The Clustering Development Program in Ethiopia

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An abridged scientific proposal-To evaluate the clustering development program in Ethiopia and recommend success Factors in Micro and Small Enterprises Cluster Development| RESEARCH TOPIC:Identifying Critical Success Factors of Micro and Small enterprises cluster development in Ethiopia| Business ResearchMBL925-R Student Number: 70994889| Luella Naidoo|

2 May 2012|

Table of Contents
1.1 INTRODUCTION4
1.2 Background and Problem Statement5
1.2.1 General Background5
1.2.2The Problem Statement5
1.3.1 Aim6
1.3.2 Objectives6
1.4 Scope and delimitations of the project6
1.5 Rational of the research6
1.6 Significance of the Study6
1.7 limitations of the Study7
1.7.1Limitations of Interviews7
1.7.2 Limitations of Focus Group7
1.7.3 Limitations of Document Analysis7
2. Theorectical Framework and Literature Review8
2.1.1 Definitions of Cluster8
2.1.2 Features of Clusters9
2.1.3 Benefits of Cluster development10
2.1.4 Success Factors in MSE Cluster Development12
3. Research Design and Methodology14
3.1 Sample14
3.2 Methods of Data Collection14
3.2.1 Semi Structured Interview15
3.2.2 Focus Group15
3.2.3 Document Analysis15
3.3Data Analysis16
3.4 Data Validity and Reliability16
4 Bibliography18

1.1 INTRODUCTION
The cluster development concept has rapidly attracted attention from governments, consultants and researchers since it was first proposed in 1990 by .Micheal Porter. According to Michael Porter “clusters are geographic concentrations of interconnected companies, specialized suppliers, service providers, and associated institutions in a particular field that are present in a nation or region. Clusters arise because they increase the productivity with which companies can compete. The development and upgrading of clusters is an important agenda for governments, companies, and other institutions. Cluster development initiatives are an important new direction in economic policy, building on earlier efforts in macroeconomic stabilization, privatization, and market opening, and reducing the costs of doing business”.()Many governments and industry organizations across the globe have turned to this concept in recent years as a means to stimulate urban and regional economic growth. One of the countries on the African continent that has turned to the concept of cluster development is Ethiopia. Situated in the Horn of Africa, Ethiopia is recognized for its diverse ethnic and religious compliment. According to the Central Statistical Agency (CSA 2008), there are 73,9 million people living in Ethiopia with the majority being rural dwellers. Majority of Ethiopians generate their income through agricultural related activities. Although agriculture addressed the current economic need of the country, the government of Ethiopia’s strategic plan included an increase in industrial activity .In order to make this a reality a comprehensive five-year plan called the Plan for Accelerated and sustained Development to End poverty (PASDEP, 2005/2006-2009/10) was embarked upon by the Ethiopian government. () In the effort to expand industrial activity Micro and small enterprises (MSE’s) became a priority in Ethiopia. MSE’s contributed to employment generation, poverty reduction, and wealth redistribution .The government in Ethiopia committed to facilitate the development of MSE clusters through the Industrial development strategy.

1.2 Background and Problem Statement
1.2.1 General Background
In Ethiopia however there is a high failure rate of MSE’s exacerbated by two reasons. * First, the practice of cluster development is rather a recent phenomenon that is less than a decade old. * Second, in most developing economies, the MSE sector is facing constraints such as unfavorable legal and regulatory environment, lack of access to markets, finance and business information ,lack of...
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