limited

partnerships), and corporations (limited liability companies and joint-stock companies).
Companies that utilize the mentioned types of businesses can be divided into micro,
small, medium, and large enterprises.
Enterprises are the most important components of the economy, representing organi-
zations that consist of two or more persons and which, by economic means, perform
activities whose goal is to make profit. SMEs are part of these enterprises with unique
characteristics and roles (Abagissa, 2021).
SME is an acronym that stands for micro and small enterprises. Though these enter-
prises play a vital role in many nations’ economic growth and development, there is no
generally accepted definition. Different countries, agencies, and institutions have defined
SMEs differently to suit their own concepts and operations (Abagissa, 2021).
However, Policies and strategies to provide result-oriented and sustainable support to
micro and small enterprise development should be based on a uniform national defini-
tion of SMEs. It is imperative to ensure that all support programs result in direct benefits
to the SMEs targeted (MoUDH, 2012).
The definition provided in the 1997 SME strategy

The formulation of the 1997 Micro and Small Enterprise Development Strategy (2005)
took into account the experiences of South Africa and other countries. During that time,
the use of a single criterion, namely, paid up capital, was preferred as it was thought
that there were difficulties in obtaining information on the numbers employed in SMEs
as most of the enterprises were operated by family members Ebabu Engidaw (2021)
(Table 1).
Small and medium enterprises in Ethiopia

SMEs have a significant effect on a country’s operation from both economic and socio-
economic aspects. Economically, SMEs can enhance economic growth and acceler-
ate socio-economic progress by providing traders with the resources to exploit market
opportunities and further accelerate the development of rural regions. Socio-economi-
cally, SMEs provide deprived communities with the financial stability to afford a better
quality of life. Therefore, the Ethiopian government continuously creates reform policies
to promote SMEs development (Oshora et al., 2021).
In the strategy, micro and small enterprises are assumed to operate under “Agricultural
Development Leads to Industrialization” (ADLI) strategy and market economy princi-
ples is considered as fundamental principles. However, as the data by Central Statistical
Agency (1997) witnessed, most of the SMEs already established are urban based and the
agriculture is insignificant (only 5%) which possibly twisted the effort and commitment
of resources to indelicate direction (Esubalew & Raghurama, 2017).
Table 1 Definition of micro and small enterprises

Sector Paid up capital
Micro enterprises ≤ ETB 20,000 (USD 1200)

Small enterprises ≤ ETB 500,000 (USD 30,000)
Though most SMEs are facing problems with access to finance, business types that
have a low-cost nature of operation are not taken as one of the eligibility criteria for gov-
ernment support. Moreover, facilitating access to finance is stated under "Other Specific
Support Areas or Programs" from ‘the Basic Principles" category, which is ostensibly less
focused (Esubalew & Raghurama, 2017).
In the strategy, among others, one of the targeted support measures and beneficiaries
is small enterprises in nomadic and disaster-prone areas. Nomads are culturally mov-
able and cannot reside in a specific area, which makes the provision of lending services
difficult. These areas could have been supported in other ways rather than unnecessarily
committing resources (Esubalew & Raghurama, 2017).
To alleviate the financial constraints, the strategy dictates that the state governments
guarantee the credit of the SMEs through the Credit guarantee fund beyond the 20%
compulsory saving amount. Nonetheless, Enterprises are supposed to pay a 1% service
fee so as to sustain the credit guarantee fund system, which is another burden for the
enterprise, and Credit delivery is on a loan ceiling basis, which is to be paid back within
not more than 36 months (Esubalew & Raghurama, 2017).
saving program for lease machines and investment materials, which is intended to
solve micro and small industries capital and asset problems and enable them to get
loans without guarantee. Accordingly, operators and actors can get 60% of their loans
or credits from the bank when they save 40% in the bank. The Lease financing program
is run jointly by the Commercial Bank of Ethiopia and Micro Finance Institutions, and
it is accessible to all SMEs in urban and rural areas. Taking on the role of commercial
banks in alleviating SMEs financial constraints is a positive response from the strategy,
though it has said nothing about the private commercial Banks involvement (Esubalew
& Raghurama, 2017).
At the end of the strategic period (2014–15), a total of 271,519 new SMEs were estab-
lished, which employed about 2.8 million people with a loan grant of more than Birr
6.5 billion. From a new enterprise establishment and employment creation perspective,
remarkable results are obtained. However, most of the establishments are micro enter-
prises, and transitions to the next level are unrealized (NBE, 2015).
Empirical literature review

Country specific
Ebabu Engidaw (2021) conducted a study on entrepreneurial culture and its socio-
cultural Determinants of Woldia University graduate scholars, the study result of this
exploration portrays that entrepreneurial education had a positive effect on scholars’
entrepreneurial intentions as one unit increased in entrepreneurial education; intentions
to come an entrepreneur increased by 0.09 units. Kassa (2021) empirical study verified
that the need for independence and occasion-seeking actions of scholars who have taken
entrepreneurship course are advanced than those of scholars who did not. In addition,
also grounded on Jones and Matlay (2011) findings, entrepreneurial education increases
entrepreneurship intentions and raises the knowledge and chops of individuals as well.
Entrepreneurship intention can be told to address colorful private morals and coffers
which are walls to produce new gambles. It has been shown that positive relationship
occurs between economics and business education and business creation.
The study conducted by Cherkos et al. (2018) discloses that the donation of small
enterprises in creating job openings and in the development of our frugality is vital.
still, their donation is veritably low as compared to that of other countries’ due to color-
ful reasons. The productivity of cabinetwork manufacturing MSEs is not competitive
enough and substantially follows the usual product process. Though these failings may
be result of different factors, there is no well-conducted and proved studies on the field.
In general, there are external (contextual) and internal factors, which are still affecting
performance of cabinetwork manufacturing MSEs.
Cross country empirical works

To explore the state of the City of Johannesburg’s entrepreneurship ecosystem and iden-
tify the gaps and weaknesses that cause the ecosystem not to function optimally Msi-
mango-Galawe and Majaja (2022) did a cross-sectional, quantitative study with a sample
of 1099 entrepreneurs. Their data analysis included aggregating and analyzing the data
through descriptive statistics, simple observation, comparison, and pattern recognition.
Their findings showed a map of the City of Johannesburg’s entrepreneurship ecosystem’s
issues and how entrepreneurs across different regions are not affected differently by the
geographic region. De Brito and Leitão (2021) conducted a systematic literature review
to map and define entrepreneurial ecosystems. Khan (2013) critically reviewed the exist-
ing initiatives of Saudi Arabia for entrepreneurship growth. The study used primary
and secondary resources to explore the initiatives and understand entrepreneurship
growth ecosystem. The researcher proves that the Saudi’s ecosystem was not complete
and whatever available was in infancy stage. Challenges also remained for the effective
intervention at strategic, institutional and enterprise levels to streamline and trigger the
entrepreneurship development.
Conceptual frame work of entrepreneurial ecosystem mapping

A variety of mapping systems and models exist, and we choose one we think would
work better. In this regard, to conduct green entrepreneurial ecosystem mapping for
this specific charge, it is intended to make use of and apply Chaves-Maza and Fedriani
(2022), De Brito and Leitão (2021), and Glancy and Isenberg (2011) entrepreneurship
ecosystem model, as developed by the ILO for the inclusive entrepreneurship ecosys-
tems approach, to support the development of inclusive entrepreneurship ecosystems
that support entrepreneurs in creating sustainable businesses. The approach emphasizes
six core pillars that together form a holistic support system for entrepreneurs, as well as
two cross-cutting confines inclusiveness and Pathways to Decent work—that ensure that
the support system is inclusive of all entrepreneurs (Fig. 1). Our platoon has named this
model for better adoption, simplicity, and effective mapping. Thus, we propose that the
approach on this specific charge will substantially use this model, with practical varia-
tions as needed and when the requirements appear. All conversations, including the data
collection and analysis, would be in close association with the model, unless otherwise
agreed upon and decided in discussion with the crucial actors.
Possible additional dimensions (cutting across the entire ecosystem or selected com-
ponents are technology and environmental sustainability). The following description
gives additional information on what each pillar represents and includes in the mapping
Fig. 1 ILO’s inclusive entrepreneurship ecosystem framework
exercise. Building on Isenberg’s (2011) entrepreneurship ecosystem model, the approach

has designed six ecosystem pillars and other cross-cutting dimensions. These are:
Human capital: Human capital in this study refers to the availability of skilled and
motivated labor, which is central to entrepreneurs’ ability to build sustainable busi-
nesses. The skills of workers are expected to be developed by the access to training given
to enterprises, and then training is used as a proxy variable for highly demanded quali-
fied labor.
Policy and leadership: Legislation and policies that foster business creation are key for
enterprise development. These include easy and transparent business registration proce-
dures, fair taxation policies, and policies that actively promote entrepreneurship.
Appropriate finance: Access to financial resources is crucial for entrepreneurs seeking
to start and grow a business, and the availability of a diversity of financial products and
services is an important component of entrepreneurial ecosystems.
Culture: This component describes the legitimacy of entrepreneurship in the wider
society of a given context, i.e., whether entrepreneurship is considered a viable career
path and whether entrepreneurs have a positive reputation.
Support: This component refers to the variety of support services available to entre-
preneurs. This includes the availability of demand-driven and accessible non-financial
business development services, such as business management training, capacity building
mentoring, and coaching, as well as operational services, such as accounting and legal
advice, IT and design support, and sector-specific support.
Markets: The availability of and access to markets is crucial for any business. In the
entrepreneurship inter-linkage with key actors, this component is specifically related to
the availability of customers who are willing and able to purchase new products and ser-
vices. Where local demand is low, strong entrepreneurial ecosystems are often charac-
terized by accessibility to regional or international markets for local green entrepreneurs.
In addition to the six pillars, the model includes two other dimensions, namely, the
cross-cutting dimension and the path to decent work.
Inclusiveness: Entrepreneurship ecosystems differ not only by context but also between
target groups in a given context. Furthermore, informal norms and values (the Culture
component of the ecosystem framework) may impede business creation among margin-
alized groups, such as women, youth, disabled people, and others.
Data and methodology

Research design
Both experimental and diagnostic research designs were applied in this research. The
first is important to identify causal relationships between dependent and independent
variables, which is important to achieve the objective of identifying determinants of
enterprise performance, and the second is important to identify root causes of the prob-
lems and identify possible solutions that will be applied to develop the entrepreneurial
ecosystem mapping. In the first step, literature and project documents related to the
assignment were reviewed to understand the resources available and the context of the
ecosystem and develop appropriate tools for capturing data from primary and second-
ary sources. At the second step, available data from relevant sources, both primary and
secondary, is collected to identify factors that can be used as determinants of the perfor-
mance of MSMEs. At the last stage, the collected data will be organized and synthesized
into its parts, making it more ready for further interpretation and writing.
Sample size and sampling procedure

The sampling frame for this study is grouped into two categories: MSMEs and stock-
holders of entrepreneurship, which are determined to be key actors. Therefore, first,
from the perspective of key actors in the ecosystem mapping, governmental (minister of
finance, minister of planning, minister of education), non-governmental, financial, and
academic institutions are considered to be part of the sample. With this regard, seven
banks in Addis Ababa, namely, the National Bank of Ethiopia, the Commercial Bank of
Ethiopia, Abyssinia Bank, Oromia International Bank, Dashen Bank, Oromia Interna-
tional Bank, and Debub Global Bank, are included with other credit institutions, such
as Addis Savings and Credit Unions. From academic institutions, Addis Ababa Univer-
sity, Bahir Dar University, Jimma University, Unity University, Ethiopian TEVT College,
Tegbared Vocational School, and St. Marry Universities are part of the sample. Fana
Broadcasting Corporation, ETV, Reporter Ethiopia from Media Stream, Job Creation
Commission, GIZ, IFAD, UNIDO, Reach for Change, and the United Nations are pos-
sessively selected for the sake of easily accessing data, and key informant interviews are
held with the concerned bodies of those institutions to develop the ecosystem mapping.
Second, owners of MSME in Addis Abeba are selected using random sampling tech-
niques to obtain respondents for the purpose of identifying the most important deter-
minants of the performance of enterprises from the pillars of the ecosystem mapping.
From the very beginning, enterprises from urban agriculture, service-giving, and indus-
trial small firms are included as part of a sampling frame. Then, finally, the total number
of enterprises is given to be 16,720, and then the appropriate sample is determined using
the formula presented below.
From total population appropriate sample size is selected by applying sample size
determination of Chaokromthong and Sintao (2021), the sample size for this study is
given by
N 16720
n= 2
= = 400
1 + N (e) 1 + 16720(0.05)2
where n = desired sample size.

N = total population (total number of small and micro enterprises).
e = margin of error (0.05).
Types of data
To achieve the objectives of the study, both primary and secondary data are used. Second-
ary data collected from various offices on different related pillars (especially to analyze pol-
icy-related issues) is applied to draw the ecosystem mapping, and primary data collected
from sampled enterprises is applied to identify determinants of entrepreneurship perfor-
mance and draw the Ethiopian entrepreneurial ecosystem mapping. The year of data collec-
tion is the 2022 fiscal year.
Method of analysis
In this study, both qualitative and quantitative, as well as descriptive and econometric
methods of analysis, are applied. To investigate the key actors of entrepreneurial ecosystem
mapping and their role in improving micro, small and medium enterprises has been ana-
lyzed qualitatively, and the primary data collected from sampled enterprises is discussed
with the help of descriptive statistics. Moreover, to identify the determinants of the finan-
cial performance of those MSMEs, the ordered logit model is applied by having the perfor-
mance grouped into three categories based on their monthly profit earning.
Econometric model specification and estimation technique

In this study, an econometric model is applied to identify the determinants of the perfor-
mance of MSMEs. The dependent variable, performance of MSMEs is measured using the
proxy variable of monthly gross profit, which is determined by applying profit margin as a
percent of paid-up capital. There are three basic categories. Based on the MSME strategy
of Ethiopia, enterprises are classified into three main categories: micro, small, and medium
enterprises based on their paid-up capital, as stated in Table 2.
The three categories of dependent variables lead to the application of the ordered logistic
regression model. Therefore, the ordered logit model is specified as follows:
Profit =f (access to credit, sector of engagment for enterprises, access to training, Business location,
level of education, age of the business, access to raw material, market access, Experiance)
Table 2 Classification of enterprises performance

Level of enterprises Sector Head count staff Paid up capital (fixed asset)
ETB
Micro enterprises Industry ≤5 ≤ 100,000

Service ≤5 ≤ 50,000
Small enterprises Industry 6–30 101,000–1,5000,000
Service 6–30 50,0001–500,000
Medium enterprises Industry > 30 > 500,000
Service > 30 > 500,000
Source: (National MSME development strategy of Ethiopia, 2019)
In this study, profit is specified as a function of an independent variable, and the model
is ordered to take the form of a multinomial case, where three categories, namely, micro,
small, and medium enterprises, profit as a percent of their paid-up capital are included
under the dependent variable.
In the ordered logit model, there is an observed ordinal variable Y, which is a function
of another continues and unobserved latent variable Y*, and the value of Y is determined
by the latent variable Y* which has various threshold levels.
Recall, Yi∗ = β0 + β1CRED + β2EDUOw + β3LOCB + β4SEC
+β5TRAIN + β6AGEB + β7RAWM + β8MKT + β9EXPER + error
The three categories of the dependent variable Yi can be explained as follows;
Yi = 1, if Yi* < k1, where k1 is the highest value of low profit groups.
Yi = 2, if k1 < Yi* < k2, where k2 is the maximum value in medium profit earners
threshold.
Yi = 3, if k2 < Yi* < k3, where k3 is the maximum profit in high income group HHS.
In general, Yi* = 3k=1 (β k Xki + ei), ei follows the logistic distribution.
After considering all the above assumptions, the logistic regression is formed below.
General formula for ordered logit model as presented by Abegaz et al. (2014) with M
categories
M exp(Xiβ − KM−1)
p(Y ) = =
x 1 + exp(Xiβ − kM−1)
exp(Xiβ − k1) 1
p(Y = 1/x) = 1 − =
1 + exp(Xiβ − k1) 1 + exp(Xiβ − k1)
1 1
p(Y = 2/X) = −
1 + exp(Xiβ − k2) 1 + exp(Xiβ − k1)
3 1
p(Y = =
X 1 + exp(Xiβ − k2)
Description of variables
See Table 3.
Results and discussion

Descriptive analysis
The descriptive summary of both the categorical and continuous variables is analyzed
using measures of mean, minimum, maximum, standard deviation, frequency, percent-
age, skewness, and kourtosis, as displayed in Tables 4 and 5.
The tabular presentation of categorical variables can indicate the number of obser-
vations in each group of the dummy variable. In this regard, the first hot issue in
today’s world is gender analysis, and we start our descriptive analysis with the gen-
der aspects of owners of MSMEs. From the total sample of 400 owners of MSMEs,
only 95 (accounting for 23.58%) are owned and run by females, and the large por-
tion, which is about 76.42%, is owned by males. This indicates that the participation
Table 3 Description of explanatory variables

Variables Definition Expected sign
Access to credit 1 = If the firm accessed Credit, +

0 = Elsewhere
Education level of the owner The number of years of education of the owner +
Location of the business 1 = If the firm has access to road infrastructure, +
0 = Elsewhere
Type of sector engaged in 1 = If the firm engaged in service sector +
0 = Elsewhere
Training 1 = If the firm get training +
0 = Elsewhere
Age of the enterprises The number of years of the enterprises stay on the market _
Access to row material 1 = If the firm easily access inputs of production +
0 = Elsewhere
Access to market for products 1 = If the firm can get market for their product easily +
0 = Elsewhere
Business experience of the owner Business experience of the owner in years +
Table 4 Summary statistics of dummy variables

Variables Type of variable with Number of Freq Percentage
category observation
Location of business Urban area = 1 400 322 80.5

Rural area = 0 178 19.5
Gender of owners Male = 1 400 305 76.42
Female = 0 95 23.58
Access to training Own = 1 400 121 30.25
Has no 280 69.75
Credit access Yes = 1 400 184 46
No = 0 216 54
Access to raw material Have access = 1 400 287 71.75
Have no access = 0 113 28.25
Access to market Have access = 1 400 242 60.5
Have no access = 0 158 39.5
Table 5 Descriptive summary of continues variables

Variables Type mean Std Min Max Skewness Kourtosis
Owners experience Continues 36.13 10.6 20 61 0.69 3.43

Age of business enterprises Continues 22.69 25.8 10 95 − 0.80 2.26
Education level of owners Continues 11.5 2.5 0 14 0.30 3.20
of females is still limited in the area of micro and small enterprises, and it needs the
highest intervention to develop the participation of women in this area. Out of the
total of 400 enterprises, 322 (80.5%) are located in urban areas with access to differ-
ent facilities, including road infrastructure facilities, and the remaining 19.5% of the
sample enterprises are located in rural areas with no access to infrastructural facili-
ties. In addition, the descriptive summary shows that even if more enterprises have
high access to markets and raw materials, credit and training are not easily accessed
by micro and small enterprises in the study area.
In addition to categorical variables included in the model, the descriptive statistics of
continuous explanatory variables are presented in Table 5 (Table 2). Based on this result,
the Owners experience and age of the business enterprises had a respective mean of
36.13 and 22.69, with respective minimum and maximum values of 20 and 61, 10 and
95. The education level of business owners ranges from 0 to 16, indicating that the farm-
ers’ education level has a maximum variance starting from illiterate persons to 14 years
of education, meaning that individuals who completed their secondary and preparatory
schools are practicing traditional farming agriculture in addition to those individual
owners who have graduated with a first degree.
The skewness and kurtosis values need more explanation, since those values are help-
ful to understand whether the distribution of observations is normal or not. A negative
Skewness value indicates that variables are skewed to the left, and positive values indi-
cate a positively skewed distribution.
The kurtosis value of for education is more than three (leptokurtic distribution) to
mean that few observations lied in the middle of distribution (around the mean) and
more observation has an extreme education status of very high level and low status or
being illiteracy level. The remaining variables age, family size and dependency ratio has
a kurtosis less than three (platikurtic distribution) tell us, the distribution of less of those
observations lies on the outliers than the normal distribution.
Cross tabulation profit status and determinant variables

The profit status of sampled enterprises is expressed in Fig. 2 in three mutually exclusive
groups of low, medium, and high profit margin categories. Out of a total of 400 sampled
firms, the majority failed under low and medium categories (126 firms are low profit
earners and 134 firms are under medium profit groups), while only 26 enterprises, which
account for only 6.5% of the sample firms, are earning high profit margins. This indi-
cates that most of the enterprises (56.5%) are in the low-profit group, whereas 37% of the
enterprises are in the medium-profit group.
low profit medium profit high profit
6.5%
37%
56.5%
Fig. 2 Profit status of sampled enterprises in the study area

40
30
percent
20
10
0
low medium high low medium high
Female male
Fig. 3 Cross tabulation of gender with profit status of enterprises
40
30
percent
20
10
0
low medium high low medium high
no credit access accessed credit
Fig. 4 Cross tabulation of access to credit with profit status of enterprise
The three categories of profit margin group firms and their relationship with the status
of some explanatory variables (gender, access to credit, and training) are expressed in the
bar graphs drawn below (Figs. 3, 4, 5). Those graphs clearly present how the profit status
of enterprises is correlated with explanatory variables of access to training, finance, and
gender differences to illustrate how many enterprises that access training and finance are
failing in three categories of profit margin, in addition to gender analysis, which com-
pares the male–female gender difference in relation to low, medium, and high profit
status.
As we can observe from Fig. 3, the gender difference has a significant relationship with
the profit status of micro, small, and medium enterprises. The majority of sampled enter-
prises are male-owned (only 96 out of 400 sampled enterprises are female-owned). Out
of a total of 96 enterprises owned by women, 49 and 40 of them are failing under low and
medium profit status, respectively. Only 3% of female-owned firms earn a high profit
margin on their paid-up capital. Besides, more than 10% of female-owned enterprises
were found in low-profit categories, while medium- and high-profit-earning female-
owned enterprises accounted for less than 10%. In addition, their male counterparts
low profit medium profit high profit low medium high

25 30
20
20
15
percent
percent
10
10
0 0
Female male Female male no credit credit no credit credit
no access to training accessed training no training training
Fig. 5 Cross tabulation of training with gender and access to finance for profit status
cover 76% (304 out of 400) of the total sample, from which more than 40% are in the
low profit category, about 28% are in the medium profit group, and 6% are earning profit
margins of high status.
In Fig. 4, the profit status of sampled enterprises in relation to access to credit is illus-
trated. Out of enterprises that gained credit access from different sources, how much of
it fell under three profit categories is analyzed in comparison with enterprises that had
no access to credit provision.
From the above graph, we can observe that only 35% of the total sampled enterprises
have access to credit, and the majority of them (65%) do not. Out of the credit accessed
by sampled enterprises, about 1.7%, 12.75%, and 20% are failing under their respective
categories of high, medium, and small profit earner groups. When we observe our non-
credit-access counterparts, about 5% of enterprises are earning high profit margins. The
remaining 35.75% and 24.25% of non-credit-accessed categories are failing under low
and medium profit margin categories, respectively.
From now on, the cross-tabulation is made on the interaction of three variables at a
time. Therefore, on the left side of Fig. 5, the profit status of the enterprises is cross-
tabulated with gender and access to training. On the right side of Fig. 5, we present a
cross-tabulation of the profit status of firms with training and access to credit.
From the left side of Fig. 5, we can say that, even if training is more provided for low-
profit categories, male-owned enterprises are more benefited by the training support
when compared with female-owned MSMEs. Among male-owned and training-acces-
sible enterprises, 23.5%, 14%, and 3.75% are failing under low, medium, and high profit
margin categories, respectively. Out of the female-owned firms with training support,
about 6%, 4.2%, and 1% are under respective low, medium, and high profit statuses. On
the other hand, about 14.75% of female-owned and 35.25% of male-owned enterprises
are not accessing training, which is important to develop the human capital level of
MSMEs. From those non-training-accessible female-owned enterprises, 1.5% are found
in high profit status, 6% are in low profit status, and the remaining 7.25% are found in
medium profit margin.
The right-hand side of Fig. 5 illustrates the provision of training with access to credit
for the three categories of low, medium, and high profit margin enterprises. Among
micro, small, and medium enterprises that have no access to both training and finance,
6%, 7.5%, and 1.75% are failing under low, medium, and high profit margin enterprises,
respectively. From sampled enterprises that have no access to training but access finan-
cial support, about 21%, 12.5%, and 1.75% are earning a respective profit margin of low,
medium, and high status. From the micro, small, and medium enterprises that have been
provided training but have not been granted financial support, about 39.25% are earning
low profit status as measured by the percentage of their paid-up capital. The remain-
ing medium- and small-profit enterprises account for 17.6% and 5.4%, respectively, while
no firm is granted both financial and training support simultaneously. In addition, the
other surprising fact is that there are no enterprises that get both financial and technical
support.
Econometric model results

To identify the determinants of Performance of MSMEs ordered logistic regression
model is applied. In addition, the result of the marginal effect for each independents var-
iable is presented in Table 6.
With 5% level of significance, the null hypothesis βj = 0 is tested to identify the most
important and powerful variables to affect performance. As indicated in Table 6, Access
to credit, experience, level of education, access to raw materials, sectoral dummy, and
access to training are statistically significant to affect the performance of micro and
small enterprises in the study area, since their probability value is less than 5%. The other
variables, such as age of business, location of business, and access to market, are sta-
tistically insignificant with a probability value greater than 5%. With this regard, access
to credit has a positive impact on improving the performance of MSMEs, and hence
access to credit is associated with a high probability of high-profit enterprises and a low
probability of low-performance firms. In addition, this result the same with the result
of Kassa (2021) and Hagos (2012). Other continuous variables, such as experience and
years of education, are positively correlated with performance, meaning that an increase
in experience and education level can bring high economic profit, since educated and
experienced owners obtain more awareness about different marketing strategies to
develop their own businesses. This study agrees with the findings of research conducted
by Mohammed and Beshir (2019).
Table 6 Marginal effect of ordered logistic regression model

Var dy/dx p>z dy/dx p>z dy/dx p>z
(y = 1) (y = 2) (y = 3)
CRED 0.0076675 0.069 0.0716776 0.039 0.0226079 0.049

AGEOB 0.0028439 0.524 0.0257241 0.499 0.0057842 0.490
EXPER − 0.0006793 0.034 − 0.0062541 0.014 − 0.0016389 0.016
Edu − 0.0014101 0.008 − 0.0129827 0.000 − 0.0034022 0.000
LOCB − 0.0009432 0.791 − 0.0086611 0.793 − 0.0022193 0.792
RAWM − 0000654 0.092 − 0.0006025 0.046 − 0.0001579 0.045
MKT − 0.0000571 0.950 − 0.0005254 0.950 − 0.0001377 0.950
SEC 0.0041378 0.238 0.0378868 0.248 0.0096342 0.0235
TRAIN − 0.172492 0.026 − 0.1386479 0.003 − 0.0073423 0.001
Source: own computation using STATA 13 software
It is obvious that access to raw material and training are basic for profitability of
businesses (Cherkos et al., 2018) and the result of this study is similar to this theoreti-
cal foundation. MSMEs that access training and have high availability of raw materi-
als are earning the highest profit from their business activities when compared with
enterprises that do not. The other relevant variable to affect profit is a dummy vari-
able for the sector. Therefore, enterprises engaged in the production sector are more
likely to earn a high profit and continue with high performance when compared with
small and medium enterprises engaged in service-giving activities. This result is the
same with the findings of Mamo (2022) and Kassa (2021).
Post estimation tests

Test of proportional odds assumption
The proportional odds assumption, also known as the parallel regression test, is applied
to check whether the explanatory variables equally affect three categories of the depend-
ent variable, which are low, medium, and high profit enterprises in this study. The Brant–
Wald test of the parallel regression assumption yields a Chi-square statistic (Appendix
A2) of 0.259, which is greater than 5% probability, indicating that the proportional odds
assumptions for the full model (with the null hypothesis H0: there is parallel regres-
sion) are held, since the null hypothesis of parallel regression exists and has failed to
be rejected. This suggests that the effect of each explanatory variable on the dependent
variable is the same irrespective of the categories, showing a consistent effect of regres-
sors across the categories of low, medium, and high profit levels.
Test of multicollinearity
Moreover, the model result is also tested against the assumptions of Multicollinearity.
The VIF mean value of 1.15 levels of tolerance indicates that there are no multi-collin-
earity problems. For all continuing independent variables, the correlation result is less
than 10, proving that there is no multi-collinearity problem (Table 7).
Test of heteroscedasticity
The Brush–Pagan test for heteroscedasticity (Appendix A3) is given a probabil-
ity value of 0.78, and hence we failed to reject the null hypothesis, which states the
presence of constant variance. This means there is no heteroskedastic variance of the
error term, and the estimation and hypothesis testing are proved to be correct.
Table 7 Variance inflation factor of the continues variables

Variable Vif 1/vif
AGOB 1.25 0.802242

EXPER 1.21 0.824736
Edu 1.01 0.986698
Mea vif 1.15 0.115
Test of normality of the error term

Finally, the Shapiro–Wilk test for normality has a probability value of less than 5%
(p > z = 0.000) to indicate that there is a non-normally distributed error term, and robust
regression is used as a solution to this normality problem (Appendix A4).
Entrepreneurial ecosystem mapping of Ethiopia

In this part, we tried to interconnect the key actors in entrepreneurship using the result
of the ordered logit model as a base. With this regard, three pillars of the entrepreneurial
ecosystem mapping, namely, finance, human capital, and business culture, are analyzed
below using data obtained from sampled enterprises and key informant interviews.
Pillar of finance
As per the key informants report, it was revealed that MFIs are the main finance sources
for MSME operators and entrepreneurs. The National Bank of Ethiopia gives special
privilege to MFIs to focus on MSMEs, where 99% of their loan portfolio is to cover
MSME and only 1% is for high-profile companies for investment loans. This gives spe-
cial emphasis to MFIs to support of MSMEs by restricting all MFIs to giving only 1% of
their loans to MSMEs for high investment loans. It was noted that MFIs have an out-
standing loan of 70 Billion birr. The main reasons for this, among others, as per the key
informants and secondary data are that MFIs are the only option for reaching out to the
missing middle, where the banks are reluctant to address this target group due to the
risks involved in financing micro and small enterprises, including smallholder farmers
(Figs. 6, 7).
Fig. 6 Key actors in financing MSMEs

Fig. 7 Key actors of human capital in Ethiopia entrepreneurship
MFIs are fundamentally mandated in their establishment to mobilize savings from

the marginalized community and give loans to the same target group through less
stringent collateral systems and other risk-sharing financing mechanisms in collabo-
ration with other development actors. NBE has mandated MFIs to allocate 99% of
their loan portfolio to SMEs, and this sector is totally left to the MFIs and other local
financing sources, whether for productive or non-productive loans. The capacity of
banks to penetrate the community with their existing financial products is unlikely
to cover the financial needs of people engaged in micro and small enterprises or any
other productive activity in relation to farming and non-farming interventions.
The KII information collected from key banking sector senior officials and MFIs
indicated that financing SMEs is highly risky as the businesses are volatile and the
operators do not have adequate collateral systems. However, recent thinking indicates
that there is growing interest among the major private (Awash, Dashen, and Oromia
Banks) and public (DBE and CBE) banks in financing SMEs, as SMEs represent the
majority of the missing middle in the banking industry. To this end, it was interesting
to see that the banks have opened an SME financing directorate in both CBE and pri-
vate banks, understanding the opportunity and future prospects of creating a poten-
tial client base with a broad base of clients.
Concerning the existence of green business financing, there was no mention of a clear
policy indicated in the SME financing of the key actors, even though there are some
donor-funded green businesses implemented on the basis of on-and-off conditions. For
instance, it was mentioned that GIZ, UNDP, UNIDO, the EU, and other funders have
supported green entrepreneurship development initiatives in the past and at present
in various sectors of the economy. One common thing that all KII respondents from
MFIs and banks mentioned is that during credit worthiness analysis, the impact of the
business on the environment is reviewed, and the loan will be released after making
sure that the business has no negative impact on the environment or society.
The Ethiopian Development Bank, in collaboration with selected MFIs, and the Min-
istry of Water and Energy, now called the Ministry of Irrigation Water and Energy, have
been working in green business, promoting and expanding the base of the private sector
in distributing renewable and clean energy since 2005. This program has been supported
by key donors such as GIZ, Energize Development, the EU, and German cooperation
in collaboration with the ministries of Water, irrigation, and electricity. The Develop-
ment Bank of Ethiopia has financed these projects in the past in collaboration with MFIs
in the regions to promote clean energy, help households get access to solar power, and
replace the traditional kerosene lamp that uses fuel for lighting their homes. Moreover,
UNIDO, GIZ, IFAD, EU AID, the World Bank, the Master Card Foundation, and other
International Non-Governmental Organizations are supporting entrepreneurship devel-
opment through providing finance.
Key actors in human capital development

Human capital is the most important asset of entrepreneurs, which enables companies
to saturate and run sustainable businesses. The main sources of knowledge and capac-
ity development in relation to entrepreneurship development are universities, technical
and vocational education, and Training colleges. Universities are output-oriented, but
TVETs are result-oriented. This means TVETs intend to produce manpower that can
be self-employed or employed by the industry. As such, the TVET polytechnic colleges
work in close collaboration with industry associations, with regular revision of the train-
ing fields every 2 years. The revision of the training fields helps to make adjustments and
incorporate the dynamism in the economic development and changes in the skill and
orientation of the economy from time to time. Federal and regional-level Technical and
Vocational Education and Training Development Institutes and Bureaus are coordinat-
ing this human capital development process to make it more context-specific and feed
the economy by increasing productivity and quality of SMEs products.
The knowledge of Ethiopians on entrepreneurship is limited, since there is no practice of
business at an early age; even the majority of individuals hear what entrepreneurship means
after joining universities. Due to this, there is no good understanding or enough knowledge
of business creation. As per our KII responses, the skill and knowledge of society related to
business creation and management are investigated to be low, and a number of initiatives are
undertaken to improve this at the national and regional levels. In addition, there are many
institutions working to improve it as part of entrepreneurial ecosystem mapping. From gov-
ernment organizations, the minister of Innovation and technology, the Entrepreneurship
Development Center (EDC), and the Minister of Education are involved in improving entre-
preneurial skills and knowledge. The Minister of Innovation and Technology developed an
incubation center and trained entrepreneurs for 6 months. Business ideas that pass this stage
will proceed to the next stage, which is the production stage, and start promoting samples of
products. EDC has also developed incubation centers in collaboration with higher education
institutions, such as Addis Ababa, Jimma, and Bahir Dar Universities, providing support for
youth entrepreneurs. The Minister of Education conducted a project called "Zoning Study"
with the objective of identifying opportunities and potential resources for new entrepreneurs
for the last 5 years, and the results will be provided soon to all concerned bodies. Higher edu-
cation institutions and vocational and technical colleges are centers of excellence in promot-
ing knowledge and skills in entrepreneurship via teaching courses, providing training, and
then creating initiatives. With this regard, Addis Ababa University, Ethiopian Technical Uni-
versity, Tegbare’ed TVET Center, Addis Ababa TVET College, and all vocational colleges at
district level are the main stockholders of the entrepreneurial ecosystem mapping, since they
are proving demand-driven training and developing projects that can scale up the knowledge
of SME in Ethiopia. The training includes financial management, Kaizen, updated technolo-
gies, and any other demand-driven topics.
Business culture and attitudinal change in Ethiopia

The fact that business culture is not well-developed can be explained in the following
three aspects: first, almost all of society gives more acceptance to white collar workers,
and this attitude leads to less initiative in business creation. Being on staff of a govern-
ment office is preferred, and that is why graduate students expect the government to cre-
ate jobs and hire them instead of creating them on their own. The second manifestation
of business culture in Ethiopia can be expressed as the transfer of MSMEs from family
to children. For those who engage in businesses, it is just like the transfer of a job from
father to son (if the father practiced retail trade, the child would continue with it; if the
mother is experienced in garments, then her child would follow it), and this is a barrier
to new business ideas being developed and put into practice.
Finally, the majority of business owners want to do business with their relatives or
friends, and more focus is placed on forming good friendships. Because of this, business
activities, including meetings of MSME members, are informal and do not emphasize
how to scale up businesses and make them more profitable. When we assess the culture
of the society in relation to green entrepreneurship, it is derived from the general business
culture. The society does not use green product targets fully to initiate green production
and sustain the environment. Production of environmentally friendly products requires
the use of organic inputs with relative high costs, but the society does not understand this
and compares only products based on their prices, then purchases cheap products. This
business culture in society creates a conducive environment for polluting production and
discourages the development of green enterprises. Media were expected to do better to
improve the business culture of Ethiopia, but the majority of mainstream media failed, and
only little has been done. Among the good practices of media to develop entrepreneur-
ship activities, Fana B.C., in its program named "Alem Shemach," which connects products
of MSME with customers, Entrepreneurial competition on ARTS TV, and promotion in
Capital magazine can be taken as examples. Capital magazine has done well by promoting
entrepreneurship for the past 15 years under a column called "Entrepreneurial Profile".
Conclusion and recommendation

This research was conducted to identify the basic determinants of the performance of MSMEs
in Ethiopia and to try to develop an entrepreneurial ecosystem mapping to connect those
enterprises with the concerned stakeholders, which can contribute to the improvement of the
performance of micro, small, and medium enterprises. To achieve the objectives of the study,
both primary and secondary data have been used. Primary data from 400 sampled enterprises
is analyzed using ordered logistic regression, and data collected from stakeholder interviews is
analyzed using descriptive analysis to develop the ecosystem mapping. Accordingly, academic
institutions, such as universities, financial institutions, such as banks and credit associations,
NGOs, such as GIZ and R4C, and government organizations are important actors in entre-
preneurship in Ethiopia. Finally, the result of the ordered logit model indicates that access to
finance, training, and raw materials, experience, level of education, and sectoral dummy are
statistically significant factors that affect the performance of MSMEs. Since those enterprises
are very important in achieving economic growth, support in the form of training, finance,
and market raw material provision is expected from the government of Ethiopia. Based on
the result of the data analysis process, we recommend the government of Ethiopia give more
emphasis to MSMEs in different forms, such as providing support in the form of financial,
training, market, and raw material linkages, since those enterprises are the driving forces for
economic growth. Additional international and local NGOs are playing a significant role in
supporting small firms, and they had better continue their financial and technical support,
starting from awareness creation to the production process, to continue being key actors in
supporting small businesses in Ethiopia.
Appendix
Stata result of ordered logit model
. ologit profitstatus exper sector accesstorawmaterial creditaccess education training accesstom

> ness , robust
Iteration 0: log pseudolikelihood = -328.2406

Ordered logistic regression Number of obs = 400

Wald chi2(9) = 80.81
Prob > chi2 = 0.0000
Log pseudolikelihood = -295.4215 Pseudo R2 = 0.1000
Robust
profitstatus Coef. Std. Err. z P>|z| [95% Conf. Interval]
experiance -.3403517 .1582955 -2.15 0.032 -.6506052 -.0300981

sector .0148857 .0041455 3.59 0.000 .0067607 .0230107
accesstorawmaterial -1.057931 .2064877 -5.12 0.000 -1.46264 -.6532231
creditaccess .0149492 .0071187 2.10 0.036 .0009968 .0289017
education -.5654391 .1744702 -3.24 0.001 -.9073944 -.2234839
training -.3409179 .1583003 -2.15 0.031 -.6511807 -.0306551
accesstomarket .0558429 .2387491 0.23 0.815 -.4120968 .5237825
ageofbusiness -.0240473 .2148682 -0.11 0.911 -.4451813 .3970867
locationofbusiness -.0073559 .0102348 -0.72 0.472 -.0274157 .0127038
/cut1 -4.234459 .5930455 -5.396806 -3.072111

/cut2 -.4538781 .5432117 -1.518553 .6107972
Proportional odds assumption test
. oparallel
Tests of the parallel regression assumption
Chi2 df P>Chi2
Wolfe Gould 20.55 14 0.114

Brant 16.95 14 0.259
score 20.1 14 0.127
likelihood ratio 23.11 14 0.059
Wald 17.66 14 0.223
Heteroscedasticity test
. hettest
Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of lny
chi2(1) = 2.05
Prob > chi2 = 0.1517
Normality test of the error term
. swilk r
Shapiro-Wilk W test for normal data
Variable Obs W V z Prob>z
r 4877 0.78052 581.624 16.690 0.00000
Abbreviations
CBE Commercial Bank of Ethiopia
DBE Development Bank of Ethiopia
ETV Ethiopian Television
GIZ Deutsche Geselleschaft Fur International Zusammenarbeit
IFAD International Fund for Agriculture
MFI Micro Finance Institutions
MSMEs Micro Small and Medium Enterprises
NGOs Non-Governmental Organizations
UNIDO United Nations Industrial Development Organization
R4C Reach for Change
TVET Technical and Vocational Education and Training Center
Acknowledgements
We want to acknowledge R4C and the GW consultancy office for their support to collect the data and technical contri-
bution in analyzing the data in the process of developing the ecosystem mapping.
Limitation of the study

At the time of conducting this research, financial constraints were the most challenging issue. The researchers face a lack
of money to collect data from sampled enterprises after paying their per-diam fees, in addition to the low willingness
of the key informants to provide information about the support provided by their institution to the development of
MSMEs.
Author contributions
TWA (Principal Researcher) developed the methodology and analysed the data and HES (Co-Author) contributed in data
collection and data interpretation.
Funding
No funding was obtained for this study.
Availability of data and materials

The data are in the hands of the principal researcher, and we can provide it to editors when needed.
Declarations
Competing interests
The authors declare that they do not have any competing interests.
Received: 16 May 2023 Accepted: 25 September 2023
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Micro, Small and Medium Enterprises and Their Linkage With Key Actors in Ethiopia: Developing Entrepreneurial Ecosystem Mapping

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Abate and Sheferaw ﻿ Journal of Innovation and

Journal of Innovation and Entrepreneurship (2023) 12:71

RESEARCH Open Access

Micro, small and medium enterprises

businesses: self-employed, sole traders, partnerships (general partnerships and limited

The definition provided in the 1997 SME strategy

Small and medium enterprises in Ethiopia

Table 1 Definition of micro and small enterprises

Micro enterprises ≤ ETB 20,000 (USD 1200)

Empirical literature review

Cross country empirical works

Conceptual frame work of entrepreneurial ecosystem mapping

Fig. 1 ILO’s inclusive entrepreneurship ecosystem framework

exercise. Building on Isenberg’s (2011) entrepreneurship ecosystem model, the approach

Data and methodology

Sample size and sampling procedure

where n = desired sample size.

Econometric model specification and estimation technique

Table 2 Classification of enterprises performance

Micro enterprises Industry ≤5 ≤ 100,000

Results and discussion

Table 3 Description of explanatory variables

Access to credit 1 = If the firm accessed Credit, +

Table 4 Summary statistics of dummy variables

Location of business Urban area = 1 400 322 80.5

Table 5 Descriptive summary of continues variables

Owners experience Continues 36.13 10.6 20 61 0.69 3.43

Cross tabulation profit status and determinant variables

low profit medium profit high profit

Fig. 2 Profit status of sampled enterprises in the study area

Fig. 3 Cross tabulation of gender with profit status of enterprises

low profit medium profit high profit low medium high

Econometric model results

Table 6 Marginal effect of ordered logistic regression model

CRED 0.0076675 0.069 0.0716776 0.039 0.0226079 0.049

Post estimation tests

Table 7 Variance inflation factor of the continues variables

AGOB 1.25 0.802242

Test of normality of the error term

Entrepreneurial ecosystem mapping of Ethiopia

Fig. 6 Key actors in financing MSMEs

Fig. 7 Key actors of human capital in Ethiopia entrepreneurship

MFIs are fundamentally mandated in their establishment to mobilize savings from

Key actors in human capital development

Business culture and attitudinal change in Ethiopia

Conclusion and recommendation

. ologit profitstatus exper sector accesstorawmaterial creditaccess education training accesstom

Iteration 0: log pseudolikelihood = -328.2406

Ordered logistic regression Number of obs = 400

experiance -.3403517 .1582955 -2.15 0.032 -.6506052 -.0300981

/cut1 -4.234459 .5930455 -5.396806 -3.072111

Proportional odds assumption test

Tests of the parallel regression assumption

Wolfe Gould 20.55 14 0.114

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Normality test of the error term

Shapiro-Wilk W test for normal data

Variable Obs W V z Prob>z

r 4877 0.78052 581.624 16.690 0.00000

Abate and Sheferaw Journal of Innovation and