The entrepreneurial ecosystem and the performance of micro and small enterprises (MSEs) in Amhara region, Ethiopia: the political–legal perspective

Abstract

All other parts of the entrepreneurial ecosystem in any country are commonly governed by the political and legal aspects of the entrepreneurial ecosystem. This is a novel approach that examines the integrated effect of the entrepreneurial ecosystem's political–legal subsystem on the performance of MSEs based on system theory and the mediating role of entrepreneurial competence taking a resource-based view in to account. There has been no detailed examination of the entrepreneurial ecosystem of MSEs in Africa in general, and Ethiopia in particular. A total sample of 499 MSE operators engaged in the three priority sectors: manufacturing, construction and urban agriculture was selected from the population of 4086 operators in three metropolitan cities of Amhara National Regional State, Ethiopia, using a proportional stratified sampling. Though the political–legal aspects of the entrepreneurial ecosystem have a major impact on both entrepreneurial competency and MSE’s performance, the relationship between entrepreneurial competencies and MSE performance was found to be insignificant. The role of entrepreneurial competency in mediating the relationships between policy and business performance and other business environments and business performance was shown to be insignificant. It is suggested by the study that the policies that the government designs concerning MSEs should be workable and attractive including the provision of different incentives. Lastly, other researchers in the area are suggested to further clarify the contradictions in the findings regarding the relationship between entrepreneurial competencies and the performance of SMEs.