Influence of Entrepreneurial Networks on Financial Performance of Medium Sized Enterprises in Kenya

Abstract

Medium-sized enterprises contribute significantly towards development but are operating in a changing environment, which requires continuous improvement to increase the financial performance of these enterprises. The said enterprises face challenges in globalized economies and only innovative sustainable strategies can save them from this competitive environment. Moreover, despite the need of medium sized enterprises to become competitive, little has been deliberately done to exploit this strategy. Existing literature on networking and financial performance looked at different dimensions, context and produced mixed results. The study sought to examine the influence of entrepreneurial networks on financial performance of medium sized enterprises within Kenya. Drawing from social network theory and structural holes, the research was based on five precise objectives founded on the influence of structural holes, network density, network structure, network ties, and network centrality on the financial performance of the medium-sized enterprises in Kenya. A descriptive survey method was used. The target population was drawn from medium-sized enterprises in Kenya, which participated in the top 100 mid-sized ranking done by KPMG for the period from 2011 to 2015. Purposive sampling and multi stage were applied in selecting a sample of 255, which had the data needed in the study. Questionnaires were used to collect primary data had been pretested for validity and reliability therefore determining suitability in the research. Data was analyzed using SPSS and a summary statistics such as mean scores, variance, standard deviation and inferential statistics that are correlation and regression were used to present the data. The results clearly showed that there was a positive and significant influence between entrepreneurial networks and financial among medium-sized enterprises in Kenya. The study findings indicated that the overall performance was positively affected by the various entrepreneurial networks adopted by medium-sized enterprises such as well laid and efficient structural holes, network structures, network density, network ties and network centrality. Therefore, firms which strategically utilized influencers to span structural holes generated brand equity more competently. The study findings showed that medium sized enterprises performance variations across businesses may be expounded, at least partly, by the scope to which establishments relish favorable admission to capabilities and external resources established by various market players. The study revealed that a person can be hindered in a network if they have very limited contacts; has associates closely linked with each another; or parts with information indirectly through a main contact. From the findings it was clear that having a varied personal network is related to significant health advantages. The study also demonstrated that the more crucial the businessperson is in the network, the deeper it will influence financial performance of the firm. From the study it can be concluded that enterprises become entrenched in various forms of network structure since they pursued varied competitive approaches and this influenced their financial performance. Furthermore, it can be concluded that the enterprises that engaged with networks that are efficiency-driven, linkages to financiers and used personal networks to access valuable resources for the company had improved financial performance. The study recommends that management of medium enterprises in Kenya should encourage managers to participate in dynamic networking with various players outside and within the prevailing networks and particularly with the ones who are pertinent to the firm in which an enterprise and the manag¬er run since it leads to high performance. Due to the influence of network ties on business development, business leaders should encourage a working environment that enables managers to pursue new networks that promote business performance. Policy recommendation is that medium sized enterprises in conjunction with the government develop programs for building connections among entrepreneurs from the same sector and linking them to a broader business community.