Effect of Value Chain Management Practices on Manufacturing Firm’s Performance: the Case of Ethiopian Industrial Parks

Abstract

Even though Ethiopia recently adopted industrial park development as a policy instrument for fostering economic transformation, the effects of value chain management practices on firm performance has not been well researched. Thus, the study examined the effect of value chain management practices on the performance of manufacturing firms operating in Ethiopian industrial parks by using an explanatory research design. Employees of the industrial parks were considered as the target population and to select suitable respondents, a non-probability sampling technique was employed. The sample size was determined to be 382, which comprised of senior and middle managers. The study purified and validated scales for data collection by using Confirmatory Factor Analysis (CFA) and to test the hypothesis, Structural Equation Modeling (SEM) was used. The result of the study revealed that outbound logistics and marketing capabilities, statistically positively and significantly, affected financial and marketing performances. However, both inbound logistics and operations management capabilities did not significantly affect financial and marketing performance. Enhancing backward and forward linkage along the value chain and improving the efficiency of value chain management practices are paramount strategies. From the empirical evidence, the result of this study adds value to the existing knowledge of value chain management in industrial park contexts. Further, the paper significantly contributes to the field of industrial parks economic sustainability, in which the findings and suggestions can provide scientific knowledge to managers, practitioners, stakeholders, and policymakers.