34 research outputs found
Innovation and Microenterprises Growth in Ethiopia
This paper addresses two prominent issues on the development of small enterprises in Africa. Which factors inhibit or foster innovation activities in small enterprises? Do innovators create more jobs? We use a large set of microenterprises survey data from Ethiopia that comprise 1000 observations with ten and fewer workers. The analysis shows that firms larger in size and in manufacturing are more likely to engage in innovative activities. Among the human capital variables vocational training is found to have a strong effect on the innovation activity. However, firms owned by female and old entrepreneurs are less likely to get involved in innovation. In an extended model of firm growth determinants that includes innovation indicators we found strong evidence that innovators grow faster than non-innovators. Firm growth is also affected by other factors such as the firm's initial size, age, access to finance, sector, and owner character. Our estimation results provide supporting evidence to the stylized fact that the smaller, younger, and less capital constrained firms grow faster than their counterparts. Firms in manufacturing also grow faster than other sectors.micro and small enterprises, firm growth, innovation, developing countries, Ethiopia
Industries without smokestacks: Implications for Ethiopia's industrialization
Although the manufacturing sector is known to have a unique role in structural transformation, the industries without smokestacks that include tradable services (e.g., IT, tourism, transport), horticulture, and agro-industry can provide new opportunities for export development in low-income countries and in turn drive economic growth. With vast natural and man-made tourist attractions and diversified agroecological advantage, Ethiopia is particularly well positioned to exploit the opportunities in industries without smokestacks. This study takes the case of Ethiopia and examines the current state and contribution of the industries without smokestacks to the economy and exports with the aim of improving our understanding of the major bottlenecks and solutions to unlocking the potential of these industries. It gives special attention to the horticulture and tourism industries, given the huge unexploited potential of these sectors in Ethiopia
Industrial policy and development in Ethiopia: Evolution and present experimentation
There has recently been a resurgence of interest in industrial policy. This paper examines the choices, implementation processes, and outcomes of the Ethiopian present industrial policy. The country represents an excellent case study of recent industrial policy experimentation in Africa as it is one of the few countries that has formulated and implemented a comprehensive industrial policy early on when the term industrial policy had been a taboo in the international policy forums. By providing detailed assessment of the policy practice this paper seeks to inform the ongoing industrial policy debate
Innovation performance and embeddedness in networks: evidence from the Ethiopian footwear cluster
This study focuses on innovation in a cluster of informal shoemaking firms in Ethiopia - namely the Mercato footwear cluster. It examines how differently those firms are embedded in networks and how heterogeneous they are in absorptive capacity, and how this heterogeneity affects their innovation performance. Business interactions with buyers, suppliers and other producers are the major channels through which knowledge flows into the cluster. These business networks are mainly built on trust and long-term relationships and tend to be selective. The study reveals that despite homogeneity in social background the firms in the cluster behave and perform differently. Based on econometric analysis we document a positive and strong effect of local network position and absorptive capacity on innovation performance.industrial clusters, networks, innovation performance, informal sector, Africa, Ethiopia
A natural experiment of industrial policy: Floriculture and the metal and engineering industries in Ethiopia
Ethiopia represents an excellent case study of recent industrial policy experimentation in Africa. The country is well known for its successful promotion of the cut-flower industry through business-government co-ordination. What is less known is that at nearly the same time it was also using co-ordination to promote the metal and engineering industry with little success. This study provides comparative analysis of the policy process and outcomes of the interventions in these two industries. Examining why one intervention worked and the other failed in the same political context and institutional setting provides a natural experiment to draw valuable lessons
Inactions and Spikes of Investment in Ethiopian Manufacturing Firms: Empirical Evidence on Irreversibility and Non-convexities
This paper provides empirical evidence on the effect of irreversibility and non-convexities in adjustment costs on firm investment decision based on 1996-2002 firm level data from the Ethiopian manufacturing. It relies on a rich census based panel data set that gives the advantage of disaggregating investment into different types of fixed assets. We document evidence of a large percentage of inaction intermitted with lumpy investment, which is consistent with irreversibility and fixed costs but not with the standard convex adjustment costs. The inaction is higher and investment lumpier for small firms. We complement the descriptive analysis with two econometric methods: a capital imbalance approach and a machine replacement model. With the capital imbalance approach we estimate the investment response of firms to their capital imbalance using a non-parametric Nadaraya-Watson kernel smoothing method. With the machinery replacement approach using a proportional hazard model that takes unobserved heterogeneity into account, we estimate the probability of an investment spike conditional on the length of the interval from the last investment spike.Investment, irreversibility and adjustment costs, manufacturing, Ethiopia
Learning to export and learning by exporting: The case of Ethiopian manufacturing
In this study, we investigate the relationship between exporting and firm performance using a longer panel dataset of Ethiopian manufacturing firms for the period 1996 - 2009. We test two hypotheses regarding exporting: selection into exporting versus learning by exporting. According to the selection into exporting hypothesis, more productive firms self-select into exporting due to high entry costs. The learning by exporting hypothesis, on the other hand, emphasizes that firms learn after entering into the export market. We find evidence in support of both self-selection and learning by exporting
Gradual Trade Liberalization and Firm Performance in Ethiopia
We use firm-level data for the Ethiopian manufacturing sector matched with commodity- level data on tariffs to examine the effect of trade liberalization on firm performance during the 1997-2005 period. We find relatively large positive effects of tariff reductions on total factor productivity, a result that is robust to treating tariffs as endogenous, and to various generalizations of the baseline model. This affects is primarily driven by mechanisms operating at high tariff level, suggesting that excessive tariff levels may be particularly distortionary. We find some evidence that the reduction of tariffs has resulted in smaller and more capital-intensive domestic firms. We note that these effects are consistent with the hypothesis that the trade liberalization has increased competition in the domestic market. We find no significant effect of the trade liberalization on entry or exit rates.
Enterprise agglomeration, output prices, and physical productivity: Firm-level evidence from Ethiopia
We use census panel data on Ethiopian manufacturing firms to analyze the connections between enterprise agglomeration, firm-level output prices and physical productivity. We find a negative and statistically significant relationship between the agglomeration of firms that produce a given product in a given location and the price of that product in the location. We further find a positive and statistically significant relationship between the agglomeration of firms that produce a given product in a location and the physical productivity of firms in the same location producing that product. These results are consistent with the notion that agglomeration generates higher competitive pressure and positive externalities. The net effect of agglomeration of own-product firms on firm-level revenues is close to zero, suggesting that firms do not have strong incentives to agglomerate endogenously. Across firms that produce different products, we find no statistically significant relationship between agglomeration and firm-level output prices and productivity
Drivers of Quality Problems in the Leather Sector Value Chain in Ethiopia
Ethiopia prioritizes the leather sector. However, the sector has underperformed relative to targets and Ethiopia’s potential. It has been long recognized that the major problem is the quality of raw hides and skins in the Ethiopian leather sector value chain. However, there has
been little evidence how and why quality leakages happen along the leather sector value chain. Our thorough analysis of the leather sector value chain shows that the quality problems are caused by structural problems (at the breeding and post-breeding stages), disconnect between quality and price (i.e., price does not signal quality), lack of efficient marketing, transportation and storage systems, and lack of better tanning technologies