Entrepreneurial Orientation, Market Orientation and Firm Performance among Agro Processing Small and Medium Enterprises in Kenya

Abstract

The general objective of the study was to establish the mediating influence of market orientation on the relationship between entrepreneurial orientation and firm performance of agro processing small and medium enterprises in Kenya. The specific objectives of the study sought to establish the influence of proactiveness, risk taking, innovation and entrepreneurial orientation on firm performance. Furthermore, the study sought to investigate the mediating influence of market orientation on the relationship between entrepreneurial orientation and firm performance. The study was anchored on epistemology philosophy, positivism approach. The study used a qualitative and quantitative exploratory research design. The study used a census approach. The target population was 111 agro processing SMEs registered by Kenya Association of Manufacturers and the respondents were owner/managers of these enterprises. A self-administered, semi structured questionnaire was used to collect primary data. The questionnaire was tested for validity and reliability. Data was analyzed using qualitative and quantitative techniques with the assistance of IBM Statistical Package of Social Sciences (SPSS), Ms-Excel and SmartPLS Version 2.0. Data analysis was conducted in two phases, that is, measurement, outer model estimation and structural, inner model estimation. Structural equation modeling - partial least squares (SEM-PLS) was used to test the developed hypotheses using SmartPLS Version 2.0. The linear relationship between the independent and dependent variable was determined using Pearson product-moment correlation coefficient. The mediated effect of market orientation was tested using bootstrapping and the Sobel test using SmartPLS software. The study findings found out that proactiveness and risk taking had a positive and significant relationship with firm performance while innovativeness had a negative and significant relationship with firm performance. Nevertheless, it is their combined influence, Entrepreneurial orientation, which leads to greatest impact on firm performance. The results also showed that market orientation does not have a significant relationship with firm performance and that it is not a critical fit in the relationship between entrepreneurial orientation and firm performance. The study recommends that owner/managers of agro processing SMEs should encourage proactiveness and risk taking behaviour as it leads to superior firm performance while entrepreneurial orientation should be engrained in the strategic planning process. Owner/managers should also identify innovativeness types adopted by its workets that have a positive impact on firm performance. Finally, the study recommends that further analysis should investigate the moderating influence of market orientation under the contingency theory research to better understand its influence on the relationship between entrepreneurial orientation and firm performance of agro processing SMEs amongst other recommendations.