The Effect of Entrepreneurial Orientation on the Performance of Manufacturing Family Owned Enterprises in Nairobi County

Abstract

Small and Medium family owned enterprises (SMFEs) are the engines of economic development through job creation and poverty reduction in all nations. Majority of the multinational corporations started as family owned enterprises. Currently, the SMFEs sector in Kenya contributes over 70% of the country’s GDP. This is in spite of the many issues surrounding this vital sector such as low performance as compared to non-family enterprises, high mortality rate especially after the founder exits, lack of finances among others. The study sought to establish the effect of entrepreneurial orientation on the performance of small and medium family owned enterprises in Kenya. The specific objectives were to find out the effect of innovativeness, risk taking and proactiveness as well as to investigate the moderating effect of competitive strategies in the relationship between entrepreneurial orientation and performance of manufacturing family owned enterprises in Kenya. Psychological/Trait Entrepreneurship theory, McClelland Motivation theory, Parker’s Theory of Proactiveness and Schumpeter’s theory of innovation were the theoretical framework for this study. Cross sectional survey research design was used because it sets to explain the current phenomenon through the use of systematic and controlled methods in data collection. The main instrument that was used to collect primary data for this research was a closed-ended and open-ended questionnaire. Validity and reliability of research instruments was ascertained through a pre-test and pilot survey. The study population was the 201-manufacturing small and medium family owned enterprises registered by Kenya Association of Manufacturers based in Nairobi City County. The respondents were the Founders, C.E.O s, Directors and Managers of the firms. Microsoft Excel and SPSS were used to analyse the frequencies of the emerging themes. Data was presented in form of graphs, tables and pie chart among others. Quantitative data was analysed using descriptive and inferential statistics. The qualitative data was analysed using content analysis. The study findings indicated that innovativeness, risk taking and proactiveness had a positive and significant effect on the family owned small and medium enterprises performance. Competitive strategies were found to enhance the relationship between entrepreneurial orientation and the performance of these enterprises. The study therefore recommended that SMFEs owners should consider the innovation process as one of the priorities in their organisation’s strategies. In addition, SMFEs should engage in taking well calculated risks to enhance their business performance. The study also recommended that SMFEs should always be on the ground so that they are able to detect the changing trends in their markets and thus proactively satisfy their customer’s needs. This will ensure that they will be among the first to benefit from the new ideas or innovations thus becoming the market or industry leaders. This can be achieved through visiting trade fairs, workshops, seminars and following the latest trends in their environment.