Determinants of Business Linkage Between Medium-Small and Large Business Enterprises in Manufacturing Sector: The Case of Kombolcha City

Abstract

The Medium and Small Enterprises (MSE) sector in Ethiopia is faced with many challenges and constraints including business linkages with large enterprises. Business linkages give MSEs the opportunity to participate as suppliers, distributors or retailers in commercial value chains which can help increase local job and wealth creation, enhance skills and capacity, add purchasing power and generally stimulate economic activity and development-contributing in the process, to quality of life. Despite the critical roles played by the business linkages in distributor MSEs in the textile sub-sector, they have been experiencing determinants leading to low- performance or limited linkage with large enterprises. This study was conducted in Amhara region, south wollo zone, Kombolcha city. The main purpose of this study was to explore the basic determinant factors of business linkages between MSEs and large firms in textile sub-sector in Kombolcha town. The population of this study was 71 MSEs and 1 large enterprise. Census method was used to conduct the research throughout enterprises in textile sub-sector and primary data was collected with the use of Self-administered questionnaire and key informant interview. The researcher had used mixed approach that was both qualitative and quantitative methods to identify and analyze determinants. Descriptive statistical methods and logit regression model supported by qualitative analysis had been employed SPSS and STATA software to analyses the collected data. The result showed that the business linkage between small and large business in Kombolcha city particularly in textile sub-sector was found limited. MSEs in Kombolcha city are facing a lot of problems that hinder their business linkage; lack of raw materials is the most series problem. Determinants such as education levels, raw materials, technology, training, and leadership were found significant that affect business linkage positively. Therefore  the study suggest that improving educational levels of MSEs owners, availability of raw materials, training like technical and managerial skills, giving attention to assure capable and committed leadership and for the future intervention strategies aimed at the mutual benefit between MSEs and large enterprises and technological transformation to strengthen business linkage . The government and private sectors are expected to exert strong effort to create business linkage between MSEs and large businesses in textile sub-sector.

Keywords: - Business linkage, Determinants, MSEs, Large, Enterprises

DOI: 10.7176/JESD/10-3-08