Entrepreneurial Orientation Effects on Business Performance of Small and Medium Enterprises in Information Technology Sector in Nairobi

Abstract

Entrepreneurial Orientation has significant influence on firm performance more so for small and medium firms operating under globalization and internationalization and regional integration regimes. Globalization results in expanded markets, characterized by increased number of competition, and shrinking market size. This global competition, increasing interdependence, rapid technology development, unstable environments, and many other factors exerts greater pressure on small and medium firms accustomed to operating under a domestic market set-up. To overcome the challenges associated with globalization, eminent scholars in other parts of the world have recommended that firms adopt entrepreneurial orientation as a solution to the challenges brought about by globalization. It is on this basis that this study sought to determine the influence of entrepreneurial orientation on the performance of small and medium enterprises in the information and communications technology sector. The study sought to answer the question of what shaped entrepreneurial orientation in SMEs in a developing country context and to answer the question of what contributed to performance for SMEs. This study utilized data from 160 randomly selected small and medium firms in the information and communications technology sector in Nairobi. To test the firm performance effects of entrepreneurial orientation, the scales for the dimensions of EO and firm performance were adopted from the existing literature. A series of reliability and validity tests are conducted for the measurement of the scales. Factor analysis, correlation and multiple regression analysis were conducted in testing the hypotheses. vi The study findings revealed that contextual factors did potentially shape entrepreneurial orientation and that certain entrepreneurial orientation dimensions and contextual factors were associated with entrepreneurial performance. These findings suggest that an increase in potential performance is possible through individual behaviour associated with an entrepreneurial orientation. The findings support the conclusion that an increase in earnings potential is possible through individual behaviour associated with an entrepreneurial orientation and learning related factors. This research demonstrated a potential positive return on human and financial capital in SMEs and recommends that assistance with regard to finance, or initial investment for these enterprises will enable higher earnings for SMEs. The provision of assistance to entrepreneurial enterprises needs a strong understanding of processes of growth and change in these enterprises to avoid potential mismatches between policy measures and the needs of these enterprises. The specific alignment of policy maker assistance with the entrepreneurial orientation and SMEs might be enabled through further research into the more detailed mechanisms of how entrepreneurial performance can be enabled. The study recommends that SME owner-managers implement strategies that enhance their enterprises‟ level of entrepreneurial orientation, i.e. the firm‟s propensity to possess a strong organizational commitment to engage in and support new ideas, novelty, experimentation, and creative processes that result in new products, services or technological processes. The study recommends that the Government develops policies and training programs to enhance the level of innovation in Kenyan SMEs.