Factors influencing internationalization of Small and Medium Sized Enterprises (SMEs): A case study of handicrafts in Kenya

Abstract

The global market is increasingly becoming popular and gaining importance as a base for internationally active organizations as well as those intending to go international. Previous studies have been carried out on factors influencing internationalization of SMEs however no known study has been done on internationalization of the handicraft sector in Kenya. This has hence created a knowledge gap as there is lack of information on the factors that influence internationalization of this sector. There is lack of proper knowledge on the challenges that the handicraft traders engaging in international businesses are faced with. The role of the government and more specifically of organizations such as Export Promotion Council (EPC) and African Growth and Opportunity Act (AGOA) in promoting internationalization of the sector is therefore examined in this research project. The target population being 196 registered handicraft traders in Kenya, a sample size of 40 handicraft companies based in Nairobi was used. Simple random sampling was used to sample the population. The data collection instrument used was questionnaires which contained both open ended and closed ended questions. The study employed both descriptive research design and content analysis to analyze the data. The study revealed that a majority of handicraft businesses are SMEs by virtue of being individually owned, having a business annual turnover of below Kshs 5million and employing less than 10 employees. Despite operating SMEs many handicraft traders engage in international trade and their exports markets are mainly to Africa, Europe and America as there is a huge demand for the Kenyan handicrafts. These traders however are faced with a myriad of challenges which range from lack of market information to high shipping costs and lack of financial capital. The traders give suggestions on what needs to be done in order for them to successfully conquer the international markets with the suggestions ranging from participation in training programs to reduction of the cost of international business. The study recommends that the role of government in promoting this sector which is a major contributor of revenue to the Kenyan economy and job creation be relooked at with an aim of giving the handicraft traders the much needed support.