Entrepreneurial Factors Influencing the Growth of Small and Medium Enterprises in Thika District , Kenya

Abstract

SMEs account for over 95 % of the business population, and are therefore an increasingly dominant form of business organisation in all countries. This study sought to assess the entrepreneurial factors influencing growth of Small and Medium Enterprises in Thika, Kenya. The study focused on four entrepreneurial factors namely innovation, human capital, access to entrepreneurial finance and access to business information. The study adopted a descriptive survey research design where both quantitative and qualitative research approaches were used. The target population was the licensed SMEs by Thika Municipal council as at 2011 in Thika town with a focus on owners and managers of the SMEs across the sectors. The total population of SMEs in Thika as per the categories of study was 1420 and a sample of 142 SMEs was used for the study to represent the entire population. Out of the 142, there were 132 respondents which is 92.96%. Primary data was collected using interview guides, structured and Semi structured questionnaires which were administered to the owners and managers of SMEs. Quantitative data obtained from the questionnaires was analyzed using Statistical Package for Social Sciences (SPSS) version 20. Multiple regression model was used to determine the relative significance of each of the four variables with respect to SME growth. Analysis of Variance (ANOVA) and correlation analysis was also used in the analysis. The findings were presented in tables for easy readership. The study found that out of the four entrepreneurial factors, access to business information had the greatest influence on the growth of SMEs, followed by access to entrepreneurial finance, innovation and lastly human capital which had the least influence on the growth of SMEs. The study recommends that the government should come up with a policy framework for SME innovation to enhance and support the innovation capacity of SMEs according to their type and growth stage. The study also recommends that the government should enforce the legal and regulatory framework that strengthens the financial infrastructure at the same time build capacity of the financial institutions to enhance SMEs access to finances. This can be done through financing policies, policy related funds and institutions. The study further recommends that the government needs to develop a policy on capacity building for SMEs and enforce it by ensuring that owners and managers embrace human capital practices through capacity building, training and education to facilitate acquisition of skills and knowledge necessary for the growth of the businesses. There is also need for the government to come up with a policy on information transfer that will facilitate information flow from one business to another through partnerships and linkages. The policy should emphasize the need for SMEs to develop information departments that capture all new business information locally and internationally for business success. This will improve the performance of SMEs and hence facilitate their growth.