Value chain competitiveness and challenges in the Ethiopian textile and apparel industry: a farm-to-fashion perspective

Abstract The Ethiopian textile and apparel (ETA) sector is considered a key driver of the national economy, generating employment opportunities and foreign exchange while supporting the country’s transition from an agriculture-based economy to manufacturing. The sector also has huge potential for growth and development. However, value chain (VC) inefficiencies constrain the ETA industry, despite its strong industrial potential. This study examines the ETA industry VC from a farm-to-fashion perspective using Porter’s VC model and diamond frameworks to determine performance drivers and constraints. We combined a cross-sectional survey of 112 respondents selected via simple random and purposive sampling from the textile and apparel sector, with a response rate of 66.7%. Qualitative insights were collected through interviews and focus-group discussions. Partial least squares structural equation modeling was used to analyze quantitative data, and interpretive structural modeling (ISM) and content analysis were used to examine qualitative evidence. The findings demonstrate that the performance of the “farm-to-fashion” value chain significantly influences overall organizational outcomes, driven directly by core operations, outbound logistics, marketing, procurement, and human resource management ( p  < 0.05). On the other hand, with severe constraints on institutions and capabilities, factors such as inbound logistics, service infrastructure, and technology adoption have indirect effects. The study’s distinctive strength is its full farm-to-fashion coverage that utilizes Porter’s VC model to diagnose internal micro-level processes and Porter’s diamond framework to capture external macro-level market dynamics and competitiveness. The study employed ISM and qualitative insights to identify systemic bottlenecks such as poor VC collaboration, low innovation capacity, and fragmented agricultural-to-industrial linkages, and structured them into a clear hierarchy for strategic intervention. The present research provides an empirical baseline for the ETA sector, but future research should extend this conceptual framework to include emerging global factors and digitalization. Researchers are also encouraged to move from this baseline toward multi-method cross-country comparative studies and very specific sub-industry analyses to follow the long-term evolution of value chains across developing manufacturing hubs.