Succession Planning, Entrepreneurial Orientation, Business Development Services and Performance of Small and Medium Family Businesses in Machakos County, Kenya

Abstract

Succession planning is a major problem that affects the performance of family-owned businesses in Kenya leading to their deaths, only one in three family businesses makes it from the first to the second generation. Family owned businesses continue to form the backbone of most of the national economies, especially in Kenya. This study sought to contribute to knowledge and based on the view that succession planning, entrepreneurial orientation, and business development services affect firm performance. Building on existing theoretical frameworks and literature, the study seeks to find out the influence of entrepreneurial orientation and business development services on the relationship between succession planning and firm performance. The study looked at the family businesses in Machakos County, Kenya. It is anchored on the family systems theory, stewardship theory; resource based theory, and agency theory. The study applied positivist research paradigm, a cross sectional survey design. Both secondary and primary data was collected using a semistructured questionnaire; the sample size was 139. The study applied both descriptive and inferential statistics to analyze the data and test the study hypotheses created from the study objectives. The study found that succession planning, though lowly applied in family businesses had a statistical significance on performance; entrepreneurial orientation whose presence among family businesses was observed to be high had significant effect on the relationship between succession planning and firm performance statistically. However, the study observed that business development services are mildly applied within these firms and did not have a statistically significant effect on the relationship between succession planning and firm performance. Finally, the joint effect of succession planning, entrepreneurial orientation, and business development services on firm performance was found to be greater than that of individual variables and, therefore, it is the best model for the study. The study concludes that succession planning, entrepreneurial orientation, and business development services positively affect the firm performance of family businesses. The findings of this study support and add knowledge to previous studies on family businesses. The results supports the resource based theory in that firms need resources to better their performance, the agency theory that the firms need to outsource human skills, the systems theory that there should be a balance in all systems in a family business. Finally, stewardship theory is also supported in that the workers must contribute positively to the growth of the business to enable it carry on the founder’s vision and be passed to other generations. The study recommends all stakeholders in entrepreneurship, policy, and practice and family business owners to enhance the application of succession planning, entrepreneurial orientation, and business development services in the County. The study suggests further studies targeting the three variables in varying environment to assess their outcomes and relationship towards their inclusion in the entrepreneurship theories and family business theories.