Determinants of operation performance of micro and small manufacturing enterprises in Jimma town

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.