An Analysis of Firm Growth in Ethiopia: An Exploration of High-Growth Firms

Abstract

This study identifies the incidence of high-growth firms (HGFs) in Ethiopia with their corresponding business obstacles and growth determinants. The research is based on data from the World Bank’s Enterprise Survey dataset (World Bank Enterprise Survey. The World Bank, Washington, DC, 2015). The survey covered 848 firms distributed over six major regions in the country—Addis Ababa, Oromia, Amhara, SNNP, Tigray and Dire Dawa. The analysis was done using OLS and QR. HGFs were concentrated in the capital city and in the services sector while medium-sized firms dominated the HGFs. Like non-HGFs, access to finance was the biggest perceived obstacle for HGFs followed by tax rates as compared to the informal sector’s activities for non-HGFs. Region-wise, access to finance was the key problem only for firms operating in Addis Ababa and Tigray while the informal sector dominated in Oromia region. In Amhara region, corruption was the most significant obstacle. The econometric estimation results show that firm growth was negatively related to firm size. Growth were associated positively with firms’ products and process innovations, resources and firms website. The research fails to show any significant difference among firms’ growth based on gender of ownership, competition, capacity utilization and nationality of ownership. The heterogeneity in business obstacles across regions and performance of firms can be taken as important lessons for policy interventions.