Dynamic Pattern of Networks and Small Business Development:: the Case of Small Enterprises in Addis Ababa, Ethiopia

Market failure create uncertainties and asset specificities to many entrepreneurs while at the same time providing preferential bargaining opportunities to the few, thus, posing huge transaction costs to the disadvantaged, the poor, and vulnerable sections of the society. In developing economies, where there exist poor entrepreneurs, alliances are not in formal patterns and most often not well developed, mainly, in small businesses to overcome an increasing transaction costs. Instead in such businesses, entrepreneurs develop evolutionary informal networks with external actors in keeping their business landscape sustainable. These networks comprising: social, industrial, and support, has not been well studied. This work examined small enterprises networking in Addis Ababa: the capital of Ethiopia. The findings, overall, revealed that entrepreneurs build strong informal networks and these networks have significant influences on small business growth, especially through developing contacts with other entrepreneurs implying the need to promote the sector through valuing and scaling-up of inter-firm networks as important tools for business success.