Impact of Technology Adoption on Growth of Micro and Small-Scale Enterprises

Micro and small enterprises (MSEs) are vital to economic growth, innovation, job creation, and poverty reduction. Yet, most studies focus narrowly on specific sectors like manufacturing than holistic view of all SMEs. This study examines how technology adoption affects MSE growth in Merawi town, Amhara Region, Ethiopia. Using stratified random sampling, data from 325 enterprises were collected via a structured questionnaire. MSE growth was measured using income, asset value, and employment, analyzed through a binary endogenous switching regression model. Results show that Average Treatment Effect on the Treated (ATT) was 0.436 for income, 0.365 for assets, and 0.434 for employment. In contrast, Average Treatment Effect on the Untreated (ATU) the expected gains for non-adopters if they adopted technology was 0.187 for income, 0.167 for assets, and 0.007 for employment. The difference between ATT and ATU, i.e., Transitional heterogeneity, was 0.248 for income, 0.198 for assets, and 0.426 for employment depicting that MSEs adopting technology significantly outperformed non-adopters across all growth indicators. Factors influencing both growth and technology adoption include age, education, teamwork, infrastructure access, marketing skills, and experience. The study recommends stronger government-enterprise collaboration, promotion of teamwork, better planning, diversified financing, and consistent financial record-keeping to support sustainable MSE development.