Abstract:
This research sought to identify the major determinants of operational performance of micro and
small manufacturing enterprises in Jimma Town. More specifically this research assessed both
internal and external factors that determine operational performance of micro and small
manufacturing enterprises. Internal factors includes; HRM practice, Basic infrastructure, Lean
Manufacturing Practices, Strategic Flexibility, Manufacturing Technology and Innovation
capacity of the enterprises and external factors includes; economic factors and Government
regulation. Both internal factors and external factors were identified based on the findings of
prior researches and journal articles. The target populations of this study were micro and small
manufacturing enterprises in Jimma town. Self-administered questionnaire was used to collect
data from 155 sample enterprise owners/mangers. The enterprises were selected by using
stratified sampling technique. The stratification was made based on the type of product they
produced. Both descriptive and empirical analysis was employed to see the impact of identified
variables and their relationship with operational performance. Ordered Logit model was
employed to assess the relationship between dependent variable and independent variables since
the dependent variable (operational performance) has categorical nature and the values of each
category have a meaningful sequential order which is impossible to express it in-terms of
numerical number and to use OLS method. The analysis of ordered logit model shows out of
eight independent variables; six variables (Human resource management practice, Basic
infrastructure, Lean Manufacturing Practices, Strategic Flexibility, Manufacturing Technology
and economic factor) have statistically significant impact (P-value <0.05) on operational
performance. Except economic factors all significant variables are positively related with
operational performance. The finding of this research reveals that internal factors have high
impact on operational performance. It is recommended that continues improvement in
operational activity through better improvement in those variables with positive relation with
operational performance such as: Human resource management practice, Basic infrastructure,
Lean Manufacturing Practices, Strategic Flexibility, and Manufacturing Technology.
