External Factors Affecting Firm Growth: Evidence from Small Scale Manufacturing Firms in Tigray Regional State of Ethiopia

Abstract

It is widely agreed that small scale enterprises (SSEs) used to play a crucial role in achieving the industrial and economic development. Though SSEs play indispensable economic role, studies are limited to analyze the external factors that affect the growth of SSEs independently. Therefore, the objective of this paper is to examine the effect of external firm factors influencing small scale manufacturing enterprises in the Tigray regional state of Ethiopia. Data was collected from 259 manufacturing SSEs in Tigray Region through semi-structured questionnaire and interview. The Multinomial logistic regression model was used to examine the effect of explanatory variables on unordered response variable. The result indicates that infrastructural development, competition, and access to market are positively and significantly determines the growth of SSEs. While the level of interest rate influences the growth of SSEs negatively and significantly. The effects of credit access and business development services were statistically insignificant. The policy towards job creation and industrial development can take into consideration these external factors to promote the start up and growth of SSEs.