Factors Influencing Spatial Distribution of Small and Medium Size Enterprises Within Nairobi County, Kenya

Abstract

Enhancing spatial distribution of SMEs ensures equal distribution of job opportunities which can be used as a strategy to reduce influx of people in major towns seeking for employment. This study intended to examine the factors that influence the spatial distribution of SMEs in Nairobi County in Kenya. The target population of the study include 30252 SMEs in all the 9 sub counties in Nairobi County. The unit of analysis was the SME owners, one from each SME in cases where there are more than one owner. The sample size for the study was 385 SMEs arrived at using the Fisher‟s 1998 formula. Primary data was obtained using a semi-structured questionnaire and captured through both dichotomous scale and a 5-point type Likert scale. Factors mentioned by the respondents that influenced spatial distribution of SMEs include, inspiration from friends and relatives, availability of markets, distribution channels and skilled labour, profits potential, availability of investment opportunities. The correlation and descriptive results showed that infrastructure, government policies, business environment, human capital, access to information, and raw materials had a positive influence on the spatial distribution of SMEs in Nairobi County. The findings of factor analysis further showed that government policies, raw material and business environment explained more variance in that order in spatial distribution of SMEs. The study concludes that the population density of SMEs in urban centers in Kenya is very high. Therefore the study concludes that all the six components (infrastructure, government policies, business environment, human capital, access to information, and raw materials) accounts for spatial distribution of SMEs in Nairobi County. The study recommends that counties in Kenya that are less developed should invest in providing efficient and cheap transportation system, which is essential for the movement of raw materials as well as the finished products to the markets. The study further recommends that national and county governments in Kenya should formulate policies that ensure simple and quick business registration, friendly taxation policies for startups to encourage entrepreneurs from anywhere in the country to start small businesses which should be easily accessible to everyone regardless of their location.