Impact of public intervention on micro and small enterprises performance in Ethiopia

Abstract

PurposeThe effectiveness of any government interventions to support small firms is always a concern in achieving improvements in enterprise performances. The purpose of this paper is to evaluate thoroughly the impact of micro and small enterprises’ (MSEs’) support programs on core intermediate and final outcomes of interest.Design/methodology/approachThe impact evaluation employs a non-parametric matching procedure for parametric outcome analysis using the propensity score matching (PSM) method. Aiming at a doubly robust evaluation process, the study applies parametric analyses than non-parametric permutation-based tests to investigate the causal effects of the public intervention.FindingsThe study reveals that the public intervention encouraged MSEs to develop innovative business practices and improve their human capital development process. Moreover, the intervention had a positive effect in expanding employment opportunities in urban areas. Contrariwise, the study shows that support beneficiaries are not at an advantage in investment intensity. The lower level of investment intensity on fixed capital resulted inefficiency among the recipients. Moreover, the intervention did not have an effect on changing the net-asset over time for the recipients.Practical implicationsThis study implies that the support programs need to be dynamic and also targets on creating innovative high-growth MSEs.Originality/valueThis paper is fairly original and provides policy makers and MSE promoters/facilitators evidence-based information on the effectiveness of the support services, with looking at firm-level analysis.