The Influence of Business Environmental Dynamism, Complexity and Munificence on Performance of Small and Medium Enterprises in Kenya
Keywords:Key words, Business Environment, Dynamism, Complexity, Munificence, Small and Medium Enterprises, Financial and Non-Financial Performance
The main purpose of this article is to examine how business environment affects small and medium enterprises. The paper is motivated by the important contributions small and medium enterprises have in many countries, especially Kenya towards job creation, poverty reduction and economic development. Literature however argues that effectiveness of the contributions is conditioned by the state of business environmental factors such as politics, economy, socio-culture, technology, ecology and laws/regulations. Dynamism, complexity and munificence of these factors are therefore vital to achievement of organizational objectives and overall performance. Even so, a review of literature reveals contradictory views regarding the effect of these factors on performance of organizations. Furthermore, studies focusing on these factors in the Kenyan context, particularly with regard to their effect on performance of small and medium firms, are scarce. This article bridges this gap based on a study focusing on 800 manufacturing organizations in Nairobi – Kenya. A sample of 150 enterprises was selected through stratification by business sector followed by simple random sampling. The research design was cross sectional survey where data was collected using a structured questionnaire over a period of one month at the end of which 95 organizations responded giving a response rate of 64%. Reliability and validity of the instrument were determined through Cronbach’s alpha tests and expert reviews. Statistical Package for Social Sciences was used to determine normality through descriptive statistics and study hypotheses tested using inferential statistics. The study established that business environment had an overall impact on organizational performance. Specifically, dynamism, complexity and munificence each had a direct influence on the enterprises in the study. Furthermore the combined effect on performance was found to be greater than that of dynamism and complexity but less than munificence. The study also established that there is a difference in the way business environment affects performance such that it impacts on financial performance more than on non-financial performance of these enterprises. These results imply that small and medium enterprises in the study are likely to perform better in business environments that are dynamic, complex and munificent.
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