Firm resources, external environment, entrepreneurial strategy and performance of Micro, small and medium furniture sector enterprises in Nairobi city county, Kenya

Abstract

This study was carried out in the field of entrepreneurship with focus being on the performance of micro, small and medium enterprises (MSMEs). The study also incorporated entrepreneurial strategy and external environment from the field of strategic management. This is because the two fields are to a large extent inter-related and also share the theories anchoring the study. Firm performance is contingent to many factors. The study sought to establish the influence of firm resources, the moderating role of the external environment and the intervening role of entrepreneurial strategy on the performance of the MSMEs operating in the furniture sector in Nairobi City County (NCC). The study employed the use of a cross sectional survey design. Primary data was obtained using a self-administered questionnaire from 93 respondent firms selected from a sample of 140 out of a population of 221 licensed MSMEs in all the 8 sub counties in Nairobi City County. It was noted that there are many furniture operators but not all are licensed by NCC. NCC did not have a complete listing of all furniture operators in the County. For the purposes of this study, only the listing of licensed MSMEs by NCC was used. The data was tested for suitability for descriptive and inferential statistics. There is dearth of empirical studies on entrepreneurship incorporating jointly the three study variables. Extant literature review identified knowledge gaps which were grouped into three categories: contextual, conceptual and methodological. Firm performance was measured in terms of financial and non financial measures. Financial measures included: improvements in revenue, capital invested, return on capital, profits. Non-financial performance measures included: growth in number of employees, stores, number of customers, improvements in customer service, business processes, employee satisfaction and corporate social responsibility (CSR). The study was anchored on four theories: resource based theory, resource dependency view, contingency theory and open systems theory. Four specific objectives were developed and four related hypotheses were tested to: establish the influence of firm resources on firm performance; establish the moderating role of the external environment on the relationship between resources and firm performance; determine the intervening influence of entrepreneurial strategy on firm resources and firm performance and, lastly; to establish that the joint effect of firm resources, external environment, entrepreneurial strategy on firm performance was different from their individual effects. The findings established that firm resources had a statistically significant influence on firm performance; the external environmental did not have a statistically significant moderating effect on the relationship between firm resources and firm performance; entrepreneurial strategy had a statistically significant intervening influence between firm resources and firm performance. Lastly, the study established that jointly the three study variables had a statistically significant influence on performance which was different from their individual effects. The results of the study support the theories anchoring the study and empirical literature. The study contributes to theory, policy and management practice. This study recommends that NCC should establish a register of all furniture enterprises operating in the County. The study further recommends for a longitudinal study, a similar research on MSMEs operating in other Counties and other significant areas such as the influence of financial resources, business training, and specific proxy factors that influence the moderating effect of external environment on firm resources and firm performance.