Abstract:
Small and Medium Enterprises are well known as the building blocks of both developed and
developing economy. Understanding the growth behaviors of SMEs is quite heterogeneous. The
basic aim to constitute this research is to identify and analyze factors that affect the growth of
SME. Firm specific factor including: size, age, human capital and managerial competence and
business environment factor which include access to finance, access to market, and
infrastructure were realized as major factors for SMEs working in Addis Ababa. In this study
both quantitative and qualitative approach was used The collected data were analyzed through
both descriptive and inftrential analysis and different statistical tools were used to check
different test. Empirical model was proposed relating dependent with independent variables and
statistical tests were applied to check for relation between growth and independent variable.
This study finds the proposed model can explain the expected relations between dependent and
independent variables This study has shown that Gibrat's law of size and age independence of
enterprise growth is not hold in the case of Addis Ababa. Rather, age of an enterprise isfound to
have significantly inverse relation with enterprise growth. Furthermore, growth of SME is
found to be affected negatively by both age and initial size, although the impact of initial size is
statistically insignificant. It is also found that the direction of growth impacts of age and initial
size are insensitive to aleernative measures of growth. Finally, the impacts of environmental
factors are weak due to geographical proximity between enterprises and its direct result of
environmental similarity
