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Abstract

This research article examines factors that influence the long-term survival and viability of a random sample of 500 micro small and medium enterprises (MSMEs) located in five geographical regions of Ethiopia based on a 6-year long follow-up study. The objective of the study is to identify key predictors of long term survival and viability in small businesses and enterprises in Ethiopia, and to find out if small businesses and enterprises operated by male entrepreneurs perform better than those operated by female entrepreneurs in Ethiopia. Data was gathered on key determinants of survival such as access to finance, managerial skills, level of education, level of technical skills, ability to convert profit back into investment, etc. between 1996 and 2001. Econometric methods such as Kaplan-Meier survival probability curves and the Cox proportional hazards model were used for data analysis. 221 of the 500 businesses in the study (44%) were operated or owned by women. 110 of the 500 businesses in the study (22%) had failed at the end of the study period. The majority of businesses that failed were operated by women (78%). 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. Businesses that failed were characterized by inability in obtaining loans from formal money lending institutions such as commercial banks (61%), inability to convert part of profit back into investment (46%), poor managerial skills (54%), shortage of technical skills (49%), and low level of education (55%). Based on hazard ratios estimated from Cox regression, businesses operated by women were 2.52 times more likely to fail in comparison with businesses operated by men.

Note on the Author

Eshetu Bekele is a Ph.D. student of economics at the University of the Western Cape at Bellville, South Africa. This article is based on his doctoral study. The study is based on a 6-year follow-up study of 500 small businesses and enterprises in five major cities of Ethiopia, and compares businesses operated by women entrepreneurs with businesses operated by male entrepreneurs with regards to long term survival.

Zeleke Worku is an associate professor of statistics at the Department of Statistics of the University of South Africa (UNISA) in Pretoria, South Africa.

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