Inter-Firm Relations, Governance and Upgrading Efforts in the Furniture Micro and Small Enterprises (MSE) Value Chain: Evidence from Addis Ababa, Ethiopia
DOI:
https://doi.org/10.68127/48sn0060Keywords:
Chain-Governance, Inter-Firm Relations, Micro and Small-Enterprises, Upgrading, Value-ChainAbstract
The objective of this article is to examine the nature and structure of inter-firm relations, governance, and upgrading efforts in the furniture Micro and Small Enterprises (MSE) value chain. The research is based on a review of related literature in the areas of value chains, MSEs, and a survey relating to MSE operators drawn from selected sub-cities of Addis Ababa. In Ethiopia, the wood furniture sector has a “domestic value chain” as major inputs are acquired from local sources, designs are crafted by local producers, and furniture products are entirely meant for local markets. The allocation of resources and benefits in the chain is governed by the domestic value chain actors. Government enterprises hold sway over plantations and major inputs. MSEs take delivery of the primary inputs from wholesalers and retailers. MSE operators make decisions related to production, design, and marketing. Middlemen in the chain have a minor role as the products reach the final users directly. Hence, the chain’s downstream is characterized by a sharply short distribution channel. Non-market (horizontal), chiefly routine operational connections, typify the feature of inter-firm relations; while “arm’s length” market-related linkages characterize the “supplier-MSE-buyer” relations. In the rare presence or nonexistence of “lead firms”, furniture MSE value chains fail to be in harmony with the conventional “buyer-driven” model. In the absence of buyer-dominated “quasi-hierarchical” relations, MSEs use “incremental upgrading” through “learning-by-doing”. Decisions to refurbish and upgrade the process of production are remarkably related to the hardware (physical) components of the firm. The value chain of MSEs is constrained by a range of problems. The present status of “product design” indicates weak links in the chain. Inter-firm relations and upgrading efforts are very weak; hence hinder entry into competitive (global) markets. The findings of this research may help MSE operators and policy makers identify the key challenges in the sector, hence search for ways to resolve the same.
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