Factors that Affect the Growth of Firms’ and Employees Income (A case of Medium and Large Scale Manufacturing Enterprise in Kolfe Keranio Sub City, Addis Ababa)

Abstract

The paper investigates firms’ growth status, firms’ growth factors, employees’ salary levels, and employees’ salary growth factors in medium and large manufacturing firms in Kolfe Keranio sub city, Addis Ababa. The study includes 18 manufacturing firms and a sample of 252 employees engaged in 9 sectors was taken for the study using stratified and simple random sampling. After the data has been collected, it was analyzed using descriptive statistics (graphs, mean and standard deviations) to analyze the firm’s growth status and employees salary level, whereas inferential statistics (multiple linear regression) was used to determine the firm and salary growth determinant factors. The results indicate that, the growth rate performance of sub sectors were weak compared to other developing countries. Firm and salary growth rates run in parallel, although the growth rate of an employees’ salary is often higher than that of the firm’s growth rate. The relationship between the age of a firm and its growth is found to be inverted Ushaped. Moreover, the growth rate of large firm’s is higher than of medium firms. Finally, the results indicate that large firms pay a higher salary than that of medium firms; and also the employees’ salary growth rate of large firms’ is higher than that of medium firms. The empirical analyses using the multiple regression model, shows that, factors like a firm’s age, firm size, level of education and the experience of firm leaders are the major determinant factors for the growth of firms, whereas employees level of education, business related experience and sex of employee were factors that influence income growth. A number of factors are identified that can be used to improve the firm and salary growth rates of employees. Improving the skill of entrepreneur and employee helps to have a better firm’s and employee income growth.