Firew Mulatu

NETWORKING AND BUSINESS PERFORMANCE OF MEDIUM SIZED
ENTERPRISES IN ADDIS ABABA
A THESIS SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES OF
ADDIS ABABA UNIVERSITY IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE MASTER OF BUSINESS ADMINISTRATION
(MBA) DEGREE.
BY: FIREW MULATU
ADVISOR: Dr. ZEWDIE SHIBRE
FEBRUARY, 2014
ADDIS ABABA
i
ADDIS ABABA UNIVERSITY
SCHOOL OF GRADUATE STUDIES
This is to certify that this thesis prepared by Firew Mulatu, entitled: Networking
and Business Performance of Medium Sized Enterprises in Addis Ababa and
submitted in partial fulfillment of the requirements for the Master of Business
Administration (MBA) Degree complies with the regulation of the University and
meets the accepted standards with respect to originality and quality.
Approved by the Examining Committee:
Internal Examiner__________________________ Signature ___________ Date_____________
External Examiner _________________________ Signature ___________ Date_____________
Advisor ________________________________ Signature _________ Date _____________
________________________________
Chair of department or graduate program coordinator
ii
Abstract
In order to stay competitive in business and upgrade performance, SMEs need to work in
collaboration with others. To do this in today’s the so-called a “one village” world it is necessary to
create chain that gives value for business through networking. The purpose of this study was to test
the impact of networking on the business performance of medium sized enterprises in Addis Ababa.
The questionnaire survey method was used in this study to collect data from respondents. The data
was collected from 128 samples of respondents identified through stratified random sampling
technique and the collected data was analyzed using ordered probit model: which is one of nonlinear
models used for analyzing data measured on ordinal scale. In this survey study it was found that
networking with financial institutions, business associates, and quality of the relationship in network
positively and significantly related with business performance of medium sized enterprises. In
addition to this, the resource acquisition capability of the network was negatively and significantly
related with business performance of medium sized enterprises. The result of this study suggests that
networking relationship with different types of supporting institutions and business associations
significantly improves the business performance of medium sized enterprises in Addis Ababa.
iii
Acknowledgement
I wish to acknowledge everyone who has helped me in different aspects in the accomplishment of
this study. First of all, I would like to thank the Almighty God for giving me strength and peace.
Secondly, I would like to express my deepest gratitude to my research advisor Dr. Zewdie Shibre for
his valuable advice and encouragement to accomplish this research work successfully. Thirdly, I
would like to also express thanks to my friends, colleagues, to Mr. Asres Abitie (MBA program
coordinator, Management Department) and Dr. Mohammed Seid (Chairperson of Management
Department), and to my family for their extensive support throughout the entire process of my study,
and to all others who have contributed directly or indirectly to the successful completion of my
thesis work.
iv
Table of Contents
List of Figures ............................................................................................................viii
List of Tables................................................................................................................ ix
List of Acronyms and Abbreviations ......................................................................... x
CHAPTER ONE: INTRODUCTION ........................................................................ 1
1.1 Background of the Study ........................................................................................................................... 1

1.2 Statement of the Problem......................................................................................................................... 3
1.3 Research Questions ................................................................................................................................... 4
1.4 The Objective of the Study ........................................................................................................................ 5
1.4.1 General Objective ............................................................................................................................... 5
1.4.2 Specific Objective ............................................................................................................................. 5
1.5 Research Hypothesis ................................................................................................................................. 5
1.6 Significance of the Study ........................................................................................................................... 6
1.7 Scope of the Study .................................................................................................................................... 6
1.8 Limitations of the Study ............................................................................................................................ 7
1.9 Organization of the Study ......................................................................................................................... 7
CHAPTER TWO: REVIEW OF RELATED LITRATURE .................................. 8
2.1 Overview and Concept of Networking ...................................................................................................... 8

2.2 Type of Networking .................................................................................................................................10
2.2.1 Horizontal Networking .....................................................................................................................10
2.2.2 Vertical Networking..........................................................................................................................11
2.3 Theories Related to Networking .............................................................................................................11
v
2.4 Networking and SMEs .............................................................................................................................11
2.5 Overview and Definition Small and Medium Enterprises .......................................................................12
2.6 Review of Related Previous Studies on Networking and Business Performance of SMEs ....................14
2.7 Conclusion and Knowledge Gap .............................................................................................................21
2.8 Conceptual Framework of the Study .....................................................................................................22
CHAPTER THREE: RESEARCH METHODOLOGY ........................................ 24
3.1 Introduction.............................................................................................................................................24
3.2 Study Area and Subject ...........................................................................................................................24
3.3 Research Design ......................................................................................................................................24
3.4 Instrumentations ....................................................................................................................................25
3.5 Population, Sample and Sample Size Determination .............................................................................26
3.6 Description of Variables for the Study ...................................................................................................29
3.7 Method of Data Analysis ........................................................................................................................30
3.8 Econometrics Model Specification .........................................................................................................30
CHAPTER FOUR: PRESENTATION, ANALYSIS AND INTERPRETATION ..
OF THE FINDINGS……………………………….……………………………… 33
4.1 Descriptive Statistics Analysis .................................................................................................................33

4.2 Reliability and Validity Tests....................................................................................................................41
4.2.1 Construct Reliability .........................................................................................................................41
4.2.2 Validity..............................................................................................................................................41
4.3 Specification Tests of the Model .............................................................................................................44
4.3.1 Heteroskedasticity Test ....................................................................................................................44
4.3.2 Normality Test Using Shapiro Wilk Test ...........................................................................................45
4.3.3 Multicollinarity Test .........................................................................................................................46
4.4 Ordered Probit Model Test Result ..........................................................................................................46
4.5 Marginal Effects of Independent Variables .............................................................................................48
4.6 Discussion of Results ...............................................................................................................................49
4.7 Summary of Findings ...............................................................................................................................50
vi
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION....................... 52
5.1 Conclusion ...............................................................................................................................................52

5.2 Managerial Implications of this Study .....................................................................................................52
5.3 Recommendations for Practical Application ...........................................................................................53
5.3.1 Medium Sized Enterprises................................................................................................................53
5.3.2 The Government ..............................................................................................................................54
5.4 Directions for Future Research ...............................................................................................................56
BIBLIOGRAPHY ....................................................................................................... xi
APPENDICES .........................................................................................................xviii
vii
List of Figures page
Figure 2.1. Conceptual Frame Work for the Study 23
Figure 4.1 Bar Chart of Ordinal Data Using Median 44
viii
List of Tables page
Table 2.1: SMEs definition in Ethiopia based on the paid up capital and number of workers.. 13
Table 3.1: Allocation of samples for early stratum (Planned Sample of Respondents) 29
Table 3.2: Function of control variables 33
Table 4.1: Number of samples actually used in the study 34
Table 4.2: networking problems of sampled firms ………………………………………………….35
Table 4.3: Mean value of firm age and firm size 43
Table 4.4: Reliability analyses of variables of the study using cronbach’s alpha 45
Table 4.5: Factor and reliability test of type of networking 47
Table 4.6: White’s test of heteroskedasticity 50
Table 4.7: Shapiro wilk test of normality 50
Table 4.8: Test of multicollinarity among independent variables 52
Table 4.9: Ordered probit model test result 52
Table 4.9.1: Marginal effects of independent variables 54
ix
List of Acronyms and Abbreviations
1. SME’s ………………………………….. Small and Medium Enterprises.
2. FEMSEDA………………………………. Federal Micro and Small Enterprise
Development Agency
3. UNIDO …………………………………...United nation international development
organization
4. CEO ……………………………………….Chief executive officer
5. ICT ……………………………………….. Information Communication Technology
x
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study

The current business environment creates obstacles for SMEs. In order to stay competitive in
business, SMEs need to work in collaboration with others. To do this in today’s the so-called a “one
village” world it is necessary to create chain that gives value for the stakeholders through
networking. Different writers define networking, for our purpose we take some of them. For
example, Easton (1992) defined networking as exchange dimensions in two or more connected
relationships. Lewis, (1990) defined network by dividing in to two parts: vertical network and
horizontal network. Vertical network is formed for the objective of solving for example like:
marketing problems with buyers, suppliers, producers. Vertical networks are also termed as
marketing channel networks. But, horizontal network is formed between competing firms (like:
similar enterprises operating in given sector) for co-operation purpose. In addition to this, Shibre et
al., (2003) also defined horizontal linkage: associations formed with similar enterprises located in a
given geographical area having aim of like: joint purchase of raw materials. While linkage formed
between small scales, medium and large enterprise for purpose of subcontracting network is known
as vertical network (Shibre et al., 2003).
The Ethiopian SMEs in current period is highly influenced by the lack of integration among
SMEs themselves and with other external resources starting from resources like :government in
giving enough training and support on their constraints, suppliers of raw material, customers,
financial institutions and with others stakeholders. Many researchers put their effort on analyzing
the effect of business networking in maximizing performance of SMEs and solving problem
related to their business operation as we can see below.
1
Tooksoon and Mudor (2012), finding showed that the business network was statistically significant
and positively associated with export success and export penetrations. Institutional network was also
statistically significant but shows a negative association with export performance. However
knowledge network was not associated with both dimensions of export performance. Tooksoon and
Mohamed (2010) also found that external resources that contributed positively to export
performance were: financial institutions, and business associates. Even though the government
agencies were also statistically significant but show a negative association. Trade association and
knowledge association were not associated with export performance. Ge et al., (2009) studied the
impact of networking and resource acquisition on the performance of SMEs. This study was
conducted by taking a total sample of 227 firms from the three cities in china and found that
resource acquisition capability and resource acquisition outcome of the network were positively
related with firm performance.
Even though the previous studies had their own contribution in investigating the networking
performance of SMEs, there were limitations that might affect the reliability and validity of the
result of the study in terms of methodology used, data analysis, and conclusion drawn. The major
one were: the existence of different arguments about the impact of networking on the performance
of SMEs, the use of incorrect statistical tests for the type of measurement scales employed in the
study, the low response rate of the respondents and a focus on a single sector were among the major
ones. In addition to this, many studies have been done on the impact of networking on the
performance of SMEs, but little information available on the impact of networking on the
performance of SMEs investigated in the Ethiopia case. Especially, most of the studies investigated
the networking and export performance relationship on SMEs. But very little is known about the
impact of networking on the domestic business performance of medium sized enterprises (which
2
were transformed from Micro and Small Enterprises) in Ethiopian case. Thus, the purpose of this
study was to identify the existing networking practice and measuring the effect of networking on the
business performance medium sized enterprises in Addis Ababa. This study may lead to a better
understanding of the impact of networking on the business performance of medium sized enterprises
to the Ethiopian enterprises as well as to the world of literature and for all concerned bodies.
1.2 Statement of the Problem

According to Barney (1991), the major determinants of a firm’s performance and strategy are the
internal organization resources. However, only focusing on internal organizational resources ignores
the advantages that a firm may possess due to its being linked to an external network (Dyer and
Singh, 1998). Because, through business relationship various value chain activities like market
knowledge can be gained by the firms. In turn these speedup growths of firms by maximizing
business performance through identifying customers need and tailoring appropriate solution, being
competent in domestic as well as international market by decreasing uncertainties involved in the
market place (Basile, 2012). Anderson and Narus, (1990) argued that, the scarce resources acquired
through the business relationships are products, services, money, information, know-how and
personnel. Especially for small and medium size enterprises business network relationship is much
important than large business in a way that in solving their constraints like marketing, finance ,
management skills and for sharing resources and capabilities with others (Johnson and
Scholes,2005) .Even though the above is true, according to Ethiopian Federal Micro and Small
Enterprise Development Agency Strategy(FEMSEDA,2010) the aim of the government among
other is creating employment opportunity, increasing export and reduce import through small and
medium size enterprise. But, the sector is hampered by problem of mainly market linkage
between and among other stakeholders (FEMSEDA,2010). Lewis (1990) stressed the opportunities
for co-operation for solving marketing problem, improving production efficiency, or exploiting a
3
market opportunity through resource mobilization and sharing. To the contrary, in the Ethiopia case,
most of the studies done on networking were exploratory in nature, for example that of Shibrie et al.,
(2003) involved in identifying the networking related problems of enterprises during their operations
specifically, focusing on the form and extent of linkage among firms and with other institutions.
They were not explanatory in nature that investigates the impact of networking on the performance
of small and medium sized enterprises. In addition to this, most of these studies focused on studying
the networking practice and problems of enterprises as general (without focusing on micro, small,
medium or large enterprises). Since medium sized enterprises are a bridge between small and large
firms, knowing in detail about the impact of networking on medium sized enterprises gives insight
for concerned bodies on how to accelerate the growth of small and medium sized enterprises, and to
lay down the base for the expansion of large industries or to bring industrialization. Thus, the
purpose of this study was to understand the current practice of networking relationship and to
measure the effect of networking on the business performance of Medium Sized Enterprises in the
manufacturing sector in Addis Ababa.
1.3 Research Questions

To address the above mentioned issues in the statement of the problem section, this study focuses on
the following research questions:
1) In what type of networking do medium sized enterprises in manufacturing sector involve?
2) How much is the impact of strength of relationship with networking resources on the
performance of medium sized enterprises in manufacturing sector?
3) How much is the impact of quality of relationship in the network on the performance of
medium sized enterprises in the manufacturing sector?
4
4) How much is the impact of the resource acquisition capability of the network on the
performance of medium sized enterprises in the manufacturing sector?
1.4 The Objective of the Study
1.4.1 General Objective
The aim of this study was to understand the existing networking relationship practice and
investigate the impact of networking on business performance of medium sized enterprises
in manufacturing sector in Addis Ababa.
1.4.2 Specific Objective
 Identifying in what kind of different networking relationships medium sized
enterprises involved.
 Measuring the impact of strength of tie with governmental agencies, financial
institution, trade associations and knowledge institutions on the performance of
medium sized enterprises.
 Analyzing the influence of quality of relationship in the network on the
performance of medium sized enterprises.
 Measuring the resource acquisition capability of the network on the performance
of medium sized enterprises.
1.5 Research Hypothesis

Based upon reviewed related literature on this study’s topic, the following research hypotheses
were formulated from the statement of the problem and research objective sections:
Hypothesis 1: Networking with governmental agencies is significantly related with business
5
Hypothesis 2: Networking with financial institutions is significantly related with business
Hypothesis 3 Networking with business associates is significantly related with business
Hypothesis 4: Networking with Trade association is significantly related with business
performance medium sized enterprises.
Hypothesis 5: Networking with knowledge institutions is significantly related with business
. Hypothesis 6: Quality of relationship in the network is significantly related with business
Performance of medium sized enterprises.
Hypothesis 7: Capability in resource acquisition in the network is significantly related with
business performance of medium sized enterprises.
1.6 Significance of the Study

The study will provide evidence of a networking and business performance relationship to the
Ethiopian Medium sized enterprises as well as to the world of literature and for all concerned
stakeholders. Further the study will reveal insight for government policy makers in how to solving
networking problems of medium sized enterprises in Addis Ababa.
1.7 Scope of the Study

This study confined itself in using only owner manager or manger in order to collect data for the
study through questionnaire. In order to investigate the impact of networking on the business
performance ranging from 2010 up to 2012 year, this study confined to medium sized enterprises
which were operating in the manufacturing sector in Addis Ababa.
6
1.8 Limitations of the Study
The major limitations of this study that may affect the reliability and validity of the study are: firstly,
the casual relationship between independent and dependent variables were tested with a single time
period on cross sectional study that paved the way for inferring causality based on observed
relationship . Secondly, in this study the mediating variables were not included between independent
and dependent variables .Therefore the relationship between variables might not be explained
directly without the involvement of mediating variables especially in entrepreneurship study.
Thirdly, this study was done only focusing on manufacturing sector. Thus, finding from this study
may not be generalized to other industry or sectors.
1.9 Organization of the Study

This paper was organized into five chapters .The first chapter presents the introduction part of study
that includes the background of the study , statement of the problem, objective of the study, research
hypothesis, significance of the study, scope and limitations of the study. The second chapter presents
review of related literature on the topic of the study composed of both theoretical and empirical
findings. Chapter three presents research methodology of the study that includes research design,
instrumentations, population and sample, description of the variables, method of data analysis and
model specification for the study. Chapter four presents data presentation, analysis and
interpretation. While in chapter five the conclusion and recommendations drawn from the study
depending upon the finding of the study was presented.
7
CHAPTER TWO: REVIEW OF RELATED LITRATURE
2.1 Overview and Concept of Networking

Networks are the arrangement among members of the network in order to receive and disseminate
different kinds of knowledge and resources. (Sternberg; Bechmann, cited in Li et al., 2013). There
are two major issues that determine whether or not a firm in the network really benefited from the
network involved in it: network structural and relational characteristics. Structural characteristics of
the network focuses on the capability of the network in giving to its members a favorable
environment for getting support, resources, and information, the significance of the information and
a network members awareness of partners who can give support and have a required knowledge.
Elements of the network structure are the size of the network (the number of networks a given
enterprise linked with), density of the network (the number of members in each network) and
network centrality: related with whether or not the information within the network is disseminated
among members of the network equally or not (Salaf and Greve; Ghosal and Nahapiet; Granovetter;
Burt, cited in Li et al., 2013). The relational characteristic of the network emphasizes the quality of
the relationship, stability of the network and the strength of the relationship exist between
networking partners (Granovetter; Burt, cited in Li et al., 2013). Doyle (cited in C Kenny, 2009)
defined Networks as systems of relationships between entrepreneurs and the outside world
particularly valuable to the small business sector. Pyke (cited in C Kenny, 2009) found that through
engaging in alliances and other co-operative arrangements, small firms can gain individual strength
and independence. Cooperation among SMEs has various advantages: the advantage of achieving
economies of scale, sharing of information about the latest techniques and technologies of
manufacturing, efficient distribution of activities, increase the size of production capacity (Mitford
Cited in C Kenny, 2009). In order to survive in the business, SMEs have two alternatives: one to
grow, second co-operate in networks. But networks are modern alternative for SMEs to get access to
8
the resources which they would be unable to obtain by acting alone (Doyle cited in C Kenny, 2009).
Rutashobya and Jaensson (cited in C Kenny, 2009) have shown that the benefit of networks are:
access to foreign market information and access to foreign markets.
Conway et al .,(2001) ;Conway and jones (2006) identified four components for networking this
are: actors, links ,flows and mechanisms . The actors are the individuals that make up the network.
They can be human beings, computers, places and organization .The links are the arches that
connect individuals. The flows indicate the exchanges that occur between the actors within the
network: flows of information, advice, money, goods, power, friendship, etc. The mechanisms of the
network are the modes interaction employed by the actors within the networks. They include: face-
to-face interactions, meetings, planning, and joint participation like in trade fairs or business
seminars. Cooperating with other firms can be an approach to managing internationalization risks
and uncertainties through domestic inter firm networks. According to Lin and Lawton (cited in C
Kenny, 2009), domestic inter firm network positively correlated with a perceived uncertainties and
risks associated with internationalization.
Generally, network includes a variety of different relationships among business units or firms, such
as strategic alliances, joint ventures, long-term supplier–buyer agreements, trade associations,
relationship among similar enterprises, institutional relationship, industrial districts, franchising and
other similar agreements or contracts. And the ultimate aim of the network is to give the firm access
to information, resources, markets and technologies and facilitates the acquisition of advantages
from economies of scale, learning. In addition to this, there are internal firm factors which affect the
networking ability of SMEs in terms of acquiring knowledge which is mainly from outside
environment by the firm by itself .One of these known as absorptive capacity of the firm: it
describes the source of knowledge of the firm in absorbing knowledge (market information) from
9
external sources. A firm can get knowledge from outside environment through the research and
development activities and by having human power equipped with knowledge, experience related to
scanning changes in technology and market (Giuliani and Bell, 2005). Since SMEs are small in their
size and financial capacity, it is not suitable for them for acquiring knowledge through research and
development activity rather they rely on upgrading their human resources with knowledge and
experience and making them active for searching knowledge through collaborating with external
firms and institutions (Gottardi, 2000). Thus, absorptive capacity of the firm internally increases the
firm networking ability for acquiring knowledge by the business itself other than pushed by other
external body and in turn improves performance of firms (Laursen and Salter, 2004).Because of
long year of existence in the business a firm may have an experience in a networking relationship
with different type of institutions and firms. In the literature reviewed, firm age increases the
networking relationship of SMEs and has an impact in improving business performance firms
(Watson, 2002; Ravichandran and Lertwongsatien, 2005).Firm size also identified as being
improving the performance of enterprises and affects the relationship between networking and
business performance of SMEs, (Maskell, 2001; Goerzen, 2007).
2.2 Type of Networking

In a broad classification networking classified in two major categories: horizontal and vertical
networking with their respective forms of establishments. Two criteria were identified for strategic
networking: the first one is the nature of the agreement among the partners and the second is
position of the networking along the entire value chain ( Inkpen and Tsang ,2005).
2.2.1 Horizontal Networking

Inkpen and Tsang (2005) explained horizontal networks: firms work together that have a similar
core business and join forces to achieve a very specific goal. This network can be among firms
working in the same industry or producing complimentary products . Firms working with this
10
type of network for example like: retailers linked in franchising networks who are interested in
selling products by adopting a common working system. Ghuari et al., (2003), also defined
horizontal network as “relationship among firms who want to solve a common marketing problem,
improve production efficiency, or exploit a market opportunity through resource mobilization and
sharing.”
2.2.2 Vertical Networking

Ghuari et al., (2003), defined vertical network as relationships between suppliers, producers and
buyers, aiming at a solution for marketing problems, improved production efficiency, or the
exploitation of market opportunities. In other dimension vertical networks are a network of firms
working together that includes a large range of business activities (Inkpen and Tsang, 2005).
2.3 Theories Related to Networking

There are three major types of theories in the firms networking literature: resource dependency
theory, transaction cost theory and social network theory. The resource dependency theory argues
that firms enter in network of relationship in order to gain access to scarce resources. Unlike the
resource dependency theory, transaction cost theory describes that collaboration among firms is
undertaken for the aim of minimizing transaction cost in doing different marketing activities. Social
network theory emphasizes the importance of trust, commitment in investing resources and times for
the network are crucial for the successful relationship within network. (Sahakijicharn, 2007;Casals,
2011).
2.4 Networking and SMEs

UNIDO (cited in Zeinalnezhad et al., 2011), scarcity of resources is one of the main problems of
SMEs. These enterprises unable to capture market opportunities that require large production
quantities, homogeneous standards, and regular supply. Also they have difficulties in achieving
economies of scale in the purchase of inputs. UNIDO also argued that SMEs can solve problems
11
with regard to economies of scale and scope imposed by their size by being linked into national,
regional and global networks of firms and value chains .Networked firms may enjoy higher growth
rates and better performance (Baum, et al., 2000; Zhao and Aram, 1995). Marketing networks also
affects firm’s strategic choices and performance (Batjargal and Liu cited in Hossein et al., 2011;
Peng and Luo, 2000). Networking significantly positively associated with firm survival. In addition
to this, formal and informal network are associated with firm survival, but that only formal networks
are associated with growth (Watson, cited in Hossein et al., 2011).
In Ethiopian case, according to the Federal Micro and Small Enterprise Development Agency[
FEMSEDA](2010):Micro and Small enterprise Development Policy and Strategy under MSE policy
support on market development and marketing supply system the government planned to realize
market network for SMEs and to allow activities in subcontracting networking with medium and
large enterprise. To do this the government adopted the support strategy of inter-firm business
linkage.
2.5 Overview and Definition Small and Medium Enterprises

There is no generally accepted definition of SMEs. Mostly used definition is the quantitative
definition measures such as the number of employees, total sales, and total assets in the international
context. There is no agreement what constitutes SMEs, because of different countries have their own
definition of what constitutes as SMEs. For example, Australian Bureau of Statistics (cited in
Zeinalnezhad et al., 2011) defined small businesses include sole proprietorships and partnerships.
Businesses employing fewer than five people as micro-businesses and other businesses employing
five or more people but less than 20 people as small ones, while medium-sized businesses were
those employing fewer than 200 people. According to UNIDO (cited in Zeinalnezhad et al.,2011),
the SMEs sector can be a strong pillar of support for regional and economic development, helps in
12
the generation of employment and income for the general benefit of regional and national
economies. In addition to this it plays important role in poverty alleviation, it stimulates
entrepreneurs to participate in the economic, political and social system of the country.
According to Ethiopian Federal Micro and Small Enterprises Development strategy paper
[FEMSEDA ](2010) ,defined SMEs depending upon the paid up capital and number of workers as
it is shown in the table below:
Table 2.1: SMEs definition in Ethiopia based on the paid up capital and number of workers
Enterprise type Sector Human resource Total asset

Micro enterprise
Manufacturing ≤5 ≤ Br. 100000
Service
≤5 ≤ Br. 50000
Manufacturing
Small enterprise 6 - 30 ≤ Br. 1.5 million
Service
6 -30 ≤ Br. 500 million
Source: Revised Federal Micro and Small enterprises Development Strategy (2010).
NOTE: Enterprises that do not belong to table 2.1 above categorized under transformed medium
level enterprises. In addition to this, the official definition of SMEs according to [FEMSEDA]
(2010) is similar to international definition of SMEs in using one of standardized measurement tools
(i.e. total asset and number of workers).But, differs in what constitute SMEs because of the level of
development of countries across the world (i.e. small enterprise in developed country may be
categorized under medium level enterprise in developing countries).
13
2.6 Review of Related Previous Studies on Networking and Business Performance of
SMEs
Several writers put their finding on the effect of network relationship on the business
performance of SMEs . It was tried to gather those empirical studies relating this study topic in the
following manner:
Li et al., (2013) studied the impact of network characteristics on the performance of firms in a mold
industry working in the province of china called Zhejiang within cluster. The study investigated the
influence of network structure: centrality and network relational characteristics: tie strength, tie
stability, and tie quality on the performance of firms within cluster ties and extra cluster ties. The
study used a total of 252 sample firms and measured the variables of the study on a multi- item likert
scale ranging from 1= totally disagree to 7=totally agree. The data was analyzed using descriptive
statistics and regression equation .The study finally found that the extra-cluster tie had a significant
effect on performance than in-cluster tie even though in -cluster tie had also positive effect on
performance. Elements of network characteristics had weak impact on the relationship between
extra-cluster ties and performance ,while network structure, network characteristics including tie
strength and tie stability had significant impact on the relationship between in-cluster ties and
performance .But in general speaking , tie stability had a positive influence on performance ,while
tie quality had a negative impact. The major limitation of this study was that the sampling unit in
which the data was collected limited to the specific single sector: mold industry .Thus this situation
might affect the generizability of the result of the study to the other sectors.
Tooksoon and Mudor (2012) studied the relationship between networking resources and export
performance among SMEs in Thai exporting the agro based sector. The objective of the study was to
suggest the idea of how networking resources relate to export performance. To achieve the aim of
the study, the total of 16 organizations were identified as being capable of enhancing exporters
14
effort to venture into international market . Interview through email was made with managers
resulting 10.09% response rate. The finding showed that the business network statistically
significant and positively associated with export success and export penetrations. While
institutional network was also statistically significant but shows a negative association with
export performance. However knowledge network was not associated with both dimensions of
export performance. The conclusion drawn from this study is questionable in its external validity
because of two reasons: in one hand small number of firms responded to the survey, on the other
hand the study only focused on the single sector: agriculture.
Behyan (2011), on the title of: Conceptualizing Export Performance Influences of Internationalizing
and Social Network , found that social network and foreign partnership had positive effect on the
internationalization process ,knowledge of foreign market opportunities ,international experience
and international knowledge . In addition to this, the relationship between social network and
export performance had positive effect on the export performance and its indicators such as
sales growth, profit growth and so on. But, the study did not tell us the impact of formal networking
relationship (domestic supporting institutions for SMEs) on the performance of SMEs: it was
focused only studying the impact of foreign partnership and interpersonal relationship on the
performance of SMEs.
Hassan and McCarthy (2011),on the study of :Influential capabilities for SMEs export performance,
they found that the capability to develop business networking, innovation capabilities and capability
to meet export standard were crucial for Malaysians SMEs export performance. The SMEs need
to focus on developing their business networking in order to enhance both their innovation
capabilities and their capability to meet export standards which in turn leads to export performance
improvement. The research followed a qualitative research approach by interviewing 23managers of
15
SMEs. The research design used in the study was exploratory in nature and the data was collected
through in depth interview with CEOs and employees. Since qualitative method of analysis used in
the study it difficult to confirm the reliability and validity of the result of the study statistically.
Che sinik et al., (2010) on their study of: Influential factors for SMEs internationalization: evidence
from Malaysia. They found that firm characteristics like: resources, skill and ability of owner
manager; Industry sector like intense competition and market attractiveness; external influence, and
motivational factors were influential factors for SMEs internationalization in Malaysia. But ,they
found that the most influencing factor was networking that firm has with its relevant institutions
and business associates like government, small or large business , local or foreign partners, friends
,colleagues and relatives .The method of data collection used in the study were expert panel and
exploratory study. The panel consisted of 32 experts including : academicians , policy makers
,governmental agencies , the chamber of commerce and research institutes. The exploratory study
by Delphi technique was used through telephone and e-mails. The limitation of this study was that it
did not used business men actually working in the business as respondents it only used panel of
experts: this may affect the understanding of the impact of networking relationship on performance
of business men. The other limitation of this study was that, the study did not used statistical method
of data analysis this may increase the researcher bias in interpreting the result of the study and may
affect the acceptance of the research finding.
Tooksoon & Mohamed (2010) on the title of : Achieving Financial Export performance the
Contribution of External Resources for the Thailand Manufacturing Exporting Firms in the
Agro based sector .The study identified the five external resources that have an effect on the
export performance of Thailand agro based exporting firms . The research methodology used in
this study was the cross sectional study using structured mail survey. According to the interview
16
from managers, a total of 15 organization were identified as being capable of enhancing exporters
effort to venture into international market .Finally five dimensions of networking were identified
and respondents were asked to indicate in what extent that they have committed resources
towards establishing relationship with these organizations on five point likert scale ranging from
: 1=not at all to 5= a great extent . The measurement of export performance were : export sales
growth and export profitability using a likert scale of ranging from : 1= much below expectation
, to 5= much above expectation. The collected data analyzed through descriptive statistics, Pearson
correlation and regression. It was finally found that external resources that contributed
positively to export performance were : financial institutions and business associates . Even
though the governmental agencies were also statistically significant, but showed a negative
association. Trade association and knowledge association were not associated with export
performance .The major limitation of this study was related to the questionability of its external
validity because of two reasons: in one hand small number of firms responded to the survey on the
other hand the study only focused on the single agricultural sector.
Nazer and Salem (2009) reviewed literature on firm level determinants of export performance. They
identified that firm’s characteristics: foreign contacts and networking, management characteristics
and marketing strategic capabilities. In the reviewed literature they found that a frequent contact that
an enterprise had with its networking resources had determinant factor for export performance. They
further noted that the foreign networking a firm has with foreign entities had a significant positive
influence on the export performance.
C Kenny(2009),studied the impact of networking capability on the international performance of
Ireland SMEs. The study focused on the three independent variables that make up the networking
capability namely: networking characteristics, networking operation and networking resources .The
17
networking characteristics comprised of : strong and weak tie form of networking collaboration,
relational capability and the trust exist in the relationship .The second independent variable:
networking operation composed of initiation ,coordination and learning exist in the network. The
third independent variable networking resources measured with human capital resources , synergy
sensitive resources and information sharing ability of the networking capability. The dependent
variable: international performance measured by objective and subjective measures of performance.
The data was analyzed using exploratory factor analysis, confirmatory factor analysis and structural
equation modeling. All variables were measured through questionnaires designed in seven point
likert scale. Finally it was found that , the strong tie than weak tie , capability in network
coordination and firm network human resources were positively and significantly related to
the international performance , while the other four which were positively but not significantly
related with international performance were synergy sensitive resources, the level of network
initiation capability ,trust between partners and strong tie networking. But, the other element of
hypothesis namely: information sharing ,relational capability of the firm, network learning and
weak tie type of collaboration were negatively and insignificantly related with international
performance. The major limitation of this study was it did not tell us the impact of trade fairs as a
factor of network initiation and its impact on the international performance of Ireland SMEs.
Ge et al., (2009) studied the impact of networking and resource acquisition on the performance of
SMEs. This study was conducted on the three cities in china .A total sample of 227 firms were
surveyed through personal interview and questionnaires designed on a five point likert scale. The
collected data analyzed by descriptive statistics, correlation and structural equation modeling and
finally it was found that networking intensity was positively related with resource acquisition
capability and resource acquisition outcome. In addition to this, there was a positive relationship
18
between networking range and resource acquisitions capability and resource acquisition outcome.
Adding to this, resource acquisition capability and resource acquisition outcome were positively
related with firm performance. The criticism against sampling method employed in this study was:
the study did not present the reason how and why the three cities of china selected for data
collection purpose. In addition to these, the study did not tell us which type of networking resources
had positive or negative impact on the performance of SMEs.
Pongapanich and phitya-Isarakul (2008), on the title of business network and export performance of
Thai exporters, they found that Business network of growers, exporters, freight providers to
importers are important for competitive and export performance of Thai fruit exports. The method of
data collection used for the study was mail survey and interview with Thai fruit exporters.
Parida (2008), studied small firm capabilities for competitiveness empirically by taking samples
from Swedish small ICT related firms. The units of analysis for the study were small firms. The data
was collected by interview and questionnaires from the CEOs of small firms. In this study variables
were measured on a seven point likert scale. The independent variables for the study were ICT
capability and dynamic capability .Dynamic capability in turn composed of absorptive, adaptive and
networking capabilities. Sub elements such as coordination activity, relational skills, partner
knowledge and internal communication within network were constructs for measuring networking
capability using likert type scale. There were two dependent variables namely: entrepreneurial
orientations and firm performance .Finally it was found that dynamic capability had significant
relationship with entrepreneurial orientation and firm performance, specifically networking
capability had strong relationship with firm performance. But, ICT capability had weak relationship
with firm performance and entrepreneurial orientations. The research hypothesis and items for
hquestionnaires were analyzed by hierarchical regression, factor analysis. This study used only two
19
years of data for analysis purpose this might affect the validity of the result of the study because of
the collected data lacks depth and breadth.
Chen et al.(2007) , by using mail survey of 104 firms in Taiwan, tested the impact of external
network : business network and partners network on the export performance of Taiwan firms. In
their study, they found that business network and network partners were positively and significantly
related with export performance. Babakus and Yavas (2007), studied the impact of foreign and
domestic networking on the performance of firms, and found that foreign networking had a
significant positive impact on performance, while domestic networking did not. They used a total of
193 samples of firms from Finland, Sweden and Norway in order to collect data for the study. Yiu et
al., (2007), by collecting data from the 274 firms in china using mail survey; they argued that
business network ties and institutional network ties were positively related with international
venturing. Sahakijpicharn (2007) studied the impact of social relationship on how it affects the
business performance of Sino-Thai SMEs. The variables investigated under this study were strength
of ties in the type of network, network embededness(quality),business uncertainty and business
performance. A total sample of 298 SMEs were used and the collected data analyzed through
kruskal-walis test, multiple regression, factor analysis and a multiple descriminant analysis .All
variables under the study were measured by questionnaire on seven point likert scale. The result of
the study revealed that family relationship tie strength was stronger than friend relationship. In
addition to this, strength of tie in the network positively related to the network embeddedeness
(quality of relationship) while the network embeddedness (quality) in turn positively related with
business performance. In this study strength of tie and business uncertainty were negatively related
and business uncertainty in turn negatively related with business performance.
20
Ghauri et al, (2003) on their study of: Using Network to Solve Export Marketing Problems of SMEs
from developing countries, using a qualitative model by reviewing several literature on the export
grouping and subcontracting networks ,they identified that clearly defined marketing problem or
opportunity, commitment for networking and trust based relationship among members were the
determinant factors for successful export network organization.
2.7 Conclusion and Knowledge Gap

Even though the above reviewed literatures on the networking performance of SMEs had its own
contribution in giving insight about the strong correlation between networking and performance of
SMEs, it could not be escape from the following criticism as presented below:
1. Most of the authors in the reviewed related literature had different arguments about the
impact of networking on the performance of SMEs. This may create controversies in
understanding the role of networking in improving the performance of SMEs.
2. The authors used incorrect statistical tests for the type of data they employed in their
research work. As can be known from most of the research method literatures, the first
requirement for selecting the right statistical test for the study is looking the type of data
used (type of measurement) in the study. For instance, in the studies reviewed in the
literature part above, most of the authors utilized ordinal type of data and measured it by
likert scale and analyzed it using mean, standard deviation, Pearson correlation and multiple
regression models. Since the distance between ordinal responses is not equal: the use of
linear models for the analysis purpose might create invalid results and incorrect conclusions
might be drawn from the study .Thus the use of non-linear models such as probit model, and
descriptive statistics of like median should be used to draw a right argument(conclusion)
from the study.
21
3. Most of the authors focused on investigating the effect of networking on the export
performance of SMEs. But, the reviewed studies did not tell us about the impact of
networking in enhancing performance of SMEs in developing countries like Ethiopia which
are mainly focused in doing business locally.
4. The reliability and validity of the result of the studies reviewed above is difficult to accept
surely because of two major reasons: in one hand the low response rate of the respondents
and a focus on a single sector on the other hand. Thus, it is necessary to undertake and see
the result of study in higher response rate and a sampling unit covering at least a single or in
other sector.
5. Most of the studies reviewed above, focused on investigating the impact of networking on
the performance of small and medium sized enterprises (as well micro and small enterprises)
as general. But, none of the studies tried to investigate the impact of networking on the
performance of medium sized enterprises specifically, they focused on micro and small
enterprises. Since medium sized enterprises are a bridge between small and large firms,
knowing in detail about the impact of networking on medium sized enterprises gives insight
for concerned bodies on how to accelerate the growth of small and medium sized enterprises,
and to lay down the base for the expansion of large industries (industrialization).
Thus, this study used the above discussed criticisms as research gab and incorporated in this study to
solve the methodological problems of the previous studies reviewed in literature part.
2.8 Conceptual Framework of the Study

There are many networking factors that have an impact on the business performance of SMEs as
tried to describe briefly in the literature review part. Based upon the literature, the strength (extent)
of relationship with different type of networking resources (formed with: governmental agencies,
financial institutions, trade associations, business associates and knowledge institutions) and
22
resource acquisitions capability and quality of relationship in network are independent variables for
this study, while dependent variable is business performance. Based upon review of related literature
discussed above the conceptual framework of this study presented below:
Figure 2.1. Conceptual Frame Work for the Study
Strength of the Relationship with:
Governmental Agencies
Financial Institutions
Business Associates
Trade Association Business performance

Knowledge Institutions
Quality of the relationship in

the network
Resource acquisition capability
of the network
Source: Adapted from the Tooksoon & Mohamed (2010); Li et al., (2013); Ge et al., (2009).
23
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
In this section of the research: the study area and subject, research design, instrumentations,
population and sample, description of variables and their measurements, method of data analysis and
model specifications for the study were explained.
3.2 Study Area and Subject

This study was conducted in Addis Ababa (without focusing on specific region or sub city) on
medium level enterprises operating in the manufacturing sector. The target population of this study
was medium level enterprises transformed from small and micro enterprises in two rounds: in 2011
and 2013 in Addis Ababa.(Addis Ababa micro and small enterprises bureau,2011 and 2013).In this
study data was collected from the medium level enterprises firstly, because of their better capacity
for wider networking relationship with various types of external resources from domestic to abroad
collaborates resulted from their large size and better growth capacity and opportunities than micro
and small enterprises, secondly they have better experience in networking because of their long year
existence in the business starting from being micro level until they reached to the medium sized
enterprises status in current time, thirdly the exact operational place of micro and small enterprises
is difficult to identify in sub-city and kebele wise because of their large size and lack of clearly
identified address of contact. But, medium sized enterprises have clearly listed address of contact
and operational place based on data gained from Addis Ababa micro and small enterprises bureau.
3.3 Research Design

This study employs quantitative approach in research design by identifying the network relationship
associated with aspects of business performance in Addis Ababa medium sized enterprises and to
investigate how these factors relate to business performance. Survey method of data collection was
used to make inference about population characteristics from statistically selected samples (Babbie,
24
2001). Comparatively the less cost requirement and rapidity in collection of data are among others
that were reasons for selecting survey method of data collection for this study (Creswell, 2003). This
study designed in cross-sectional research approach since for survey method a cross-sectional
research approach is a best choice than a longitudinal study (Saunders, 2007).
3.4 Instrumentations
The data was collected from the managers of medium sized enterprises in Addis Ababa. There were
two reasons for using managers of medium sized enterprises to collect data for this study: firstly, to
manage respondents more effectively in data collection process. Secondly, mostly in the SMEs case,
owner of the business manages and decides on the business related issue including having
networking with different kind of organization: suitable to gain data for this study. In this study,
primary source of data were used and collected from managers of enterprises through
questionnaires. The likert scale questionnaire was developed by modifying from previous studies
and measured based on ordinal scale. Items for questionnaires for measuring independent variables:
strength (extent)of relationship that medium sized enterprises have with external resources was
measured based on a 5 -point likert scale ranging from 1=not at all, to 5=at a great extent was
modified from the study of (Tooksoon and Mohammed,2010).Quality of relationship in the network
also another independent variable was measured by a multi- item likert scale questionnaire ranging
from 1= strongly disagree to ,5 = strongly agree, which was modified from the study of( Li et
al.,2013). Resource acquisition capability of the network variable was measured by a multi- item
likert scale questionnaire ranging from 1= strongly disagree to, 5 = strongly agree, which was
modified from the study of (Ge et al., 2009). The dependent variable business performance was
measured by a multi- item likert scale questionnaire dealing with financial and no-financial
performance measures (composite measure of performance) ranging from 1= strongly disagree to ,5
= strongly agree, which was modified from the study of( Li et al.,2013). A combination of financial
25
and no-financial performance measures on a multi-item likert scale employed in this study because
of the following reasons: firstly, it is difficult get quantitative measure of performance a country like
Ethiopia where modern way of recording financial result which is described as profit or loss
statement not experienced (they can guess it, but it may not be exact because it is difficult to verify
it).Secondly, mostly this enterprises are not forced to publish and report their financial results to the
concerned governmental bodies( Li et al.,2013;Watson,2007). Schayek (2011), argued that the use
of composite financial measure of performance have many advantages over using either of the two
measure of performance: in one hand a single type of measures cannot tell us surely whether a firm
operating in a better performance or not, on the other hand composite measure of performance
accelerates the response rate of the respondents. Because of these reasons a composite financial
measures performance was used in this study. In order to insure that the content validity of the study
(to check items of questionnaires accurately measures the constructs), a pilot- testing with 8
university researchers and owners or managers of medium sized enterprises from Addis Ababa (i.e.
three sample from university researchers and 5 from the medium sized enterprises) and their idea for
the improvement of the content of the questionnaires was included in the final revised questionnaire.
3.5 Population, Sample and Sample Size Determination

The sample frame consisted of Ethiopian based medium sized enterprises in the manufacturing
sector. The reasons why manufacturing sector was selected to collect data for this study were:
primarily the manufacturing sector is believed to be a backbone for a given country economic
growth since the sector is a core place for domestic entrepreneurs to upgrade their innovation and
exporting ability to the international a market, secondly a special focus was given by Ethiopian
Federal Micro and Small Enterprise Development Agencies and identified as being a major a source
of economic growth in substituting imported goods and having potential for export market and in
26
creating a favorable environment for transforming to large scale industries (Federal Micro and
Small Enterprise Development Agency[ FEMSEDA],2010).A total population of 200 enterprises in
the manufacturing sector were identified from the Addis Ababa Micro and Small Scale Enterprise
Bureau which were transformed to medium level enterprises from micro and small enterprises in
2010 and 2012. The key criterion for inclusion in the total population is that they must be
manufacturers of the products they sell and meet the criteria of inclusion under SMEs manufacturing
sector category set by Ethiopian Federal Micro and Small Enterprise Development Agency, 2010.
Since this study has an access to list name of population for the study, a single stage sampling
design (the samples were selected from the total population once at Addis Ababa level without the
need of re-sampling for the sub city or sub region of Addis Ababa) was used in order to sample from
total population (Creswell, 2003). The probabilistic sampling technique was used for this study
because of its ability in giving equal chance for selecting respondents from the total population
(Creswell, 2003). Stratified random sampling method was employed by stratifying the sampling
frame proportional to the size of subsectors in the total population of manufacturing sector that
includes textile and garment, leather and leather products, food and beverage, metal works and
engineering, and wood works: for selecting representative samples having a true proportion of
respondents (look more how it was done in sample size determination part below) from the total
population of 200 enterprises(Creswell, 2003, ([FEMSEDA], 2010). There were two bases of
stratifications of the population in to stratum: firstly, in order to gain in precision of the estimates of
the characteristics of the whole population since the elements of population were heterogeneous in
the type of business they are involved (it needs inclusion of respondents from all types of business).
Secondly, in order to estimate the business type effect on the performance of medium level
enterprises.
27
3.5.1 Sample Size Determination
To select samples from the total finite population of 200 enterprises in the manufacturing sector, a
formula developed by Rosemary and Chizoba (2011) which is adapted from the Yamane’s formula
was used as can be seen below.
n= = = 133.33 =134 approximately.
Where n = sample size, N = Population, e- margin of error (0.05 at 95% confidence level), 1=
constant.
Depending upon the sample size calculated above the number of medium sized enterprises were
selected from each subsector proportional to the size they have in the total population of 200
enterprises which were transformed to medium level enterprises from micro and small enterprises in
2010 and 2012 based on the data gained from the Addis Ababa Micro and Small Scale Enterprise
Bureau. The mechanism used in this study to determine the number of samples from each subsectors
based on their proportion in the total population was presented in the table 3.1 below.
Table 3.1 Allocation of Samples for Early Stratum (Planned Sample of Respondents)
Manufacturing Sector Population Proportionate Stratified Random

Sampling
Frequencies Percent Frequencies Percent
Textile and Garment 16 0.08 11 0.08

Leather and Leather 8 0.04 5 0.04
products
Wood products 85 0.425 57 0.425
Metal work and 76 0.38 51 0.38
Engineering
Food processing and 15 0.075 10 0.075
Beverage
Total 200 1.00 134 1.00
Source: Developed for the research, 2013.
28
To select specific respondent from each subsector based on their proportion in the total population: a
lottery method was used. Then a total of 134 questionnaires distributed to the owners or managers of
medium sized enterprises in Addis Ababa based on the sample size determination and early
allocation to the stratums (sub sectors) done in the table 3.1above.
3.6 Description of Variables for the Study

The objective of this study was to measure the impact of networking on the business performance of
medium sized enterprises working in manufacturing sector in Addis Ababa. The seven independent
variables for this study namely were: strength of relationship (extent) enterprises had with
governmental agencies, financial institution, trade associations, knowledge institutions and business
associates, and resource acquisition capability of the network and quality of relationship in the
network. The extent(strength) of relationship medium sized enterprises had with this networking
types was measured by likert scale, while the resource acquisition capability of the network and
quality of relationship in the network was measured by a multi item likert scale( Tooksoon and
Mohammed ,2010 ; Li et al .,2013; Ge et al.,(2009). In this study three control variables believed to
be influence performance of medium size enterprises other than hypothesized independent variables.
This were firm age measured by log of the number of years the firm is in the operation (Watson,
2002; Ravichandran and Lertwongsatien, 2005), firm size measured by log of the number of
employees (Maskell, 2001; Goerzen, 2007) ,industry type effect, and absorptive capacity of the
business measured by multi item likertscale ranging from 1= strongly disagree to ,5 = strongly
agree, which was modified from the study of( Li et al.,2013).The dependent variable business
performance of medium sized enterprises was measured by likert scale to investigate the influence
of networking on the financial performance of medium sized enterprises for the past three years
from 2010 up to 2012.
29
3.7 Method of Data Analysis
To analyze variables of the study a descriptive statistics: mean, standard deviation, median,
frequency and percentage were used. Factor analysis was employed to analyze scales of construct
measurements for the study. For checking internal consistency of scales that used to measure
constructs, reliability test was made by Cronbach alpha by taking into account the cutoff point of
0.7and above (Hair et al., 2006). Discriminant validity was checked by variance inflation factor
(VIF) to solve the problem of multi co -linearity among independent variables (Hair et al, 2006) .To
test the hypothesis of the study, ordered probit model was used. For the analysis purpose, computer
software program of STATA.12 was used for this study.
3.8 Econometrics Model Specification

The econometrics model shown below was designed for measuring the impact of networking on the
business performance of medium sized enterprises operating in Addis Ababa .In this study non-
linear ordered model the so called ordered probit model was used. There are a number of reasons for
selecting non linear model in this study other than linear models such as multiple regression models.
The first reason was the existence of unequal difference between ranks of ordinal variables unlike
with interval and continuous scales which have equal difference among results of variables
resulting in a linear relationship between independent and dependent variables analyzed with
multiple regression model since multiple regression model requires the fulfillment of linearity
assumption among variables making it easy to use for interval and continuous scale data(quantitative
data in nature). But, in this study since ordinal scale of measurement used, which reveals unequal
difference among ranks of ordinal responses reflecting non-linear relationship between independent
and dependent variables that needs non-linear model for analysis. Secondly, the beta coefficient of
linear multiple regression model reflects only the linear contribution (it only assumes that each unit
change in independent variables has a fixed effect on dependent variable) of independent variables
30
on the dependent variables while non-linear models describes the non linear impacts of independent
variables on the dependent variables through marginal effects. Unlike linear models which show the
direction of the effect of coefficients of independent variables on the dependent variable, marginal
effects in non linear models show how the probabilities of each outcome change with respect to
changes in the independent variables. Even though ordered probit and logit models reveals similar
result in the research work, in this study because of the normality assumption of the ordered probit
model, with mean “0” and standard deviation of “1,”the ordered probit model was applied
(Storchmann, 2005). The observed value of Yi is depending upon latent variable Y* value based on
the following five values of observed category:
yi = 1 if yi* ≤ μ1
yi = 2 if μ1 < yi* ≤ μ2
yi = 3 if μ2< yi* ≤ μ3
yi = 4 if μ3 < yi* ≤ μ4
yi = 5 if yi* > μ4
Where cutoff points are: μ1, μ2, μ3, μ4 and the cutoff points and residual ε is following a standard
normal distribution. The cutoff points and β is estimated using the maximum likelihood method.The
ordered probit model for this study seems the following:
Y = βo + ∑βXi + €i , where Y is dependent variable, Βo is intercept term, Βi the coefficients of
Xi variables, Xi independent variables, €I error terms of the model.
Y is dependent variable measured by a multi-item likert scale. To measure the business performance
of medium sized enterprises, the following ordered probit equation was used having the model
indicating the impact of independent and control variables on business performance as described
below:
31
Y (business performance) = βo +β1 (GOV) +β2 (FIN) + β3 (BUS) + β4 (TRA) + β5 (KNI) + β6
(QUR) + β7 (RAC) + β9 (FIA) + β10 (FIS) + β11 (ABS)
+β12 (∑ITE) +ε
Where: GOV= Governmental agencies, FIN = Financial institutions, BUS = Business associates,
TRA= Trade associations, KNI= Knowledge institutions, FIA= Firm age, FIS= Firm size, ABS=
Absorptive capacity of the business, QUR= Quality of the relationship in the network, RAC =
Resource acquisition capability of the network, ITE =Industry type effects.
Table 3.2 Function of control variables
Name of variable Function

Firm age To control for the impact of firm age
Firm size To control for the impact of firm size
Absorptive capacity of the To control for the impact of absorptive capacity of the
business business
Industry type effects. To control for the impact of Industry type effects.
32
CHAPTER FOUR: PRESENTATION, ANALYSIS AND INTERPRETATION
OF THE FINDINGS
4.1 Descriptive Statistics Analysis
Gerber –Nel et al., (2005) defined that the major purpose of using descriptive statistics is to simplify
and summarize large amount of data into a manageable form. In this study descriptive statistics of
mean, standard deviation, median, frequency and percentage were used. For presenting the collected
data graphs (bar chart) and tables were used. The reason why median, frequency and percentage
used in this study was for their suitability for describing ordinal type of questions while mean and
standard deviation were used for describing type of questions which are continuous scale. In the
tables below, descriptive statistics of the collected data for the study were presented:
Table 4.1 Number of samples actually used in the study
Sector type Number of Proportion of sector sample from total

sample sample taken
Textile and Garment 11 8.59%
Leather and Leather products 5 3.91%
Wood products 54 42.19%

Metal work and Engineering 49 38.28%
Food processing and Beverage 9 7.03%
Total 128 100%

Source: own survey, 2013
As it is presented above from the total 134 proposed number of samples to distribute questionnaires
and to collect data, only 128 actual numbers of samples were collected from the distributed 134 total
number of questionnaires indicating that the response rate was 96 percent.
33
Table 4.2 Networking Problems of Sampled Firms
Variable name Category Variable code Frequency Percent

Type of the Textile and 1 11 8.59
business garment
Leather and 2 5 3.91
leather products
Wood products 3 54 42.19
Metal work and 4 49 38.28
engineering
Food processing 5 9 7.03
and beverage
Networking 1 29 22.66
problem 1 2 62 48.44
3 33 25.78
4 4 3.13
problem 2 2 70 54.69
problems 4 7 5.47
Networking 1
problem 3 2 68 53.13
3 53 41.41
4 7 5.47
Networking 1
problem 4 2 58 45.31
3 31 24.22
4 39 30.47
problem 5 2 63 49.22
3 35 27.34
4 4 3.13
Networking 1 4 3.13
problem 6 2 73 57.03
3 45 35.16
4 6 4.69
problem 7 2 72 56.25
3 36 28.13
4 4 3.13
problem 8 2 75 58.59
3 29 22.66
4 10 7.81
34
Networking 1
problem 9 2 48 37.50
3 32 25.00
4 48 37.50
Among 128 respondents interviewed about the type of business sector they are operating, 11(8.59%)
of firms were belonged to the textile and garment, 5(3.91%) of firms in leather and leather products,
54(42.19%) were in wood products, 49(38.28%) were in metal work and engineering, 9(7.03%)
were in food processing and engineering. Identifying the type of business medium sized enterprises
working helps for weather the type of business have an impact on the networking performance of
enterprises and for examining in what kind of business enterprises involved. In this study, most of
the enterprises were working in wood products sector followed by metal work and engineering
sector. In these two sectors most of entrepreneurs engaged might be because of high profit
opportunity of the sector than the others. Regarding measuring the problem and barriers SMEs faced
in networking with external resources: Lack of finance and cooperation problem among SMEs
(nominated by networking problem1) was highly serious problem for 29(22.66%) respondents,
moderately serious problem for 62(48.44%),somewhat serious problem for 33(25.78%),and not a
problem for 4(3.13%)respondents while Lack of getting the required support from concerned
body’s(nominated by networking problem2) is highly serious problem for 18(14.06%)respondents,
problem for 7(5.47%)respondents. A problem of no cluster area or shed provided by government
(nominated by networking problem 3) was highly serious problem for none of the respondents,
moderately serious problem for 68(53.13%), somewhat serious problem for 53(41.41%), and not a
problem for 7(5.47%) respondents. Networking problem of low awareness about networking benefit
(nominated by networking problem 4) was highly serious problem for none of the respondents,
35
moderately serious problem for 58(45.31%), somewhat serious problem for 31(24.22%), and not a
problem for 39(30.47%) respondents. Problem of getting raw material supply as per the firm
need(nominated by networking problem 5) was highly serious problem for 26(20.31%)respondents,
problem for 4(3.13%)respondents. Partners search and selection problem (nominated by networking
problem 6) was highly serious problem for 4(3.13%) respondents, moderately serious problem for
73(57.03%), somewhat serious problem for 45(35.16%), and not a problem for 6(4.69%)
respondents. Lack of skills of personnel (nominated by networking problem 7) was highly serious
problem for 16(12.50%) respondents, moderately serious problem for 72(56.25%), somewhat
serious problem for 36(28.13%), and not a problem for 4(3.13%) respondents. A problem of lack of
trust when working with others(nominated by networking problem 8) was highly serious problem
for 14(10.94%) respondents, moderately serious problem for 75(58.59%), somewhat serious
problem for 29(22.66%), and not a problem for 10(7.81%) respondents. Lack of favorable situation
in promoting products through exhibition or trade fair (nominated by networking problem 9) was
highly serious problem for none of the respondents, moderately serious problem for 48(37.50%),
somewhat serious problem for 32(25%), and not a problem for 48(37.50%) of interviewed
respondents.
4.1.1 The Type and Extent of Networking
Concerning the question of the extent or strength of relationship with the external resources for the
last three years ranging from the 2010 up to 2012, 0.8% of the respondents did not have any
relationship, 21.1% of them at some extent, 26.6% of them neutral, and 51.6% of them at moderate
extent have relationship with governmental agencies. Most of the medium sized enterprises had a
moderate extent of relationship with governmental agencies. This moderate extent of relationship
36
might be attributed to lack of awareness creation programs about the type of service rendered by
governmental supporting agencies to the enterprises. Of sampled respondents 3.9%of them did not
have any relationship, 24.2% of them at some extent, 42.2% of them neutral, and 16.4% of them at
moderate extent, and 13.3% of them have at great extent relationship with financial institution. As
presented in the above table, most of the enterprises choose neutral option to express the extent of
relationship they had with financial institutions for the last three years. This might be related to
inadequate (not as per the need of the enterprises) support given by financial institutions to the
medium sized enterprises in terms of financial requirements via debt and other related factors. Of
sampled respondents 8.6%of them did not have any relationship, 71.1% of them at some extent, and
20.3% of them have neutral relationship with trade association. Most of the enterprises had at some
extent of relationship with trade associations. This could be related to lack of promoting the benefit
of these associations towards the performance of enterprises. Of sampled respondents, 10.9% of
them at some extent, 40.6% of them neutral, and 47.7% of them at moderate extent, and 0.8% of
them had at great extent relationship with business associates. Most of the enterprises have a
moderate extent of relationship with customers, suppliers, similar enterprises, and subcontracting
relationship with large firms. But, in order to improve the performance of enterprises at a great
extent it is necessary to have relationship with business associates beyond a moderate extent. Of
sampled respondents 2.3% of them did not have any relationship, 52.3% of them at some extent,
22.7% of them neutral, and 22.7% of them have at moderate extent relationship with knowledge
institutions. The result of extent of relationship with knowledge institutions implies that the
knowledge sharing between enterprises and knowledge institutions was almost not exist this might
be because of knowledge institutions were weak in community service program: in introducing new
ways of production process, in promoting new products to enterprises done through research and
development programs. (For further information look appendix 4).

37
4.1.2 Quality of the Relationship and Resource Acquisition Capability of the Network
Regarding the quality of the relationship in the network for the last three years ranging from the
2010 up to 2012, 14.8% 0f the respondents disagree, 45.3% of the respondents neutral, 39.8% of the
respondents agree about the quality of the relationship in the network. The result showed that most
of the respondents were neutral about the quality of relationship. This condition might be related to
some problems related to trusted relationship especially with similar enterprises. Relating to the
resource acquisition capacity of the network medium sized enterprises involved for the last three
years ranging from the 2010 up to 2012, 2.3% of the respondents strongly disagree, 11.7%0f the
respondents disagree, 22.7% of the respondents neutral, 60.2% of the respondents agree and 3.1% of
the respondents strongly agree about the resource acquisition capacity of the network in terms of
tangible and intangible resources. Most of the respondents were agree about the benefit of the
network in providing resources as per the requirement of their operation. ((for further information
look appendix 5)
4.1.3 Control Variables Used in the Study
Relating to absorptive capacity of the business for the last three years ranging from the 2010 up to
2012, 10.2% 0f the respondents disagree, 9.4% of the respondents neutral, 37.5% of the respondents
agree and 42.9% of the respondents strongly agree about the level of absorptive capacity of their
business. Most of them medium sized enterprises were active in searching knowledge (absorptive
capacity) through collaborating with external firms and institutions. This activeness might be
resulted from owner manager or employees previous experience in networking and a better
knowledge (educational status) relating to networking benefit in improving business performance
(for further information look appendix 6).
38
Table 4.3 Mean Value of Firm Age and Firm Size
Mean estimation Number of obs = 128
Mean Std. Err. [95% Conf. Interval]
firmage 6.25 .1484003 5.956343 6.543657

firmsize 17.1875 4.921177 7.449379 26.92562
Source: own survey, 2013.
The two other control variables in this study other than absorptive capacity of the business and
industry type effects were firm age and firm size were presented in descriptive statistics of mean and
standard deviation in the table above. The mean age of firms and firm size were 6.25 and 17.19 with
the standard deviation of 0.15 and 4.92 respectively. As shown above, on the average, medium sized
enterprises were in the operation for the 6.25 years. In addition to this, according to the outlined table
above, medium sized enterprises had 17.19 employees on the average as time of this study data was
collected.
4.1.4 Business Performance of Medium Sized Enterprises
Of the interviewed respondents regarding their business performance measured by six items
composed of financial and non-financial questions,0.9% of them were responded strongly disagree,
0.9% of them disagree, 8.6%of them neutral,51.6% of them agree,38.3% of them strongly agree
about their business performance for the last three years ranging from the 2010 up to 2012.This
result indicated that most of the enterprises(more than 50% of them) had better business
performance for the past three years (for further information look appendix 7).
39
Figure 4.1 Bar Chart of Ordinal Data Using Median
Source: own survey 2013.
Based on the above result depicted on the bar chart using median value of variables measured on
ordinal data, 50% of the response given by respondents for absorptive capacity of the business,
resource acquisition capacity of the network, strength of relationship with business associates,
financial institutions, governmental agencies, trade association, knowledge institutions, the quality
of relationship in the network, and for business performance lie beyond agree, agree, at moderate
extent, neutral, at moderate extent, at some extent, at some extent, agree ,and agree respectively. In
another word, the median value of respondents for the variable absorptive capacity, resource
acquisition capacity of the network, financial institutions, the quality of relationship in the network,
and for business performance was agree, agree, neutral, agree ,and agree respectively. While the
median value of respondents for the variable: strength of relationship with business associates and
governmental agencies was at moderate extent, while with trade association and knowledge
institution was at some extent.

40
4.2 Reliability and Validity Tests
4.2.1 Construct Reliability
Zikmund(2000),defined that the aim of instrument reliability test is for measuring internal
consistency of items that measuring a given construct and for testing a unidimensionality of items of
questionnaire for checking whether or not items measuring a single construct or not. In this study
reliability test was made by Cronbach alpha by taking into account the cutoff point of 0.7and above
(Hair et al., 2006).As it can be seen in the table below, the Cronbach coefficient for all items
satisfied the minimum requirement thus certainly suitable for this study objective.
Table 4.4 Reliability Analyses of Variables of the Study Using Cronbach’s Alpha
Variables of the study Number Coefficient of reliability

of items
Business performance 6 0.84

Quality of the relationship in the 3 0.80
network
Resource acquisition capacity of the 3 0.81
network
Absorptive capacity 7 0.85
Source: own survey.2013.
In order to minimize the research errors and more to strengthen the reliability of the study, response
error (unintentionally filling incorrect answers to questions by respondents) and non-response error
(a problem of not contacting the respondents) a telephone follow-up to respondents, a use of self-
administered questionnaire and a pilot test was made to items of questionnaire.
4.2.2 Validity
Validity is about the extent that an instrument is measuring what it is intended to measure. In this
study the validity of a questionnaire was measured by content and construct validity.
41
4.2.2.1 Content Validity
Content validity measures whether or not individual items of test measures the construct. In this
study the content validity of the questionnaire was tested by pilot test with 3 university researchers
and with 5 medium sized enterprises managers and checked for incorrect instruction, unclear
questions, ambiguous words and phrases (Churchill, 2002).Finally the result of the test was included
to the final revised questionnaire and the content validity of all variables included in the study was
confirmed.
4.2.2.2 Construct Validity
Construct validity is focused on the extent in which a construct is measured by a test. The construct
validity was measured by factor analysis, discriminant validity and reliability test. (Sharfman and
Fernando, 2008; Hair et al.,2006).
Table 4.5 Factor and Reliability Test of Type of Networking
Results of Factor Loading

TYPES OF NETWORKING RESOURCES Factor Factor Factor Factor Factor
1 2 3 4 5
Factor 1(Governmental agencies)
1.1 Addis Ababa micro and small
enterprise bureau 0.81
1.2 Industry minister 0.85
1.3 Trade minister 0.75
1.4 Textile industry development institute 0.79
1.5 Leather industry development institute 0.82
1.6 Metal work industry development 0.73
institute 0.70
1.7 Ethiopian kaizen institute
Factor 2 (Business associates)
2.1 Raw material suppliers 0.83
2.2 Customers 0.77
2.3 Subcontracting relationship with
large firms 0.71
42
2.4 Relationship with similar 0.80
enterprises in the same sector
Factor 3 (Financial institutions )
3.1 Commercial bank of Ethiopia 0.87
3.3 Other private banks 0.79
3.4 Micro finance institutions 0.76
3.5 Saving and credit institutions 0.78
Factor 4 (Trade associations)

4.1 Addis Ababa chamber of commerce 0.79
4.2 Women’s export association 0.78
Factor 5( Knowledge institutions)

5.1 Technical and vocational schools 0.77
5.2 University or college research 0.79
institute
5.3 Media organization 0.75
Eigen value 1.17 1.65 1.28 1.11 1.10
Variance explained in percentage 10.85 23.25 18.32 9.07 8.33
Reliability (using Cronbach’s alpha) 0.81 0.78 0.79 0.71 0.72
Total variance explained 69.82
Measure of sampling adequacy(KMO) 0.71
Barlett’s test of sphericity significant 0.02

In the table above to analyze items of scales; factor analysis was made on 20 networking types. The
Eigen value method was used for selecting components because it is free from making subjective
bias in selecting components (Stevenson, 1986). Finally, five factors were extracted and there were
no items which cross load more than one factor. The quality of factor analysis was assessed by
Bartlett’s test for sphercity (if p-value lessthan0.05) and Kaiser-Meyer olkin (KMO) test: that
measures the degree of Multicollinarity among items included in the analysis which should be
greater than 0.5-0.6.In this study, KMO test and Bartlett’s test for sphercity were 0.71 and 0.02
respectively which indicated the existence of significant correlation among items of networking
types for factor analysis and which assured the construct validity of networking types items of
43
questionnaire. The coefficient of reliability for networking types using Cronbach’s alpha for factor
one, two, three, four and five were 0.81,0.78,0.79,0.71and 0.72 respectively which is greater than
the minimum requirement for reliability test indicating that internal consistency among items was
suitable for measurement instrument. In addition to this the reliability test of variables other than
networking types :for business performance, Quality of the relationship in the network, Resource
acquisition capacity of the network and absorptive capacity of the business were 0.84,0.80,
0.81,0.85 respectively which satisfied reliability test of the study.
The discriminant validity of independent variables included in the study was checked by variance
inflation factor (VIF) and resulted in 1.09 which is between acceptable range (VIF<10) and revealed
that independent variables were free from Multicollinarity problem with each other.
4.3 Specification Tests of the Model

Before running the ordered probit model to the study, three assumptions of the model were tested
namely: Heteroskedasticity, Normality and Multicollinarity tests. The results were presented below:
4.3.1 Heteroskedasticity Test

Table 4.6 white’s test of Hetroskedastic
White's test for Ho: homoskedasticity

against Ha: unrestricted heteroskedasticity
chi2(100) = 116.36
Prob > chi2 = 0.1259
In order to test whether or not an error term is Hetroskedastic or possesses unequal variance:
meaning checking for whether a parameter judged to be significant when it is actually not, white
44
general test was used because of its applicability for non-linear and normally distributed data. But,
as it is presented above the p-value is greater than 0.05 (0.1259 >0.05) indicating that the error term
is homoskedastic (not Hetroskedastic) or having equal variance .Thus Heteroskedasticity assumption
of the model was not violated.
4.3.2 Normality Test Using Shapiro Wilk Test
Table 4.7 Shapiro wilk test of normality
Variable Number of W p -value at 0.05

observation
Business performance 128 0.98882 0.61234
Governmental agencies 128 0.99724 0.99343
Financial institutions 128 0.99150 0.62847
Trade association 128 0.99635 0.98707
Business associates 128 0.99519 0.85225
Knowledge institutions 128 0.98877 0.38329
Resource acquisition capacity 128 0.99403 0.84178
Quality of the relationship in the network 128 0.99278 0.75627
Absorptive capacity of the business 128 0.99301 0.82322
Textile and garment sector 128 0.99076 0.61345
Leather and leather product sector 128 0.99516 0.85412
Wood product sector 128 0.99602 0.98712
Metal work and engineering sector 128 0.99530 0.92226
Food processing and beverage sector 128 0.99411 0.79000
Ln of firm age 128 0.99172 0.68113
Ln of firm size 128 0.99694 0.98875
In order to make the interpretation and inference drawn from the collected data reliable and valid,
the normal distribution of the random variable was tested. Before testing the normality assumptions
of the model, quantitative variables: firm size and firm age were transformed to logarithmic values
in order to keep the normality of the data. In this study the test of normality was undertaken by
numerical method statistically known as Shapiro-wilk test because of its best estimating ability. As
45
it is presented in table above the p-value for all variables in the study are greater than 0.05 fulfilling
the normality assumption of the ordered probit model.
4.3.3 Multicollinarity Test

Table 4.8 Test of Multicollinarity among independent variables
Variable VIF 1/VIF
qualityofr~p 1.13 0.885064

businessas~s 1.10 0.908431
govermenta~s 1.09 0.920415
tradeassoc~s 1.08 0.921812
resourceac~y 1.08 0.922821
finantiali~s 1.08 0.926284
knowledgei~s 1.08 0.928037
Mean VIF 1.09
Since the VIF value is less than 10 and the tolerance value is greater than 0.2, there is no a problem
of co linearity among independent variables. Therefore, Multicollinarity assumption was achieved.
4.4 Ordered Probit Model Test Result

Table 4.9 Ordered probit model test result
Variables in the model Coefficient P value(at 0.05)

Governmental agencies .064472 0.674
Financial institutions .2873355 0.012
Trade associations -.1681317 0.446
Business associates .4037304 0.017
Knowledge institutions -.119843 0.375
Resource acquisition capability of the -.3301507 0.027
network
Quality of the relationship in the network .3658749 0.037
Absorptive capacity of the business -.1017562 0.443
46
Textile and garment .389222 0.495
Leather and leather products -.8014281 0.303
Wood products .661191 0.227
Metal work and engineering .0842006 0.783
Food processing and beverage -.3036326 0.603
Ln of firm age .814924 0.046
Ln of firm size .2629984 0.069
Looking at the results of ordered probit model in table 4.9, using p-value less than 0.05 most of the
hypotheses were confirmed depending upon the estimates obtained. The model significance level is
p=0.0002 and the chi-square is 42.20 and the model log likelihood(LL test) was-106.36715.The first
hypothesis networking with governmental agencies is positively and insignificantly related with
business performance rejecting our hypotheses, while the second hypothesis networking with
financial institutions is positively and significantly related with business performance confirming
our hypotheses. The third hypothesis trade associations negatively and insignificantly related with
business performance rejecting our hypothesis. The fourth hypothesis networking with business
associates positively and significantly related with business performance confirming our hypothesis.
The fifth hypothesis networking with knowledge institutions negatively and insignificantly related
with business performance rejecting our hypothesis. The six hypothesis resource acquisition
capability of the network is negatively and significantly related with business performance
confirming our hypothesis, while the seventh hypothesis the quality of the relationship in the
network is positively and significantly related with business performance confirming our hypothesis.
Regarding the result of control variables except for the firm age, all the control variables in the study
namely industry type effect, absorptive capacity of the business and firm size were statistically in
significant in the model.
47
4.5 Marginal Effects of Independent Variables
In this section to interpret the result of ordered probit model more effectively and present clearly the
factors that explain the choice of medium sized enterprises business performance responses were
presented:
Table 4.9.1 Marginal Effects of Independent Variables
Variables Business performance measured using ordinal scales

Strongly dis- Disagree(2) Neutral(3) Agree(4) Strongly agree(5)
agree(1)
Government -0.000 -0.001 -0.007 -0.017 0.024
al agencies
Financial -0.001 -0.003 -0.029 -0.074 0.107

institutions
Trade 0.001 0.001 0.017 0.043 -0.063
associations
Business -0.002 -0.004 -0.041 -0.104 0.151
associates
Knowledge 0.001 0.001 0.012 0.031 -0.045
institutions
Resource 0.002 0.003 0.034 0.085 -0.123
acquisition
capability of
the network
Qualityof the -0.002 -0.003 -0.037 -0.094 0.137

relationship
inthenetwork
As can be seen in table 4.9.3 above, networking with governmental agencies decreases chance of
reporting ‘strongly disagree’ in business performance by 0.0 percentage points, ‘disagree’ by 0.1,
‘neutral’ by 0.7,‘agree’ by 1.7,and increases chance of reporting ‘strongly agree’ by 2.4 percentage
48
points. Medium sized enterprises networking with financial institutions decreases chance of
choosing alternative ‘strongly disagree’ in business performance by 0.1 percentage points, ‘disagree’
by 0.3, ‘neutral’ by 2.9, ‘agree’ by 7.4,and increases chance of choosing alternative ‘strongly agree’
by 10.7 percentage points. Medium sized enterprises networking with trade associations increases
chance of reporting ‘strongly disagree’ in business performance by 0.1 percentage points, ‘disagree’
by 0.1, ‘neutral’ by 1.7, ‘agree’ by 4.3,and decreases chance of reporting ‘strongly agree’ by 6.3
percentage points. Networking with business associates decreases chance of reporting ‘strongly
disagree’ in business performance by 0.2 percentage points, ‘disagree’ by 0.4, ‘neutral’ by
4.1,’agree’ by 10.4,and increases chance of reporting ‘strongly agree’ by 15.1 percentage points.
Medium sized enterprises networking with knowledge institutions increases chance of reporting
‘strongly disagree’ in business performance by 0.1 percentage points, ‘disagree’ by 0.1, ‘neutral’ by
1.2, ‘agree’ by 3.1,and decreases chance of reporting ‘strongly agree’ by 4.5 percentage points. The
Resource acquisition capability of the network in terms of intangible and tangible resources
increases chance of reporting ‘strongly disagree’ in business performance by 0.2 percentage points,
‘disagree’ by 0.3, ‘neutral’ by 3.4, ‘agree’ by 8.5,and decreases chance of reporting ‘strongly agree’
by 12.3 percentage points. The quality of the relationship in the network decreases probability of
choosing alternative ‘strongly disagree’ in business performance by 0.2 percentage points, ‘disagree’
by 0.3, ‘neutral’ by 3.7, ‘agree’ by 9.4,and increases probability of choosing alternative ‘strongly
agree’ by 13.7 percentage points.
4.6 Discussion of Results

This study investigated the impact of networking in the form of extent of relationship with different
type of networks, quality of the relationship in the network, and resource acquisition capacity of the
network on the business performance of Medium sized enterprises in the manufacturing sector in
Addis Ababa.
49
According to the reviewed related literature to the topic of this study, to Ethiopian case in testing the
impact of elements of networking including: strength of networking with external resources, quality
of the relationship in the network, and resource acquisition capacity of the network, this study is the
first in investigating the impact of networking on the performance of Medium sized enterprises.
4.7 Summary of Findings

Networking with Governmental agencies is positively and insignificantly related with business
performance of medium sized enterprises rejecting the hypotheses. This was not in line with
previous studies reviewed in the literature part. The fact that the Governmental agencies was not
found to be significant for the performance of Medium sized enterprises might be attributed to
firstly, to lack of enough business support program by governmental agencies related to skill
development, collecting market information, the transfer of technology, basic managerial training,
general advise and so on. Secondly the kind of support service given for enterprises might not be as
per the need (weakness side) of manufacturing firms. Thirdly, might be because of rendering
unequal support programs for medium sized enterprises depending on the strength of governmental
agencies located at different sub cities of Addis Ababa.
Networking with Financial institutions is positively and significantly related with business
performance confirming the hypotheses. This result supports the prior research of Tooksoon &
Mohamed (2010), indicating that the relationship with financial institutions is important in
improving the performance of medium sized enterprises. As per the interviewed respondents the
necessity of collateral for loan, lack of getting enough amount of finance ,and a shortage of finance
for selling the manufactured products abroad were a serious problems related to the relationship
with financial institutions beyond the result of the tested hypothesis.
50
Trade associations negatively and insignificantly related with business performance of medium
sized enterprises rejecting our hypothesis. This finding consistent with the research result of
Tooksoon & Mohamed (2010).The insignificant relationship between trade association and business
performance might be explained by lack of delivering the required support other than registering
enterprises to be members of the trade association.
Networking with business associates positively and significantly related with business performance
of medium sized enterprises confirming our hypothesis. This result is supported by a number of
researchers where they argue that networking with business associates such as customers ,suppliers,
similar enterprises and subcontracting relationship with other firms have significant effect on
performance of SMEs(Tooksoon and Mudor ,2012; Tooksoon & Mohamed ,2010; Pongapanich and
phitya-Isarakul ,2008; Chen et al. ,2007; Yiu et al, ,2007).
Consistent with the previous studies (Tooksoon and Mudor, 2012; Tooksoon & Mohamed, 2010)
networking with knowledge institutions negatively and insignificantly related with business
performance of medium sized enterprises rejecting our hypothesis. Similar to the result of empirical
research by Ge et al., (2009) resource acquisition capability of the network negatively and
significantly related with business performance confirming our hypotheses. The negative and
significant relationship indicates that resource acquisition capability of the network has minimal but
necessary impact on the performance of medium sized enterprises. The quality of the relationship in
the network is positively and significantly related with business performance of medium sized
enterprises confirming our hypothesis. This finding is similar with earlier studies of (Sahakijpicharn,
2007).The result indicates that the more the trust (quality) in the network of relationship with
different external resources the higher the performance of manufacturing medium sized enterprises.
51
CHAPTER FIVE: CONCLUSION AND RECOMMENDATION
5.1 Conclusion
This research was designed in order to investigate the impact of networking on the business
performance of medium sized enterprises operating in Addis Ababa. In order to achieve the
objective the study: the hypothesis and the research design were developed and finally the research
objective was achieved. According to the result of this study, there are four independent variables
which were significantly related with business performance of medium sized enterprises namely:
networking with financial institutions, business associates, the resource acquisition capability of the
network and quality of the network in the relationship. Among the four independent variables which
have significant impact on the business performance of medium sized enterprises, networking with
financial institutions, networking with business associates, and quality of the relationship in the
network positively while the resource acquisition capability of the network negatively related with
business performance of medium sized enterprises.
5.2 Managerial Implications of this Study

This study investigated the impact of networking on the business performance of medium sized
enterprises working in manufacturing sector in Addis Ababa and will provide a clue for managers in
what extent that networking relationship has importance on the performance of their business. The
finding of this study motivates managers of the business to have networking relationship with
business associates and financial institutions. In addition to this, resource acquisition capability of
the network and quality of the relationship in the network has an impact on the performance of
medium sized enterprises. The results strongly supports the necessity for managers to have
networking relationship with business associates such as customers, suppliers, subcontracting
relationship with large firms and relationship with similar enterprises. Secondly, managers of
medium sized enterprises must have relationship with financial institutions for getting credit service
52
as per the amount of finance they need by forming collaboration with similar enterprises and making
the necessary contractual arrangement with banking, and credit and saving organizations. According
to the result of this study, the quality of the relationship measured by trusted relationship with
collaborators and the accuracy of the information provided within the network was reliable. Thus
managers of medium sized enterprises should also enter to networking relationship with external
resources with full confidence. In general speaking, networking relationship by managers of
medium sized enterprises should be developed with important partners such as business associates
and financial institutions to improve the performance of their business.
5.3 Recommendations for Practical Application

In this section depending upon the conclusion drawn from this study recommendation was given for
medium sized enterprises on how to use networking strategy to improve their business performance.
In addition to this, recommendation was given for the government relating to the role it has in
improving performance of enterprises as presented below.
5.3.1 Medium Sized Enterprises

1. To improve business performance, medium sized enterprises expected to have networking
relationship with external resources. According to resource dependency theory, the aims of
networking relationship are to gain information, knowledge and resources. In turn this helps
for improving the performance of medium sized enterprises since they are important inputs
for marketing activities. Thus medium sized enterprises should use networking relationship
as a vital strategy to be competitive in the market for solving their managerial, resources and
information lacks.
2. Medium sized enterprises should consider networking with external environment as part of
business planning objective and the management or the owner manager of the business
53
should use it as an instrument for accessing marketing information, for acquiring tangible
and intangible resources and finally to improve the performance their business.
3. To expand the business within domestic as well as for having international marketing
exposure through exporting medium sized enterprises should have networking relationship
with supporting institutions extensively.
5.3.2 The Government

1. Governmental support agencies should create awareness for medium sized enterprises about
the service they offer for them. Most of the enterprises according to the data collected from
this study unaware of the existence of supporting institutions that give support for them.
Especially trade associations: Addis Ababa chamber of commerce and women’s export
associations, among knowledge institutions such as university and college research institutes,
technical and vocational schools and media organizations should have close relationship with
medium sized enterprises by advertising themselves, by giving training on technical and
marketing activities, transmitting research results done by university and college research
institutes that solves problem of medium sized enterprises and promoting firms products
through their news papers and magazines, internet, television and radio.
2. The government should network medium sized enterprises among themselves and with other
external resources through linkage and cluster development program.
3. The government should give different incentives for medium sized enterprises until they are
able to compete in the market: through tax reduction, financial support to create favorable
environment for exporting their products to international market.
4. The government should also create opportunities for medium sized enterprises to have
subcontracting relationship with large enterprises which are located domestic (can be
governmental as well as private) and abroad. This is because, subcontracting relationship
54
benefit medium sized enterprises for sharing technological knowledge and focusing on their
core business for accelerating their growth.
5. The government should bring fair marketing competitions among competitors such as
controlling a trade undertaken by contraband and taking the necessary other measures.
6. The government should ensure the constant supply of the required quantity and quality of
raw materials for SMEs. According to the result of this study some of the enterprises,
especially leather and leather product sector, responded that they were encountered with
ordering problems of raw materials(in terms of quantity and quality) for their operation
because suppliers primarily and largely export it to international market.
7. The government should also provide modern manufacturing machines by a gift as well as by
rent for improving performance of medium sized enterprises in order to connect them with
latest technological innovation.
8. The government should create opportunities for medium sized enterprises to have access to
bank loan. Even though, the result of this study revealed that the impact of financial
institutions on the performance of medium sized enterprises was significant and positive,
some of the enterprises on the open ended question part responded that it was difficult for
them to get the required amount of finance because of the collateral for loan required by
institutions was beyond the capacity of enterprises. Thus, the government should work
together with private banks to encourage enterprises by offering the loan for medium sized
enterprises by asking collateral requirement that go with capacity of enterprises, providing a
low interest rate and aligning the loan negotiation with government (by including
government agencies as a third party: a credit guarantee body) and making a government
accountable when medium sized enterprises failed to pay the loan). Governmental banks
should also support medium sized enterprises by supporting microfinance institutions, saving
55
and credit associations to increase their lending capacity through giving financial incentives
and upgrading their status to cooperative banks. The governments should also think on the
special lending mechanism for medium sized enterprises from governmentally owned banks.
9. The government should also motivate and help Knowledge institutions: university and
college research institute, technical and vocational schools so as to improve the performance
of medium sized enterprises through their research and development program by
disseminating new ways of technology, providing solution for their operational and
marketing problems since they are a source of new information. But, this all only be done by
having a close contact relationship with medium sized enterprises. The government should
also support medium sized enterprises by advertizing their products through its media, and
connecting with a general market.
5.4 Directions for Future Research

In this study, firstly the data was collected on single time period on cross sectional study. This may
affect the understanding of the real casual relationship exist or the changes over time between
variables in different time periods through longitudinal study. Therefore future studies could design
this study based on longitudinal study. Secondly, in this study the mediating variables were not
included between independent and dependent variables .Therefore the relationship between
variables may not be explained directly. Thus, future works can include mediating variables other
than independent variables included in this study to make the result of the study more reliable.
Because it is difficult to explain the relationship between variables directly without the involvement
of mediating variables.
56
Thirdly, in this study the data was collected from medium sized enterprises operating in the
manufacturing sector .Thus, future studies could be done on the other sectors to check for weather or
not the result of this study is valid to the other sectors.
57
BIBLIOGRAPHY
Babakus, E., &Yavas, U. (2006).Perceived Uncertainty, Networking and Export
Performance. European Business Review, 18(1), pp.4 – 13.
Babbie, E. (2001).Survey Research Methods.9th ed. Belmont, CA: Wadsworth.
Barney, J. (1991).Firm Resources and Sustained Competitive Advantage. Journal of
Management, 17(1), pp.99 – 120.
Basile, A. (2012).Evaluating R&D Networking to Revitalize SME’s Innovative
Performance: A Management Perspective. Business: Theory and Practice, 13(3),
pp.217-227.
Baum, J.A.C., Calabrese, T. & Silverman, and B.S. (2000) .Don‘t Go It Alone: Alliance
Network Composition and Startups Performance in Canadian Biotechnology.
Strategic Management Journal, 21(3), pp.267 – 294.
Behyan, M. (2011).Conceptualizing Export Performance Influence of Internationalization
and Social Network. Advances In Business-Related Scientific Research Journal,
2(1), pp.69-75.
C Kenny. (2009).A Network Perspective on International Business: Evidence from
SME’s in the Telecommunication Sector in Ireland. PH.D Thesis, University
Limerick, Ireland.
Casals, E., F. (2011). 2010 International Conference on E-Business, Management and
Economics IPEDR, Vol (3), IASIT Press, Hongkong, pp.118-124.
xi
Che sink, Z., Entrekin, L., Mat-Isa, R. &Scot-Ladd, B. (2010).Influential Factors for
SME’s Internationalization: Evidence from Malaysia. International Journal of
Economics and Management, 4(2), pp.285 – 304.
Chen,C.,Tzang,L.C.,Ou,W,M.&Chang,K.T.(2007). The Relationship among Social
Capital, Entrepreneurial Orientation, Organizational Resources’ and
Entrepreneurial Performance for New Ventures. Contemporary Management
Research, 3(3), pp.213 – 232.
Churchil,G.A.(2002). Marketing Research: Methodological Foundations. Chicago:
Dryden press.
Conway, S. & Jones, O. (2006). Networking and the Small Business. In: Carter, S. &
Jones-Evans. (eds). Enterprise and Small Business. Harlow: Prentice Hall, pp, 23- 43.
Creswell. W. (2003).Research Design: Qualitative, Quantitative and Mixed Approaches,
2nd ed. Sage publication, California.
Darroll,C.,Bannock,G.,Schlemmer,L.,Ahmad,L.,Dagut,S.,Hampton,K.,&
Irvine,D.(2004).Counting the Cost of Red Tape for Business in South Africa.
Headline Report, Strategic Partnership for Business Growth in Africa.
Dyer, J. &Singh, H. (1998).The Relational View: Corporate Strategy and Sources of
Internal Organizational Competitive Advantage. Academy of Management
Review, 23(4), pp.660 – 679.
Easton, G. (1992).Industrial Networks: A Review .In: Axelsson, B., &Easton, G.
(eds).Industrial Networks: a New View of Reality, Route ledge, London, pp. 1-27.
Federal Micro and Small Enterprise Development Agency (2010).Micro and Small
Enterprise Development and Strategy. Addis Ababa: Ethiopia.
xii
Ge, B., Hisrich, R.D., &Dong, B. (2009).Networking, Resource Acquisition, &the
Performance of Small and Medium Sized Enterprises: An Empirical Study of
Three Cities in China. Managing Global Transitions, 7(3), pp.221-239.
Gerber-Nel, C., Nel, D., & Kotze,T.(2005).Marketing Research. Claremount: New Africa
Books LTD.
Ghauri, P., Lutz, C., &Tesfom, G. (2003). Using Network to Solve Export Marketing
Problems of Small and Medium Sized Firms from Developing Countries. European
Journal of Marketing, 37(5/6), pp.728 – 752.
Giuliani, E., & Bell, M. (2005).When Micro Shapes the Meso: Learning Networks in a
Chilean Wine Cluster, Research Policy:In Press.
Goerzen, A. (2007).Alliance Networks and Firm Performance: The Impact of Repeated
Partnership .Strategic Management Journal, 28(5), pp.487-509.
Gottardi,G.,(2000).Innovation and the Creation of Knowledge in Italian Industrial
Districts :A System Model ,in:Belussi,F.,Gottardi,G.,(eds),Evolutionary Patterns of
Local Indstrial Systems ,Ashagate Publishing ,ltd,England.
Hair,J.F.,Black,W.C.,Babin,B.J.,Anderson,R.E.,&Tatham,R.L.(2006). Multivariate Data
Analysis: International Edition.6th ed.Pearson Prentice Hall, Newjersy.
Hassan, M. &McCarthy, G. (2011).Influential Organizational Capabilities for SME’s
Export Performance: An Exploratory Study. ASBES 2011 Annual Summit on
Business and Entrepreneurial Studies.Viewed, on-december, 5, 11, 2012, URL:
https%3A%2F%2F2.gy-118.workers.dev/%3A443%2Fhttp%2Fwww.google.com.
Havnes, P.A., Senneseth, K. (2001).A Panel Study of Firm Growth among SME’s in
Networks. Small Business Economics 16(4), 293-302.
xiii
Hossien, H., Huam, H.T., Naser, k. & Mojgan,B.S.(2011).Marketing Network
Dimensions and SME’s Performance :A New Conceptual Model. Australian
Journal of Basics and Applied sciences, 5(10), pp.1528 – 1533.
Inkpen, A.C., &Tsang, E.W.K. (2005). Social Capital, Networks and Knowledge Transfer.
The Academy of Management Review, 30(1), pp.46 -165.
Johnson, G., &Scholes, K. (2005).Exploring Corporate Strategy.7thed.India: Paerson
Education (Singapore) Pte.LTD.
Kennedy, P. (1992).A Guide Econometrics. Cambridge: MIT Press, MA.
Laursen, K., Salter, A., (2004).Searching High and Low: What Types of Firms Use
Universities as a Source of Innovation? Research Policy 33, pp.1201-1215.
Lewis, J. (1990).Partnership for Profit: Structuring and Measuring Strategic Alliances,
Free Press, New York, NY.
Li, W., Valiyath, R., &Tan, .J. (2013).Network Characteristics and Firm Performance: An
Examination of the Relationships in the Context of a Cluster. Journal of Small
Business Management, 51(1).pp.1-22.
Maskell, P. (2001).Towards a Knowledge Based Theory of the Geographical Cluster.
Industrial and Corporate Change, 10(4), pp.921-943.
Nazer, S.M. &Salem, N.M.H. (2009).Firm Level Determinants of Export Performance.
International Business and Economics Research Journal, 8(2), pp.105 – 112.
Nunnaly, J.C. (1978).Psychometric Theory. New York: McGraw hill.
Parida, V. (2008).Small Firm Capability for Competitiveness. PH.D Thesis, Technology
University of Lulea, Sweden.
xiv
Peng, M.W& Lou,Y.(2000).Managerial Ties and Firm Performance in Transition Economy:
The Nature of Micro Macro Link. Academy of Management Journal, 43(3),
pp.486-501.
Pongpanich, C., &Phitya-Isarakul, P. (2008).Enhancing the Competitiveness of Thai
Fruit Exporters: A Study in China .Contemporary Management Research, 4(10,
pp.15 – 28.
Ravichandran, T. &C.Lertwongsatien. (2005).Effect of Information Systems Resources
and Capabilities on Firm Performance: A Resource Based Perspective .Journal of
Management Information System, 21(4), pp.237-276.
Sahakijpicharn, K. (2007). Guanxi Network and Business Performance of Sino. Thai
SME’s, PHD Thesis, University of Wollongong, Australia.
Sauders, M., Lewis, P. &Thornhill, A. (2007).Research Method for Business Students, 4th
ed. Harlow: Financial Times/Prentice Hall.
Schayek, R.(2011).The Effect of Strategic Planning, Entrepreneurship ,Human and
Financial Resources and Market Orientation on Small Business Performance
.http://www.small-medium-business.blogspot.com/.
Sha, S. (2006).An Investigation into Problems Facing Small and Medium Sized Enterprises
in Achieving Growth in the Eastern Cape: Enhancing The Strategy For Developing
Small ‘Growth Potential’ Firms In The Eastern Cape. Published Thesis, Rhodes
University, Grahamstown, South Africa.
Sharfman, M.P., &Fernando, C.S. (2008).Environment Risk Management and the Cost of
Capital. Strategic Management Journal, 29(6), pp.569-592.
xv
Shibrie, Z., Van Der Loop, T., &Solomon, E. (2003).Horizontal And Vertical Linkage in the
Textile and Leather Foot Ware Sectors in Addis Ababa. Addis Ababa
University, Ethiopia and Institute of Social Studies, The Netherlands.
Stevens.J. (1986).Applied Multivariate Statistics for Social Sciences. Hillsdale, NJ:
Lawrance Elbaum Associates.
Storchmann, K. (2005).English Weather and Rhine Wine Quality: An ordered Probit
Model. Journal of Wine Research, 16(2), pp.105-119.
Tooksoon, P., &Mohammed, O. (2010).Achieving Financial Export Performance:
Contribution of External Resources. International Journal of Marketing Studies,
2(1), pp.110 – 116.
Tooksoon, P., &Mudor, H. (2012).Commitment to Networking and Export Performance:
Evidence from Thai SME’s in Agro Based Sector. Information Management and
Business Review, 4(5), pp.268 – 274.
Watson, J. (2002).Comparing the Performance of Male and Female Controlled Business:
Retailing Output to Inputs. Entrepreneurship Theory and Practice, 26(3), pp.91-
100.
Watson, J. (2007).Modeling the Relationship between Networking and Firm
Performance. Journal of Business Venturing 22:852 – 874.
Yiu, D.W., Lau, C., & Bruton, G.D. (2007).International venturing by Emerging Economy
Firms: The Effects of Firm Capabilities, Home Country Networks, and Corporate
Entrepreneurship. Journal of International Business studies, 38(5), pp.519 – 540.
Zeinalnezhad, M., Mukhtar, M., & Sahran, S. (2011).The Role of Clusters and Networks in
Development of Industrial SME’s. Proceedings of 2010 International
xvi
Conference on Business and Economics Research, IACSIT Press, Kual Lumpur ,
Malaysia ,pp.76 – 80.
Zhao, L. &Aram, J.D.(1995).Networking and Growth of Young Technology-Intensive
Ventures in China . Journal of Business Venturing, 10(5), pp.349 – 370.
Zikmund,W.(2000).Business Research Methodlogy,6th edition Harcourt, INK,USA.
xvii
APPENDICES
Appendix 1: RESEARCH QUESTIONNAIRE ENGLISH VERSION
Addis Ababa University
College of Business and Economics
Department of Management
Research questionnaire
This questionnaire is designed for medium sized enterprises operating in the manufacturing
sector in Addis Ababa.
Dear Respondents,
My name is Firew Mulatu I am conducting a research on the topic entitled “Networking and
business performance of medium sized enterprises in Addis Ababa”. This questionnaire is therefore
designed to collect data and write a thesis for the partial fulfillment of the requirements for the
Master of Business Administration (MBA)degree at the Addis Ababa university .The purpose of this
study is to understand in what kind of relationship that medium sized enterprises in manufacturing
sector are involved and to measure the impact of networking on their business performance and
based on the finding of the study to make the necessary conclusion and recommendation. Hence,
you are selected to participate in the data collection process and contribute to the success of this
study .Therefore you are humbly requested to complete this questionnaire. All information you
provide used only for academic purpose and your response will be kept confidential .Hence, there is
no need to write your name or any identification.
Thank you very much for your cooperation and contribution
xviii
PART ONE: QUESTIONS RELATED TO THE CHARACTERSTISTICS OF THE
BUSINESS
In this section, please put your answers for following questions by putting a tick
mark () in the appropriate box.
1. How long has been your business in the operation? ___________________
2. What is the total number of employees working in your business?
_______________________________
3. What are problems and barriers to your business to collaborate with similar business and
other companies for the past three years? For the following statements please measure the
extent of the problems by putting a coded number in the appropriate box.
Measurement codes:
1= Highly serious problem, 3=Somewhat serious problem
2=Moderately serious problem, 4= Not a problem.
Problems and barriers related to the formation of network with Rate them
others
1. Lack of finance and cooperation problem among medium

sized enterprises
2. Lack of getting the required support from concerned body’s
3. No cluster area or shed provided by government
4. Awareness about networking benefit is low
5. Problem of getting raw material supply as per the firm need
6. Partners search and selection
7. Lack of skills of human resources
8. Lack of trusted relationship when working with others
9. Lack of favorable grounds for promoting our products

through trade fairs and exhibition.
10. Others (please write them) --------------------------------------------------------------

-----------------------------------------------------------------------------------------------
xix
PART TWO: QUESTIONS RELATED TO PERFROMANCE OF THE BUSINESS
In this section, please indicate your agreement or disagreement about your business
performance for the past three years for following statements by putting a tick mark () in the
appropriate box.
Measurement codes:
Where; 1= Strongly disagree 3= Neutral
2= Disagree 4= Agree 5= Strongly agree.
Scales
Items for Measuring Business Performance
1 2 3 4 5
1. Compared with major competitors our company’s

return on assets is superior

average sales growth rate is superior

Percentage of sales from new product is superior
4. Compared with major competitors our company’s new
product success rate is superior
firm’s defective product return rate is lower

customers are more satisfied
PART THREE: OTHER QUASTIONS RELATED TO NETWORKING

3.1 EXTENT OF RELATIONSHIP (STRENGTH OF RELATIONSHIP) WITH
NETWORKING TYPES
In this section, please indicate your agreement or disagreement about extent of relationship
(strength of relationship) you have with the following networking types for the past three
years by putting a tick mark () in the appropriate box.
xx
Measurement codes:
Where; 1= Not at all, 3= Neutral
2= To some extent 4= To moderate extent 5= At a great extent
Type of Networking Scales
1 2 3 4 5
A) Governmental Supporting Agencies

1. Federal micro and small enterprise development
agency
2. Addis Ababa micro and small enterprise bureau
3. Industry minister
4. Urban construction and development minister
5. Trade minister
6. Ethiopian kaizen institute
B. Financial Institutions
1. Commercial bank of Ethiopia
2. Other private banks
3. Micro finance institutions
4. Saving and credit institutions
C. Trade Associations
1. Addis Ababa chamber of commerce
2. Ethiopian women’s export association
D. Business Associates
xxi
1. Raw material suppliers
2. Customers
3. Subcontracting relationship with large firms
4. Relationship with similar enterprises operating in

the same sector.
E. Knowledge Institutions
1. Technical and vocational training agencies and

schools
2. University or college research institute
3. Media organization
3.2 RESOURCE ACUISITION CAPABILTY OF THE NETWORK

In this section, please indicate your agreement or disagreement about the resource
accusation capability of the network you have entered for the past three years by putting a
tick mark () in the appropriate box.
Measurement codes:
Items for Measuring Resource Acquisition Scales

Capability of the Network
1 2 3 4 5
1. We get enough tangible resources from the network
2. We get enough intangible resources from the network
3. Generally we get enough resources (both tangible and

intangible) from the network.
xxii
3.3 QUALITY OF THE RELATIONSHIP IN THE NETWORK
In this section, please indicate your agreement or disagreement about the quality of
relationship you have with different networking types for the past three years for following
statements by putting a tick mark () in the appropriate box.
Measurement codes:
Items for Measuring Quality of the Relationship Scales

in the Network
1 2 3 4 5
1. When our company has technical exchange with

suppliers/customers/other institutions both parties do not
harm each other.
2. When our company has technical exchange with

suppliers/customers/other institutions both parties do not
take advantages of the other even if opportunities to do
so arise.
3. When our company has technical/business knowledge

exchanges and collaboration with other companies, we
sometimes suspect the accuracy of the information these
companies provide.
xxiii
3.4 ABSORPTIVE CAPACITY OF THE BUSINESS
In this section, please indicate your agreement or disagreement about the absorptive
capacity of your business for the past three years for following statements by putting a
tick mark () in the appropriate box
Measurement codes:
Items for Measuring Absorptive Capacity of Scales

the Business 1 2 3 4 5
1. Compared with major competitors, our company
has internal resource advantage.
can accurately evaluate technology related
knowledge that is acquired externally.
has a greater ability to modify and use externally
acquired knowledge.
has a greater ability to adjust pricing based on
market condition.
can quickly recognize changes in the market and
industry.
can more easily obtain market information from
our customers.
can more quickly obtain information on technology
or market changes.
Thank you once again.

Firew Mulatu
PHONE NUMBER : 0910141319
E-MAIL = [email protected]
NOTE: When questionnaires distributed across the sectors for measuring strength of tie with
governmental agencies: metal and engineering institute included for metal and engineering sector,
textile institute for textile sector, leather industry development institute for leather and products of
leather sector.
xxiv
Appendix 2: RESEARCH QUESTIONNAIRE AMHARIC VERSION
አዲስ አበባ ዮኒቨርሲቲ
የቢዝነስና ኢኮኖሚክስ ኮሌጅ
የስራ አመራር ዲፓርትመንት
የጥናት መጠይቅ
ይህ መጠይቅ የተዘጋጀዉ በአዲስ አበባ በማኑፋቸሪንግ ዘርፍ ለተሰማሩ ለመካከለኛ
ኢንተርፕራይዞች ነዉ፡፡
ውድ የጥናቱ ተሳታፊዎች፡-
ስሜ ፍሬው ሙላቱ ይባላል በአሁኑ ሰዓት የመመረቂያ ፅሁፌን “ትስስርና የመካከለኛ ተቋማት
የንግድ ስራ ብቃትበአዲስ አበባ” በሚል ርዕስእየሰራሁ እገኛለው፡፡ ይህ መጠይቅ የተዘጋጀው
በርዕሱ ዙሪያ መረጃዎችን በመሰብሰብ በአዲስ አበባ ዮኒቨርሲቲ በንግድ አስተዳደር ለሁለተኛ ድግሪ
መሟያ የሚሆን የመመረቂያ ፅሁፍ ለማዘጋጀት ነው፡፡ የዚህ ጥናት ዓላማ በማኑፋክቸሪንግ
ሴክተር ውስጥ የሚገኙ መካከለኛተቋማት በምን ዓይነት ትስስር ውስጥ አንዳሉ መገንዘብና ትስስሩ
በተቋማቱ ላይ ያለውን ኢኮኖሚያዊ ፋይዳ መለካት ነው፡፡ በተጨማሪም በጥናቱ ውጤት ላይ
በመመስረት ድምዳሜዎች ላይ ለመድረስና መሻሻል የሚገቡአቸውን ሁኔታዎችን ለመጠቆም ነው፡፡
በመሆኑም እርስዎ በመረጃ ሰብሰባ ሂደት ውስጥ በመሳተፍ ለጥናቱ ዓላማ ስኬት የበኩሉዎን
አስተዋፅኦ እንዲያደርጉ ተመርጠዋል፡፡ ስለዚህ እርስዎ በጥንቃቄ መጠይቁን እንዲሞሉ በትህትና
እንጠይቆታለን፡፡ እርስዎ የሚሰጡን መረጃዎች ለዚህ ጥናት ዓላማ ብቻ የሚውሉና ሚስጢራዊነቱ
የተጠበቀ መሆኑን ለአረጋግጥሎት እወዳለሁ፡፡ በመሆኑም ስምዎትንም ሆነ ማንነትዎን መግለፅ
አይጠበቅቦትም፡፡
ለትብብሮና ለአስተዋፅኦ በጣም አመሰግናለሁ፡፡
xxv
ክፍል አንድ፡- የንግድ ስራውን የተመለከቱ ጥያቄዎች
ከዚህ በታች ለተዘረዘሩት ጥያቄዎች መልሶዎትን በተሰጠው ሳጥን ውስጥ የእርማት
ምልክት () በማስቀመጥ ይምረጡ፡፡
1. ድርጅትዎ ከተመሰረተ ምን ያህል ጊዜ ሆነው? ------------------------------------------------

2. በድርጅትዎ ውስጥ ያለው የሰው ኃይል መጠን ምን ያህል ነው?
-----------------------------------------
3. ከተመሳሳይ ድርጅቶች ጋር ወይም ከሌሎች ጋር በመቀናጀት ወይም በመተሳሰር
እንዳይሰሩ ያደረጉዎት ችግሮችና እንቅፋቶች ምንድን ናቸው? እባክዎ እንደሚከተለው
በመለካት ያስቀምጡአቸው፡፡
የመለኪያዎቹ ኮድ
1. በጣም አንገብጋቢ ችግር, 2. በመካከለኛ ሁኔታ አንገብጋቢ ችግር
3. በመጠነኛ ሁኔታ አንገብጋቢ ችግር, 4. ችግር አይደለም
ከሌሎች ጋር ትስስር ለመፍጠር ያላስቻሎዎት ችግሮችና እንቅፋቶች ለካቸዉ
1. በተመሳሳይ ኢንተርፕራይዞች መካከል ተባብሮ (ተቀናጅቶ)

ያለመስራትና የገንዘብ እጥረት ማጋጠሙ
2. ከሚመለከተው መንግስታዊ ተቋም በትስስሩ ዙሪያ ተፈላጊውን
ድጋፍ ያለማግኘት ችግር
3. የጋራ ማምረቻና ሽያጭ ቦታ በመንግስታዊ ተቋም አለመሰጠቱ
4. በገበያ ትስስር ጥቅም ዙሪያ ያለው ግንዛቤ አናሳ መሆኑ
5. በሚፈለገው መጠን የጥሬ ዕቃ አቅርቦት ያለማግኘት ችግር
6. የአጋሮች (አብረው የሚሰሩ) ፍለጋና ምርጫ ችግር
7. የሰው ሀይላችን የእውቀት እጥረት
8. ከሌሎች ጋር በሚሰራበት ጊዜ ያለመተማመን ሁኔታ መኖር
9. ምርቶቻችንን በባዛርና ኤግዚቢሽን መልክ ለማስተዋወቅ ሁኔታዎች
ስላልተመቻቹልን
10. ሌሎች(ካሉ ይጥቀሱ)………………………………………………………………………...
……………………………………………………………………………………………
ክፍል ሁለት:- ከንግድ ስራ ብቃት ጋር የተያያዙ ጥያቄዎች

በዚህ ክፍል ባለፈው ሶስት ዓመት ውስጥ ስለድርጅትዎ የንግድ ስራ ብቃት መጠን መስማማትን
ወይም አለመስማማቶን ከዚህ በታች ለተዘረዘሩት መዘርዝሮች በተሰጠው ሳጥን ውስጥ አንድ ጊዜ
ብቻ የእርማት ምልክት () በማስቀመጥ ይምረጡ፡፡
xxvi
1. በፍፁም አልስማማም 2. አልስማማም 3. ሀሳብ መስጠት ይቸግረኛል
4. እስማማለሁ 5. ሙሉ በሙሉ እስማማለሁ
የንግድ ስራ ብቃትን የሚለኩ መዘርዝሮች መለኪያዎች

1 2 3 4 5
1. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር የድርጅታችን
አጠቃላይ የንብረት ገቢ ከፍተኛ ነው
2. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር የድርጅታችን አመካይ
የሽያጭ እድገት መጠን ከፍተኛ ነው
3. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር ድርጅታችን ከአዳዲስ
ምርቶች የሚያገኘው የሽያጭ ፐርሰንት ከፍተኛ ነው
4. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር የድርጅታችን የአዳዲስ
ምርቶች የስኬት መጠን ከፍተኛ ነው
5. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር የድርጅታችን
የተበላሹ ዕቃዎች የመመለስ መጠን አነስተኛ ነው
6 ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር የድርጅታችን
ደንበኞች በተሻለ ሁኔታ የረኩ ናቸው
ክፍል ሶስት፡- ሌሎች ከትስስር ጉዳዮች ጋር የተያያዙ ጥያቄዎች

3.1. ከተለያዩ አካላት ጋር ያለ የትስስር መጠን ወይም የትስስር ጥንካሬ
በዚህ ክፍል ባለፈው ሶስት ዓመት ውስጥ ድርጅትዎ ከተለያዩ አካላት ጋር ስላለው
የትስስር ጥንካሬ (መጠን) የመስማማቶን ወይም ያለመስማማትዎን መጠን ከዚህ በታች
ለተዘረዘሩት መዘርዝሮች በተሰጠው ሰጥን ውስጥ አንድ ጊዜ ብቻ የእርማት ምልክት ()
በማድረግ ይምረጡ፡፡
1. ምንም ግንኙነት የለኝም 2. በመጠነኛ ሁኔታ 3. ሀሳብ ለመስጠት ይቸግረኛል
4. በመካከለኛ ሁኔታ 5. በከፍተኛ መጠን
xxvii
የትስስሩ ዓይነት መለኪያዎች
1 2 3 4 5
ሀ. ድጋፍ ሰጪ መንግስታዊ ተቋማት
1. የፌዴራል የጥቃቅንና አነስተኛ ኢንተርፕራይሮዞች የልማት
ኤጄንሲ
2. የአዲስ አበባ የጥቃቅንና አነስተኛ ኢንተርፕራይዝ በሮ
3. የኢንዱስትሪ ሚኒስቴር
4. የከተማ ልማትና ኮንሰትራክሽን ሚኒስቴር
5. ንግድ ሚኒስቴር
6. የኢትዮጵያ ካይዘን ኢንስቲቱት
ለ. የገንዘብ ተቋማት
1. የኢትዮጵያ ንግድ ባንክ
2. ሌሎች የግል ባንኮች
3. የማይክሮ ፋይናንስ ተቋማት
4. የብድርና ቁጠባ ተቋማት
ሐ. የንግድ ማህበራት
1. የአዲስ አበባ የንግድ ዘርፍ ማህበር
2. የኢትዮጵያ ሴቶች ኤክስፖርት ማህበር
መ. የንግድ ስራ አጋሮች
1. የጥሬ እቃ አቅራቢዎች
2. ደንበኞች
3. ከትላልቅ ድርጅቶች ጋር የንዑስ ስራ ተቋራጭነት ትሰስር
4. በተመሳሳይ ስራ ላይ ከተሰማሩ ኢንተርፕራይዞች ጋር ያለ
ትስስር
ሰ. የእውቀት ተቋማት
1. ከቴክኒክና ሙያ ትምህርት ቤት ስልጠና ኤጅንሲና ት/ቤቶች
2. ከዮኒቨርሲቲ ወይም ኮሌጅ የምርምር ተቋማት
3. ከመገናኛ ብዙሀን
3.2. የትስስሩን ጥቅም የማሰገኘት አቅም የተመለከቱ ጥያቄዎች

በዚህ ክፍል ባለፈው ሶስት ዓመት ውስጥ ድርጅትዎ ከተለያየ አካላት ጋር ስላለው
ትስስር ጥቅም የማስገኘቱ አቅም ላይ ያልዎትን የመስማማት ወይም ያለመስማማት
መጠንከዚህ በታች ለተዘረዘሩት መዘርዝሮች በተሰጠው ሳጥን ውስጥ አንድ ጊዜ ብቻ
የእርማት ምልክት () በማድረግ ይምረጡ፡፡
1. በፍፁም አልስማማም 2. አልስማማም 3. ሀሳብ ለመስጠት ይቸግረኛል
xxviii
የትስስሩን ጥቅም የማሰገኘት አቅም የሚለኩ መለኪያዎች

መዘርዝሮች 1 2 3 4 5
1. ከትስስሩ ቁሳዊ ጥቅም (ድጋፍ) በበቂ መጠን አገኛለዉ
2. ከትስስሩ ቁሳዊ ያልሆነ ጥቅም (ድጋፍ) በበቂ መጠን
አገኛለዉ
3. ከትስስሩ አጠቃላይ ጥቅም(ድጋፍ) በበቂ መጠን አገኛለዉ
3.3. የትስስሩን ጥራት የተመለከቱ ጥያቄዎች

በዚህ ክፍል ባለፈው ሶስት ዓመት ውስጥ ድርጅትዎ ከተለያዩ አካላት ጋር ስላለው
የትስስር ጥራት የመስማማቶን ወይም ያለመስማማቶን መጠን ከዚህ በታች ለተዘረዘሩት
መዘርዝሮች በተሰጠው ሳጥን ውስጥ አንድ ጊዜ ብቻ የእርማት ምልክት () በማድረግ
ይምረጡ፡፡
የትስስሩን ጥራት የሚለኩ መዘርዝሮች መለኪያዎች

1 2 3 4 5
1. ድርጅታችን ቴክኒክዊ የሆነ ልውውጥ ከአቅራቢዎች ጋር
ወይም ከደንበኞች ወይም ከሌሎች ተቋማት ጋር ካለው
ሁለቱም አካላት አንዱ አንዱን የሚጎዳ ነገር አያደርጉም
2. ድርጅታችን ቴክኒካዊ የሆነ ልውውጥ ከአቅራቢዎች ጋር
ወይም ከደንበኞች ወይም ከሌሎች ተቋማት ጋር ካለው
እድሎችን እንኳን ቢያገኙ የሌላውን ተጠቃሚነት የሚጋፋ
ከሆነ ሁለቱም አካላት አያደርጉትም
3. ድርጅታችንን ቴክኒካዊ ወይም የንግድ ስራ እውቀት
ልውውጥና ትብብር ከሌሎቹ ጋር ካለው አንዳንድ ጊዜ እነዚህ
አካላተ የሚሰጡንን መረጃ ትክክለኛነት እንጠራጠራለን
3.4. የድርጅቱን ዉስጣዊ አቅም የተመለከቱ ጥያቄዎች

በዚህ ክፍል ባለፈው ሶስት ዓመት ውስጥ ድርጅትዎ ስላለው ዉስጣዊ አቅም
የመስማማቶን ወይም ያለመስማማቶን መጠን ከዚህ በታች ለተዘረዘሩት መዘርዝሮች
በተሰጠው ሳጥን ውስጥ አንድ ጊዜ ብቻ የእርማት ምልክት () በማድረግ ይምረጡ፡፡
xxix
የድርጅቱን ዉስጣዊ አቅም የሚለኩ መዘርዝሮች መለኪያዎች

1 2 3 4 5
1. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን የውስጣዊ
ሀብት ተጠቃሚነት አለው
2. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን ከሌሎች
የሚያገኘውን ቴክኖሎጂ ነክ እውቀት በትክክል መገምገም
ይችላል
3. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን ከሌሎች
የሚያገኘውን አዉቀት አሻሽሎ የመጠቀም የተሻለ ብቃት አለው
4. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን ዋጋን
በገበያው መሰረት የማስተካከል የተሻለ ችሎታ አለው
5. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን
በገበያውና በኢንዱስትሪ ውስጥ ያለውን ለውጥ በፍጥነት
የመገንዘብ ችሎታ አለው
6. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን በተሻለ
ሁኔታ ከደንበኞች የገበያ መረጃን በቀላሉ ማግኘት ይችላል
7. ከዋነኞቹ ተወዳዳሪዎቻችን ጋር ሲወዳደር, ድርጅታችን
በገበያውና በቴክኖሎጂካዊ ለውጥዎች ዙሪያ በተሻለ ፍጥነት
መረጃ ማግኘት ይችላል
በድጋሚ አመሰግናለሁ፡፡
ፍሬው ሙላቱ
የስልክ ቁጥር፡- 0910-14-13-19

Email: [email protected]
ማስታወሻ :የጥናት መጠይቁን በተመለከተ
ለብረታ ብረትና ኢንጅነሪንግ ሴክተር ለመንግስታዊ ተቋማቱ የብረታ ብረትና ኢንጅነሪንግ

ኢንሰቲቱት፤ለጨርቃጨርቅና አልባሳት ሴክተር የጨርቃጨርቅ ኢነስቲቱት፤ለቆዳና የቆዳ ዉጤቶች
ሴክተር የቆዳ ኢንዱስትሪ ልማት ኢንስቲቱት መጠይቁ በየሴክትሩ በሚበተንበት ሰአት
ተጨምሮአል፡፡
xxx
APPENDIX 3: Variables Used in the Study
No. Variable description Variable measurement /coding Type of variable

1. “1” for textile and garment
“2”for leather and leather
products
“3” for wood products Descriptive
Type of business “4” for metal work and
engineering
“5” for food processing and
beverage
“2” for group
“3” for cooperative association
“4” for joint venture
2. Business year of Ln
operation (firm age) Control
3. Numberof employees Ln
in the business (firm Control
size)
4. Networking “1” for highly serious problem
problems “2” for moderately serious Descriptive
problem
“3” for slightly serious problem
“4”for not a problem
5. Governmental “1”for not at all
agencies “2” for to some extent
Independent
“3” for neutral
“4” at moderate extent
“5” at a great extent

6. Financial institutions “1”for not at all
“2” for to some extent
Independent
“3” for neutral

7. Trade associations “1”for not at all
Independent
“3” for neutral
xxxi
8. Business associates “1”for not at all
Independent
“3” for neutral

9. Knowledge “1”for not at all Independent
institutions “2” for to some extent
“3” for neutral


10. Resource acquisition “1” for strongly disagree
capability of the “2” for disagree,
network Independent
“3” for neutral
“4” for agree
“5”for strongly agree

11. Quality of the “1” for strongly disagree
relationship in the “2” for disagree,
network Independent
“3” for neutral
“4” for agree

12. Absorptive capacity “1” for strongly disagree
of the network
“2” for disagree, Control
“3” for neutral
“4” for agree
13. Industry type effect “1” for textile and garment,”0”

otherwise.
“1”for leather and leather Control

products,”0” otherwise.
“1”for wood products,”0”

otherwise.
xxxii
“1”for metal work and
engeenering,”0” otherwise.
“1”for food processing and

beverage,”0” otherwise.
14. Business “1” for strongly disagree

performance “2” for disagree, Dependent
“3”for neutral
“4” for agree
“ 5” for strongly agree
xxxiii
Appendix 4. Type and extent of networking
Proportion estimation Number of obs = 128
Proportion Std. Err. [95% Conf. Interval]
govermentalagencies
1 .0078125 .0078125 -.007647 .023272
2 .2109375 .0362018 .1393006 .2825744
3 .265625 .0391915 .1880722 .3431778
4 .515625 .0443462 .427872 .603378
finantialinstitutions
1 .0390625 .017192 .0050427 .0730823
2 .2421875 .038015 .1669627 .3174123
3 .421875 .0438229 .3351574 .5085926
4 .1640625 .0328617 .0990352 .2290898
5 .1328125 .0301144 .0732216 .1924034
tradeassociations
1 .0859375 .0248701 .0367241 .1351509
2 .7109375 .0402263 .631337 .790538
3 .203125 .0357006 .1324801 .2737699
businessassociates
2 .109375 .0276952 .0545712 .1641788
3 .40625 .0435809 .3200112 .4924888
4 .4765625 .0443191 .3888631 .5642619
5 .0078125 .0078125 -.007647 .023272
knowledgeinstitutions
1 .0234375 .0134247 -.0031275 .0500025
2 .5234375 .0443191 .4357381 .6111369
3 .2265625 .0371454 .1530585 .3000665
4 .2265625 .0371454 .1530585 .3000665
xxxiv
Appendix 5. Quality of the relationship and resource acquisition capability of the network
qualityofrelationship
2 .1484375 .0315485 .0860088 .2108662
3 .453125 .0441724 .3657158 .5405342
4 .3984375 .0434429 .3124719 .4844031
resourceacuisitioncapacity
1 .0234375 .0134247 -.0031275 .0500025
2 .1171875 .0285413 .0607095 .1736655
3 .2265625 .0371454 .1530585 .3000665
4 .6015625 .0434429 .5155969 .6875281
5 .03125 .0154393 .0006983 .0618017
Appendix 6. Absorptive capacity of the business
absorbitivecapcityofthebusiness
2 .1015625 .0268046 .0485211 .1546039
3 .09375 .0258647 .0425684 .1449316
4 .375 .042959 .289992 .460008
5 .4296875 .0439269 .342764 .516611
xxxv
Appendix 7. Business performance of medium sized enterprises
businessperfromance
1 .0078125 .0078125 -.007647 .023272
2 .0078125 .0078125 -.007647 .023272
3 .0859375 .0248701 .0367241 .1351509
4 .515625 .0443462 .427872 .603378
5 .3828125 .043132 .297462 .468163
xxxvi
Appendix 8: Ordered probit model test result
Ordered probit regression Number of obs = 128

LR chi2(15) = 42.20
Prob > chi2 = 0.0002
Log likelihood = -106.36715 Pseudo R2 = 0.1655
businessperfromance Coef. Std. Err. z P>|z| [95% Conf. Interval]
govermentalagencies .064472 .1534171 0.42 0.674 -.2362199 .365164

finantialinstitutions .2873355 .1138967 2.52 0.012 .0641021 .5105689
tradeassociations -.1681317 .2208449 -0.76 0.446 -.6009798 .2647163
businessassociates .4037304 .1694606 2.38 0.017 .0715938 .735867
knowledgeinstitutions -.119843 .1352156 -0.89 0.375 -.3848606 .1451747
resourceacuisitioncapacity -.3301507 .1491456 -2.21 0.027 -.6224706 -.0378307
qualityofrelationship .3658749 .1757133 2.08 0.037 .0214831 .7102667
absorbitivecapcityofthebusiness -.1017562 .1326225 -0.77 0.443 -.3616915 .1581792
textileandgarment .389222 .5699646 0.68 0.495 -.7278881 1.506332
leatherandleatherproducts -.8014281 .7778398 -1.03 0.303 -2.325966 .7231099
woodproducts .661191 .5478546 1.21 0.227 -.4125843 1.734966
metalworkandengeenering .0842006 .3058018 0.28 0.783 -.5151599 .683561
foodprocessingandbeverage -.3036326 .5846044 -0.52 0.603 -1.449436 .842171
lfirmage .814924 .4078398 2.00 0.046 .0155727 1.614275
lfirmsize .2629984 .1448769 1.82 0.069 -.0209552 .5469519
/cut1 .5280386 1.568736 -2.546627 3.602705

/cut2 .8998379 1.536755 -2.112146 3.911821
/cut3 1.92347 1.50309 -1.022532 4.869471
/cut4 3.862092 1.522508 .8780313 6.846152
xxxvii
xxxviii

Firew Mulatu

Uploaded by

Copyright:

Available Formats

Firew Mulatu

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Firew Mulatu

Uploaded by

Copyright:

Available Formats

NETWORKING AND BUSINESS PERFORMANCE OF MEDIUM SIZED

ENTERPRISES IN ADDIS ABABA

A THESIS SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES OF

ADDIS ABABA UNIVERSITY IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE MASTER OF BUSINESS ADMINISTRATION

BY: FIREW MULATU

ADVISOR: Dr. ZEWDIE SHIBRE

SCHOOL OF GRADUATE STUDIES

and Business Performance of Medium Sized Enterprises in Addis Ababa and

submitted in partial fulfillment of the requirements for the Master of Business

meets the accepted standards with respect to originality and quality.

Approved by the Examining Committee:

Internal Examiner__________________________ Signature ___________ Date_____________

External Examiner _________________________ Signature ___________ Date_____________

Advisor ________________________________ Signature _________ Date _____________

Chair of department or graduate program coordinator

coordinator, Management Department) and Dr. Mohammed Seid (Chairperson of Management

List of Figures ............................................................................................................viii

List of Acronyms and Abbreviations ......................................................................... x

CHAPTER ONE: INTRODUCTION ........................................................................ 1

1.1 Background of the Study ........................................................................................................................... 1

CHAPTER TWO: REVIEW OF RELATED LITRATURE .................................. 8

2.1 Overview and Concept of Networking ...................................................................................................... 8

CHAPTER THREE: RESEARCH METHODOLOGY ........................................ 24

CHAPTER FOUR: PRESENTATION, ANALYSIS AND INTERPRETATION ..

4.1 Descriptive Statistics Analysis .................................................................................................................33

5.1 Conclusion ...............................................................................................................................................52

Figure 2.1. Conceptual Frame Work for the Study 23

Figure 4.1 Bar Chart of Ordinal Data Using Median 44

Table 3.2: Function of control variables 33

Table 4.1: Number of samples actually used in the study 34

Table 4.2: networking problems of sampled firms ………………………………………………….35

Table 4.3: Mean value of firm age and firm size 43

Table 4.5: Factor and reliability test of type of networking 47

Table 4.6: White’s test of heteroskedasticity 50

Table 4.7: Shapiro wilk test of normality 50

Table 4.8: Test of multicollinarity among independent variables 52

Table 4.9: Ordered probit model test result 52

Table 4.9.1: Marginal effects of independent variables 54

1. SME’s ………………………………….. Small and Medium Enterprises.

2. FEMSEDA………………………………. Federal Micro and Small Enterprise

3. UNIDO …………………………………...United nation international development

4. CEO ……………………………………….Chief executive officer

5. ICT ……………………………………….. Information Communication Technology

1.1 Background of the Study

as vertical network (Shibre et al., 2003).

related to their business operation as we can see below.

related with firm performance.

1.2 Statement of the Problem

competent in domestic as well as international market by decreasing uncertainties involved in the

Enterprise Development Agency Strategy(FEMSEDA,2010) the aim of the government among

manufacturing sector in Addis Ababa.

1.3 Research Questions

the following research questions:

1) In what type of networking do medium sized enterprises in manufacturing sector involve?

performance of medium sized enterprises in manufacturing sector?

medium sized enterprises in the manufacturing sector?

performance of medium sized enterprises in the manufacturing sector?

1.4 The Objective of the Study

Internal Examiner____________________ Signature _ Date_________

External Examiner ___________________ Signature _ Date_________

Advisor ____________________________ Signature _ Date _________