Entrepreneurial Ecosystem and Growth of Small and Medium Manufacturing Entreprises in Kenya

Abstract

This study intended to find out the relationship between entrepreneurial ecosystem and the growth of manufacturing small and medium enterprises (SMEs) in Kenya. The manufacturing SMEs have been identified as one of the economic pillars to help Kenya achieve Vision 2030. However, it has been undergoing premature de-industrialization. This informed the need for this study. The study was guided by the following theoretical underpinnings: Pecking Order Theory, Social Network Theory, Human Capital Theory and Cochran’s social culture Theory. The general objective of the study was to establish the relationship between entrepreneurial ecosystem and growth of manufacturing SMEs in Kenya. The specific objectives of the study were: To determine the relationship between seed capital, business development services, entrepreneurial team and social culture on the growth of manufacturing SMEs in Kenya. Entrepreneurial orientation was used as the moderating variable. The study adopted a descriptive survey design. The target population was 422 manufacturing SMEs in Nairobi County who are members of Kenya Association of Manufacturers (KAM). The sampling methods used in the study were; Purposeful, stratified and simple random sampling methods. Structured open and close ended questionairres were used to collect primary data while secondary data was collected using desk review. Structured interviews with key informants were used for data triangulation. A Pilot study was conducted on 20 manufacturing SMEs in Kiambu County to improve on the validity and reliability of research instruments using factor analysis and Cronbach’s alpa Coefficient respectively. Data collected was coded and stored in tabular form using Microsoft Excel. Diagnostic tests for a regression model were carried out to determine data normality, auto-correlation, multi-collinearity, homoscedasticity and linearity. Data was analyzed using both quantitative and qualitative data analysis methods. Quantitative data was analyzed using Statistical Package for Social Sciences (SPSS) Version 25 software through descriptive statistics (measures of central tendency and measures of dispersion) and inferential statistics (Pearson correlation coefficient (r), multiple linear regression models and ANOVA). T- test was used to test the hypothesis. Thematic analysis was used for qualitative data. Analyzed data was presented using percentages, frequencies and tables. The study established that there was a significant positive relationship between seed capital, business development services, entrepreneurial team, social culture and growth of manufacturing SMEs. The study also established that there was a significant moderating effect of entrepreneurial orientation on seed capital, business development services, entrepreneurial team, social culture and growth of manufacturing SMEs. The aggregated model results indicated that, 49.2% of the growth of maufacturing SMEs was influenced by seed capital, business development services, entrepreneurial team and social culture and the interactions between the moderating variables and the independent variables. The study recommended that the government should formulate supportive policies for entry, survival and growth of manufacturing SMEs such as favorable terms and conditions for accessing finance, entrepreneurial education and training and research and development. Further research should be carried out to assess how entrepreneurial ecosystems affect the growth firms in other sectors of the economy, other entrepreneurial ecosystem factors other than the ones used in this study and a longitudinal study should be carried out to track the ups and downs in business cycle.