Determinants of firm size in Kenyan manufacturing firms case study of Thika – Kiambu county

Abstract

Most small and micro enterprises in Kenya have for a long time faced a challenge of growing into larger corporations. This is despite the reality that they form the basis upon which the economy of the country can be transformed. Most Small and Medium enterprises (SME) start small but end up not growing in size. This study focused on assessing the determinants of firm size by taking SMEs operating in the manufacturing industry. The study took a sample of 50 manufacturing firms that are operating in Thika Town, Kiambu County, Kenya. The assessment was based on a model composed of Number of employees in the firm as the dependent variable indicating the size of the firm. Other variables taken as independent variables were initial startup capital, availability of raw materials, level of education of the key decision maker in the firm, relevant experience in years of the key decision maker in thefirm, age of the key decision maker in the firm in years, age ofthe firm in years, interest rate (Central Bank Rate), Location of the firm referring to either rural or urban, annual tax paid and gender of the owner. These factors were perceived to have an effect on ability of a firm to grow. The business owners and managers were approached and interviewed on these issues that formed the basis of discussion of the findings. The study found out that these factors affect the ability of the firms to increase the number of workforce which indicated smallness of the firms. This study recommended the use of venture coaching, improved access to finance and expansion to international markets as the solution to enhance growth of the firms.