IDEAS home Printed from https://ideas.repec.org/a/eco/journ3/2020-02-8.html
   My bibliography  Save this article

Effect of Institutional Pillars on Small and Micro Enterprises Firm Performance in Ethiopia

Author

Listed:
  • Endres Ahmed Mohammed

    (Department of Management, Bule Hora University, Ethiopia,)

Abstract

Though much research had been conducted examining the role of institutions on the practice of micro and small enterprise, it is now the effect of institutional pillars on organization performance is to be assessed in Ethiopian case. Examining the 200 small and micro enterprises (SME), we had tested a model of institutional variables to explain performance of firms. To cater the variance of firm performance due to the effect of institutional environment, we used structural equation modeling nesting polychoric correlation to measure firm performance measured in ordinal data variables. We found that the normative and cognitive institutional pillars positively correlated to firm performance, while the regulative pillar is negative but insignificant affecting performance. Thus, we showed that entrepreneurs’ interpretation of the value system within the society regarding innovation and their perception about innovation practice determines firm performance keeping the quality of idea and their resource endowment constant, in micro and small enterprise in Ethiopia.

Suggested Citation

  • Endres Ahmed Mohammed, 2020. "Effect of Institutional Pillars on Small and Micro Enterprises Firm Performance in Ethiopia," International Review of Management and Marketing, Econjournals, vol. 10(2), pages 56-67.
    • Handle: RePEc:eco:journ3:2020-02-8
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/irmm/article/download/9131/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/irmm/article/view/9131/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zoltan J. Acs, 1992. "Small Business Economics: A Global Perspective," Challenge, Taylor & Francis Journals, vol. 35(6), pages 38-44, November.
    2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    3. Tetsushi Sonobe & Keijiro Otsuka, 2014. "Cluster-Based Industrial Development," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-38511-6, March.
    4. Bernard Kwamena Cobbina Essel & Faizal Adams & Kwadwo Amankwah, 2019. "Effect of entrepreneur, firm, and institutional characteristics on small-scale firm performance in Ghana," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 9(1), pages 1-20, December.
    5. Keijiro Otsuka, 2006. "Cluster‐Based Industrial Development: A View From East Asia," The Japanese Economic Review, Japanese Economic Association, vol. 57(3), pages 361-376, September.
    6. Ali, Merima & Godart, Olivier & Görg, Holger & Seric, Adnan, 2016. "Cluster development programs in Ethiopia: Evidence and policy implications," Kiel E-Books, Kiel Institute for the World Economy (IfW Kiel), number 141418.
    7. Acs, Zoltan & Virgill, Nicola, 2010. "Entrepreneurship in Developing Countries," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 6(1), pages 1-68, February.
    8. Jennings, P. Devereaux & Greenwood, Royston & Lounsbury, Michael D. & Suddaby, Roy, 2013. "Institutions, entrepreneurs, and communities: A special issue on entrepreneurship," Journal of Business Venturing, Elsevier, vol. 28(1), pages 1-9.
    9. Pamela S. Tolbert & Robert J. David & Wesley D. Sine, 2011. "Studying Choice and Change: The Intersection of Institutional Theory and Entrepreneurship Research," Organization Science, INFORMS, vol. 22(5), pages 1332-1344, October.
    10. Boudreaux, Christopher J. & Nikolaev, Boris N. & Klein, Peter, 2019. "Socio-cognitive traits and entrepreneurship: The moderating role of economic institutions," Journal of Business Venturing, Elsevier, vol. 34(1), pages 178-196.
    11. Cardon, Melissa S. & Gregoire, Denis A. & Stevens, Christopher E. & Patel, Pankaj C., 2013. "Measuring entrepreneurial passion: Conceptual foundations and scale validation," Journal of Business Venturing, Elsevier, vol. 28(3), pages 373-396.
    12. Garry D. Bruton & David Ahlstrom & Han–Lin Li, 2010. "Institutional Theory and Entrepreneurship: Where Are We Now and Where Do We Need to Move in the Future?," Entrepreneurship Theory and Practice, , vol. 34(3), pages 421-440, May.
    13. Christine Oliver, 1997. "Sustainable competitive advantage: combining institutional and resource‐based views," Strategic Management Journal, Wiley Blackwell, vol. 18(9), pages 697-713, October.
    14. Leff, Nathaniel H, 1978. "Industrial Organization and Entrepreneurship in the Developing Countries: The Economic Groups," Economic Development and Cultural Change, University of Chicago Press, vol. 26(4), pages 661-675, July.
    15. Shane, Scott A., 1992. "Why do some societies invent more than others?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 29-46, January.
    16. Delmar, Frederic & Shane, Scott, 2004. "Legitimating first: organizing activities and the survival of new ventures," Journal of Business Venturing, Elsevier, vol. 19(3), pages 385-410, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Urbano & Sebastian Aparicio & Victor Querol, 2016. "Social progress orientation and innovative entrepreneurship: an international analysis," Journal of Evolutionary Economics, Springer, vol. 26(5), pages 1033-1066, December.
    2. Jing Su & Qinghua Zhai & Tomas Karlsson, 2017. "Beyond Red Tape and Fools: Institutional Theory in Entrepreneurship Research, 1992–2014," Entrepreneurship Theory and Practice, , vol. 41(4), pages 505-531, July.
    3. Ding, Zhujun & Au, Kevin & Chiang, Flora, 2015. "Social trust and angel investors' decisions: A multilevel analysis across nations," Journal of Business Venturing, Elsevier, vol. 30(2), pages 307-321.
    4. Yoon, Hyungseok & Tashman, Peter & Benischke, Mirko H. & Doh, Jonathan & Kim, Namil, 2024. "Climate impact, institutional context, and national climate change adaptation IP protection rates," Journal of Business Venturing, Elsevier, vol. 39(1).
    5. Slade Shantz, Angelique & Kistruck, Geoffrey & Zietsma, Charlene, 2018. "The opportunity not taken: The occupational identity of entrepreneurs in contexts of poverty," Journal of Business Venturing, Elsevier, vol. 33(4), pages 416-437.
    6. Sarah Fitz-Koch & Mattias Nordqvist & Sara Carter & Erik Hunter, 2018. "Entrepreneurship in the Agricultural Sector: A Literature Review and Future Research Opportunities," Entrepreneurship Theory and Practice, , vol. 42(1), pages 129-166, January.
    7. Lee, Keun & Kim, Byung-Yeon & Park, Young-Yoon & Sanidas, Elias, 2013. "Big businesses and economic growth: Identifying a binding constraint for growth with country panel analysis," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 561-582.
    8. Francisco Díez-Martín & Alicia Blanco-González & Camilo Prado-Román, 2016. "Explaining nation-wide differences in entrepreneurial activity: a legitimacy perspective," International Entrepreneurship and Management Journal, Springer, vol. 12(4), pages 1079-1102, December.
    9. Norin Arshed & Sara Carter & Colin Mason, 2014. "The ineffectiveness of entrepreneurship policy: is policy formulation to blame?," Small Business Economics, Springer, vol. 43(3), pages 639-659, October.
    10. Daniel L. Bennett & Boris Nikolaev, 2021. "Individualism, pro-market institutions, and national innovation," Small Business Economics, Springer, vol. 57(4), pages 2085-2106, December.
    11. Charles E. Eesley & Robert N. Eberhart & Bradley R. Skousen & Joseph L. C. Cheng, 2018. "Institutions and Entrepreneurial Activity: The Interactive Influence of Misaligned Formal and Informal Institutions," Strategy Science, INFORMS, vol. 3(2), pages 393-407, June.
    12. Sahasranamam, Sreevas & Nandakumar, M.K. & Pereira, Vijay & Temouri, Yama, 2021. "Knowledge capital in social and commercial entrepreneurship: Investigating the role of informal institutions," Journal of International Management, Elsevier, vol. 27(1).
    13. repec:aly:journl:202071 is not listed on IDEAS
    14. Luis Alfonso Dau & Aya S. Chacar & Marjorie A. Lyles & Jiatao Li, 2022. "Informal institutions and international business: Toward an integrative research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 985-1010, August.
    15. Christopher J. Boudreaux & Daniel L. Bennett & David S. Lucas & Boris N. Nikolaev, 2023. "Taking mental models seriously: institutions, entrepreneurship, and the mediating role of socio-cognitive traits," Small Business Economics, Springer, vol. 61(2), pages 465-493, August.
    16. Deerfield, Amanda & Elert, Niklas, 2022. "Entrepreneurship and Regulatory Voids: The Case of Ridesharing," Working Paper Series 1426, Research Institute of Industrial Economics.
    17. Aparicio, Sebastian & Urbano, David & Audretsch, David, 2016. "Institutional factors, opportunity entrepreneurship and economic growth: Panel data evidence," Technological Forecasting and Social Change, Elsevier, vol. 102(C), pages 45-61.
    18. James B. Ang, 2015. "Agricultural Legacy, Individualistic Culture, and Techology Adoption," Economic Growth Centre Working Paper Series 1506, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    19. Emmanuel Affum-Osei & Sharon G. Goto & June Chun Yeung & Rong Wang & Hodar Lam & Inusah Abdul-Nasiru & Darius K. S. Chan, 2024. "A cross-cultural study of entrepreneurial motivation and entrepreneurial intentions amongst university students: the roles of individualism and collectivism," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 14(1), pages 1-19, December.
    20. Gaffney, Nolan & Cooper, Danielle & Kedia, Ben & Clampit, Jack, 2014. "Institutional transitions, global mindset, and EMNE internationalization," European Management Journal, Elsevier, vol. 32(3), pages 383-391.
    21. Alfredo Monte & Sara Moccia & Luca Pennacchio, 2022. "Regional entrepreneurship and innovation: historical roots and the impact on the growth of regions," Small Business Economics, Springer, vol. 58(1), pages 451-473, January.

    More about this item

    Keywords

    Institutional theory; regulative; normative; cognitive pillar; firm performance.;
    All these keywords.

    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ3:2020-02-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.