<p>Micro and small enterprises are considered engines of economic growth and play a significant role in the process of economic development in both developed and developing countries. However, their growth is affected by diverse dynamic and sector- and context-specific factors. Empirical studies have suggested that enterprise growth is determined not only by internal factors but also by other external causes. Although several studies have well explained these factors, empirical evidence regarding how value chain dynamics affect the growth of micro and small enterprises is limited in the study area. To address this issue, cross-sectional data were collected from 119 micro and small enterprises drawn via systematic sampling technique. The data were analyzed using descriptive, multiple regression, and instrumental variables (2SLS) methods. The results show that value chain dynamics such as inter-enterprise linkages and upgrading practices (process, product, functional, and channel) have a statistically significant positive effect on enterprise growth. It is, therefore, suggested that Addis Ababa city administration should pay special attention to enterprise clustering and strengthen business development services that will enhance the growth and productivity of enterprises.</p>