Challenges Hindering Sustainability of Small and Medium Family Enterprises After the Exit of the Founders in Kenya

Abstract

Small and medium enterprises are a vital economic base for any economy as they have the ability to create employment. A family enterprise is an enterprise that is influenced by two or more family members through their participation, ownership, strategic preference or culture. Most enterprises start as family enterprises. Empirical studies show that as vital as they are, family enterprises have very low survival rate. This study sought to investigate the challenges that hinder sustainability of small and medium family enterprises (SMFEs) after the exit of the founders in Kenya. Specifically, the study looked at managerial skills, entrepreneurial skills, human resource management skills, individual behaviour and succession planning. The study used a mixed research design of exploratory, descriptive survey, ex-post facto and quantitative designs. Stratified random sampling was applied stratifying the population into trade, manufacturing and service strata. The list of licensed small and medium enterprises from Nairobi city council and Thika municipality served as the sampling frame. A sample of 247 enterprises was randomly selected from the strata. A preliminary study found out that SMFEs constitute 74.6% of all the SMEs in Kenya. xx Data was analyzed using Statistical Package of Social Sciences (SPSS) version 19 as a tool of analysis. Linear regression relationship curves were developed showing positive relationship between all independent variables and the dependent variable. The study found out that there is strong positive influence on sustainability of SMFEs after the exit of the founders attributable to a unit of change on all independent variables namely managerial skills, entrepreneurial skills, human resource management, skills succession plan and individual behaviour. The principal confidant has a negative influence on sustainability of an SMFE after the exit of the founder. The study recommended that leaders and owners of SMFEs require managerial, entrepreneurial, HRM skills and succession plan to effectively lead the enterprises to long term sustainability. Their individual behaviours also influence the sustainability of the same enterprises.