Abstract:
Entrepreneurial mindset plays an important role in sustainable growth, development
and performance of small and medium enterprises (SMEs). Entrepreneurial mindset is
an important factor for the success of SMEs without which they are likely to fail.
According to KNBS (2016) and the Micro and Small enterprises act No. 55 of 2012,
an SME is a firm, trade, service, industry or a business activity whose annual turnover
ranges between five hundred thousand and eight hundred million Kenya shillings; and
which employs between ten and ninety nine people. SMEs play a crucial role in Kenya
because they control above 80% of all jobs in the country and contribute to over 30%
of the Gross domestic product (GDP) in Kenya in 2019 (KNBS, 2019). However, some
of the SME’s do not survive past their first year, others do not grow beyond the initial
status, while others fail to perform as well as they were projected to perform.
Entrepreneurial mindset is one possible strategy for enhancing the performance of
SMEs. Although theoretical review and some studies have explored the area of
entrepreneurial mindset, there is no study which focused on effect of entrepreneurial
mindset on the performance of SMEs in Kenya. This study, therefore, sought to fill
this gap by investigating the effect of entrepreneurial mindset on the performance of
small and medium enterprises in Kenya. The focus of the research was to measure the
entrepreneurs’ mindset exhibited through creativity, innovation, propensity to take
risk, awareness about SME support services and self-efficacy and how these attributes
contribute to the performance of an SME. Specifically, the study sought to determine
the effect of creativity on performance of SMEs, to assess the effect of innovation on
performance of SMEs, to find out the effect of propensity to take risk on performance
of SMEs, to establish the effect of awareness about SME support services on
performance of SMEs and to determine the effect of self-efficacy on performance of
SMEs. The study adopted survey research design focusing on a population of 268,100
licensed small and medium enterprises in Nairobi County in Kenya, from which a
sample of 400 SMEs were selected through a multi-stage probability sampling method
where stratified sampling method was used first to select firms under the sector strata’s
(manufacturing, services, wholesale and retail trade and real estate activities) and then
simple random sampling was used to select representative samples from each sector.
Quantitative data was collected using questionnaires and analyzed using Statistical
Package for Social Science (SPSS) and Microsoft Excel. The study results established
that creativity, innovation, awareness about SMEs support services and self-efficacy
had positive and significant effect on performance of small and medium size
enterprises in Kenya. Propensity to take risk was positively but insignificant related to
performance of small and medium size enterprises in Kenya. The study concluded that
entrepreneurial mindset influenced performance of small and medium enterprises in
Kenya and entrepreneurs with creativity, innovative, risk taking, aware and selfefficacy
outperform their competitors and steer their enterprises to profitability. The
results of this study will contribute to the theoretical and empirical body of knowledge
especially in the area of entrepreneurship and entrepreneurial mindset. The study
recommends that SMEs owner or managers should adopt entrepreneurial mindset to
help them build resilient and high performing sustainable small and medium
enterprises.