Entrepreneurial Orientation, Business Environment, Business Development Services and Performance of Smalland Medium Manufacturing Enterprises in Kenya

Abstract

Entrepreneurship has been regarded to have a significant effect on the development and performance of businesses worldwide. The effect is however contingent upon many different factors. How these factors interact in an integrated configuration is a key issue for organizations. Vital among these factors are business environment and services that affect product development and service delivery. However there are few studies on entrepreneurship in Kenya especially those integrating business environmental factors and development services. This study therefore intended to interrogate the nature and effect of entrepreneurial orientation, moderating roles of internal and external business environments as well as business development services, and their joint effect on the performance of small and medium enterprises in Kenya. The study adopted a cross sectional survey design and used primary data collected from a sample of 150 enterprises in the manufacturing sector in Nairobi. To examine the moderating and joint inter-variable relationships, both descriptive and inferential statistical approaches were used to analyze the data at composite, dimensional and parameter levels. The findings illustrate that, contrary to expectation, the composite and construct forms of entrepreneurial orientation had no direct effect on performance. However, further regressions on entrepreneurial orientation measures indicate that three parameters significantly affected performance. These findings therefore demonstrate that, at composite and construct level, entrepreneurial orientation did not affect performance, whereas at individual parameter level entrepreneurial orientation had a significant relationship. The findings at composite and construct levels contradict expectation of the study while those at parameter level support the theory that entrepreneurial orientation is positively related to performance. Concerning internal business environment, the study found lack of moderating on the relationship between entrepreneurial orientation and performance. Additional tests to determine if internal business environment mediates the relationship also found no effect. As for external business environment, this study confirmed presence of a significant moderating effect on the relationship between entrepreneurial orientation and performance. In another vein, business development services were found to have a positive and significant, although weak moderating effect, on the link between entrepreneurial orientation and performance of small and medium enterprises in the study. However, in view of the weak moderation result, additional tests to determine other roles of business development services found that the variable was a very strong mediator in the relationship. In addition, this study found that, whereas the joint effect of all the predictor variables on performance was greater than individual effects of entrepreneurial orientation, internal and external business environments, the individual effect of business development services were greater than the joint effect. This study concludes that while performance of the studied small and medium enterprises were generally affected by entrepreneurial orientation and external business environmental changes, internal business environment had no moderating or mediating effect. In contrast, business development services had moderating and mediating effect on their performance. These findings find support in theory and empirical literature. This study therefore recommends that small and medium manufacturing enterprises in Nairobi should develop strategies to manage these variables and improve their performance. Key Words: Entrepreneurial Orientation, Business environment, Business Development Services, Performance, Moderating, Mediating, Small and Medium Enterprises.