The Effect of Business Development Services on Performance of Small and Medium Manufacturing Enterprises in Kenya

Authors

  • Washington Oduor Okeyo University of Nairobi, Kenya
  • Dr. James Gathungu
  • Prof. Peter K’Obonyo

DOI:

https://doi.org/10.18533/ijbsr.v4i6.536

Keywords:

Business Development Services, Performance, Small and Medium Enterprises, Procurement services, Infrastructure facilities, Market Access.

Abstract

Small and Medium Enterprises have been regarded to play significant roles of job creation, poverty alleviation and economic development of many countries worldwide. These enterprises are however affected by many different factors. How these factors manifest singly or jointly is therefore a key concern for these organizations. Vital among these factors are business development services that affect how organizations produce and sell their finished goods. There is however a dearth of studies focusing on effects of aspects of business development services on organizational performance in Kenya. This study aimed at establishing how market access, procurement services and infrastructure facilities affect performance of small and medium manufacturing enterprises in Kenya. The study adopted a cross sectional survey design and examined primary data collected from 150 enterprises in Nairobi. Inferential statistics were used to interrogate relationships between independent variables and performance while descriptive statistics were used to determine distribution, central tendency and dispersion and hence establish conformity to linear regression requirements. Contrary to expectation, market access did not show any relationship but procurement services and infrastructure facilities each had a positive and significant influence on performance of the enterprises. The study also determined that the joint effect of the three variables on performance is greater than their individual effect. This study therefore concludes that since procurement services and infrastructure facilities showed a positive influence on performance of small and medium manufacturing enterprises in Kenya, the enterprise studied should adopt strategies that enhance procurement and improve infrastructure facilities to experience better performance.

References

Awino, Z.B. (2011). Strategic Management: An Empirical Investigation of Selected Strategy Variables on Firms Performance – A Study of Supply Chain Management in Large Private Manufacturing Firms in Kenya. Prime Journals Business Administration and Management Vol. 1(1) pp 9-18.

Ayyagari, M., Beck, T., & Demirgüç-Kunt, A. (2003). Small and Medium Enterprises Across the Globe: A New Database. World Bank Policy Research Working Paper 3127. Retrieved from : http://www. worldbank.org New Ventures, Second edition. Prentice Hall, Pearson International Edition.

Beck, T., Demirguc-Kunt, A. & Levine, R. (2005). SMEs, Growth, and Poverty: Cross- Country Evidence. Journal of Economic Growth. 10, 199-229.

Buseinei, J., K’Obonyo, P., & Ogutu, M. (2013). The Effect of Human Resource Strategic Orientation on Performance of Large Private Manufacturing firms in Kenya. Prime Journals of Business Administration. Vol. 3(1)834-857.

Brijlal, P. (2008). Business Development Service: Addressing the Gap in the Western Cape, South Africa. International Business and Economics Research Journal, 7(9), 49-56.

Caniels, M.C.J., Romijn, HA., and De-Wilt, M.R (2003). Can Business Development Services Practitioners Learn from Theories on Innovation and Services Marketing? Working Paper 03.07. Technische Universiteit Eindhoven, The Netherlands

Cochran, W. G. (1977). Sampling Techniques. (3rd ed.). New York: John Wiley & Sons.

Delmon, J. (2008) Private Sector Investment in Infrastructure facilities: Project Finance, PPP Projects and Risk, Alphen aan den Rijn, Netherlands: Kluwer Law International.

Easterly, W. (2002) Inequality does cause underdevelopment: New evidence from commodity endowments, middle class share, and other determinants of per capita income. Washington DC: Center for Global Development.

Fatoki, O. (2012). Entrepreneurial Orientation, Debt Finance and Performance of Small and Medium Enterprises in South Africa. Journal of Social Science. 32(2) 121-131.

Gathenya, J. W., Bwisa, H. M. & Kihoro, J. M. (2011). Interaction between Women Entrepreneurs Age and Education on Business Dynamics in Small and Medium Enterprises in Kenya. International Business Journal of Business and Social Science. Vol. 2, No. 15, 265-272.

Gomez, L (2013). Sustaining the Delivery of Business Development Services: Strategies and Practices for Mobilizing Resources. The Aspen Institute, Washington D.C., USA.

Gramlich, E.M. (1994) "Infrastructure facilities Investment: A Review Essay." Journal of Economic Literature, 1994: 1176-1196.

Hong, P., and Jeong, J. (2006), “Supply chain management practices of SMEs: from a business growth perspective”. Journal of Enterprise Information Management, Vol.19 No. 3, pp. 292-302.

Hornby, A.S. (2005). Oxford Advanced Learner’s Dictionary of Current English. International Students. 7th Edition. India: Oxford University Press.

IBM Corporation (2012). IBM SPSS Statistics 21. Retrieved from http://www.ibm.com/spss on March 27, 2014.

Ihua, U.B (2009). SMEs Key Failures: A Comparison between the United Kingdom and Nigeria. Journal of Social Science, Vol. 18(3): 199-207

Izquierdo, R. and Vasallo, J.M. (2004) Nuevos Sistemas de Gestión y Financiación de Infraestructuras de Transporte. Madrid: Colegio de Ingenieros de Caminos, Canales y Puertos, 2004.

JP Morgan Chase Foundation (2013). The Small and Medium Enterprise, Catalyst for Growth (C4G) Initiative in South Africa: One Year On. Retrieved from Dalberg.com/documents/SME_C4G_Year_1_JP_Morgan.pdf on 27th January 2014

KAM (2012). Kenya Manufacturers and Exporters Directory. Nairobi: Kenya Association of Manufacturers.

Kayanula, D and Quartey, P. (2000). The Policy Environment for Promoting Small and Medium Sized Enterprises in Ghana and Malawi. Institute for Development Studies, University of Manchester, ISBN: 1 902518675

Kidd, A. (2005). The Definition of Procurement. CIPSA Steering Group, CIPS Australia Pty, Melbourne

Koh, L.S.C., Demirbag, M., Bayraktar, E., Tatoglu, E and Zaim, S (2007). The Impact of Supply Chain Management Best Practices on Performance of SMEs. Industrial Management and Data Systems, Vol. 107(1) pp 103-124.

Kruger, L.P. (2011). The impact of Black Economic Empowerment (BEE) on South African Businesses: Focusing on Ten Dimensions of Performance. South African Business Review Vol. 15 (3) pp 207-233.

Lumpkin, G.T., & Dess, G.G. (1996). Clarifying the Entrepreneurial Orientation Construct and Linking it to Performance. Academy of Management Review. 21, 135-172.

Maalu, J.K. (2010). Succession Strategy and Performance of Small and Medium Family Businesses in Nairobi, Kenya. (Unpublished PhD Thesis), University of Nairobi, Kenya.

Mahmoud, M.A. (2011). Market orientation and business performance among SMEs in Ghana. International Business Research, 4(1), 241-251.

Mazanani, M and Fatoki, O (2011). The Effectiveness of Business Development Service Providers in Improving Access to Debt Finance by Start-up SMEs in South Africa. International Journal of Economics and Finance. Vol. 3 (4), 208-216.

McCormick, D. (1999). Africa Enterprise Clusters and Industrialization: Theory and Reality. World Development. 27( 9), 1531-1551.

McVay, M. and Miehlbradt A.O. (2002). ‘Background reader, Business Development Services’, 3rd annual BDS Seminar, Turin, Italy, 9-13 September 2002.

Miehlbradt, A. O and McVay, M (2003). Small Enterprise Development Programme of the International Labour Organization. International Training Center of ILO, Turin, Italy

Moorthy, K., Tan, A., Choo C., Wei, CS., Ping, JTY and Leong, KT (2012). A Study of Factors affecting the Performance of SMEs in Malaysia. International Journal of Academic Research in Business and Social Sciences, Vol. 2 (4) pp 224-238 ISSN: 2222 - 6990

Musara, M., and Fatoki, O. (2010). Has technological innovations resulted in increased efficiency and cost savings for banks' customers? African Journal of Business Management, 4(9): 1813- 821

Nelson, C. (1997). Training Goes to Market: A Comparative Study of Two Kenyan Training Programs. MBP Publications, Bethesda, Maryland: DAI.

Nganga, S. I., Onyango, G.M., & Kerre, B.W. (2011). Determinants of SME growth (wood enterprises): Infrastructure, technology and collective efficiency. Journal of Geography and Regional Planning.4(8), pp. 498-504.

Nunnally, J.C. and Bernstein, I.H. 1994. Psychometric Theory, 3rd edition, McGraw-Hill, New York, New York.

O’Dweyer, M., Gilmore, A., and Carson, D. (2009). Innovative Marketing in SMEs: An Empirical Study. Journal of Strategic Marketing. Vol. 17(5) pp 383-396

Penrose, E. T. (1959). The Theory of the Growth of the Firm. New York: John Wiley.

Pett, T. L. and Wolff, J.A. (2010). SME Performance: The Role of Learning Orientation and Its Relationship to Market Orientation and Entrepreneurial Orientation. Journal of Small Business Management.

Pfeffer, J. and Salancik, G. R. (1978). The External Control of Organizations. New York: Happer and Row.

Pollard, D., and Jemicz, M. (2006). The Internationalisation of Czech SMEs: Some issues relating to Marketing Knowledge Deficiencies. International Journal of Entrepreneurship and Small Business, 3(3-4), 400–416

Price, D.P, Stoica, M, and Boncella, RJ (2013). The Relationship between Innovation, Knowledge and Performance in family and non-family firms: An Analysis of SMEs. Journal of Innovation and Entrepreneurship, Vol. 2 (14) 1-20

Raymond, L., Bergeron, F., and Blili, S. (2005). The Assimilation of E-Business in Manufacturing SMEs: Determinants and Effects on Growth and Internalization. Journal of Electronic Markets Vol. 5(2) pp 106 – 118.

Schimitt-Degenhardt, S., Stamm, A., and Zehdnicker, M (2002). The Growth Gap: A Small Enterprise Phenomenon. San Salvador, El Salvador

SEEP (2000). SEEP Guide to Business Development Services and Resources. Retrieved from www.seepnetwork.org. on 2nd September 2012.

Steel, F.M. and Webster, L.M. (2001). “Business Development Services for Small Enterprises: Guiding Principles for Donor Intervention”, SME Department MSN F2K - 207 World Bank Group USA.

The World Bank (2008). World Bank Group Sustainable Infrastructure facilities Action Plan Fiscal Years 2009-2011. Washington, D.C.: The International Bank for Reconstruction and Development.

UNDP (2004). Business Development Services: How to Guide. Bratislava Regional Center, United Nations Development Programme

Van der Ree, K (2003). The role of Small Business Associations in Business Development Services Provision in Ghana. Background paper for presentation to IFP/SEED, ILO.

White, W. J., O’Connor, A.C., & Rowe, B.R (2004). Economic Impact of Inadequate Infrastructure for Supply Chain Integration. Paper prepared for National Institute of Standards and Technology, Research Triangle Park, North Carolina.

Wonnacott, T. H. & Wonnacott, R. J. (1990). Introductory Statistics for Business and Economics. New York: John Wiley & Sons.

Downloads

Published

2014-06-22

Issue

Section

Article