Entrepreneurial Mindset and Performance of Small and Medium Enterprises in Kenya

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.