INFLUENCE OF DEMOGRAPHIC FACTORS ON THE FINANCIAL PERFORMANCE OF SMALL AND MEDIUM-SIZED ENTERPRISES IN KAJIADO COUNTY, KENYA
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May 13, 2023
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Abstract
This study reviewed both theoretical and empirical literature that has tried to explain the relationship between demographic factors and financial performance. The study particularly considered studies done in Kenya and other countries that have examined relationships between such factors and their influence on SME financial performance. The study used secondary data gathered from financial and regulatory institutions, sampled SMEs within the county and primary data from the owner/managers of the same SMEs to acquire information regarding demographic characteristics of owner/managers and financial performance of the SMEs. Data analysis was done using Statistical Package for the Social Sciences (SPSS) that was used to conduct a correlation analysis between the independent variables and to produce a regression equation between the dependent and the independent variables The study findings indicate that education had a significant positive effect on the financial performance of SMEs in Kajiado County. The findings also show a positive correlation between income and financial performance. Furthermore, the findings also show a positive correlation between employment and financial performance. The study recommends that the SME managers/owners should seek to advance their education levels in relevant fields like book keeping and communication. The study also recommends initiatives be put in place by SMEs managers/owners to enhance their incomes independent of the SMEs. This will cause most SMEs to experience improved financial performance. Furthermore, the study recommends that in order for most SME owners/managers to experience better financial performance in their organisations, they should improve their employability before starting out as entrepreneurs. The findings of this study will be used to inform policy makers and other stakeholders on the extent to which education, income and employment influence financial performance of SMEs. This will help in predicting, guiding and ensuring sustainability and growth of SMEs in the county by applying measures on these demographic factors when managing the county’s economy. The study will form a basis for more research on dynamics around SME performances within Kenya, it will also add to the existing body of literature on the topics encompassing demography, finance and economics of a country.
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References
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Chechet. I., & Olayiwola,A.,(2014) Capital Structure and Profitability of Nigerian Quoted Firms: The Agency Cost Theory Perspective. Center for Promoting Ideas, USA
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Cyert, R. M., March J. G. (1963). A Behavioral Theory of the Firm. 2nd ed. Prentice Hall, Englewood Cliffs, NJ.
Davidsson, P. (2005). Determinants of Entrepreneurial Intentions. Paper for RENT IX workshop, Italy Nov. 23-24.
Davidsson, P., Lindmark, L. & Olofsson, C. (2013).The extent of overestimation of small firm job creation: an empirical examination of the ‘regression bias’. Small Business Economics Vol.10: 87-100.
Davies, G., & Gibb, A. (2000). Recent Research in Entrepreneurship. Avebury England: Aldershot.
Ehrlich, I., Gallais-Hamonno, G., Liu, Z., & Lutter, R. (2004). Productivity growth and firm ownership: an analytical and empirical investigation. Journal of Political Economy 102 (5), 1006–1038
Fini, R., Grimaldi, R., & Sobrero, M. (2009). Factors Fostering Academics to Start up New Ventures: an Assessment of Italian Founders' Incentives, Journal of Technology Transfer, forthcoming. 34(4) 380-402.
Gamage, D., & Henegedara, R.H. (2019). An Investigation of the Impact of Social Capital for the Entrepreneurial Intentions. International Journal of Trend in Scientific Research and Development.
Gartner, W., Kelly, S., Elizabeth, G., & Jerome, K. (2007). Finding the Entrepreneur in Entrepreneurship. Entrepreneurship Theory and Practice, 18 (3), 5-9.
Gibson, D.E. (2004). Role models in career development: New directions for theory and research. Journal of Vocational Behaviour, 65, 134-156.
Gist, M., & Mitchell, T. (2000). Self-efficacy: A theoretical analysis of its determinants and malleability. Academy of Management Review, 17, 183–212.
Giorgio, C., & Ilario, F. (2011). The economics of small businesses: An international perspective. London: SPI Publishers.
Githaiga, J., (2015). Effects of Credit Risk Management on the Financial Performance of Commercial Banks in Kenya. Doctoral Dissertation, University of Nairobi.
Gomez, L.J. (2005). Principles of Managerial Finance. (7thEdition). New York: Harper Collins College Publishers.
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Hansen, E.L., & Wortman, M.S. (2009). Entrepreneurial Networks: The Organization in Vitro. Academy of Management Best Paper Proceedings, 69- 77.
Hansen, E.L. (2005). Entrepreneurial Networks and New Organization Growth. Entrepreneurship Theory and Practice 19 (4), 7-19.
Jurajda, J., & Terrell, K. (2009). Regional unemployment and human capital in transition economies. Economics of Transition 17 (2), 241-274
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Kirui M., (2012). Challenges of SMEs in Kenya, Study mode.com.retrived o5, 2013, from http//www.studymode.com/essays/Challenges of Small-and-MediumEnterprises-1182214 1, 7-9.
Klyver, K., & Schott, T. (2011). How Social Network Structure Shapes Entrepreneurial Intentions? Journal of Global Entrepreneurship Research, 1(1), 3-19
Krueger, F, & Brazeal, V. (2004). Entrepreneurial potential and potential entrepreneurs. Entrepreneurship Theory and Practice, 18, 91–105.
Linan, F., & Chen, Y. (2007). Testing the Entrepreneurial intention model at a two country sample. Document de Treball.06/07 Barcelona.
Linan, F., & Santos, J. (2007). Does Social Capital affect Entrepreneurial Intentions? International Advances in Economic Research, 13(4), 443-453.
Linan, F., & Chen, Y. W. (2009). Development and cross-cultural application of a specific instrument to measure entrepreneurial intentions. Entrepreneurship Theory and Practice, 33(3) 33-52.
Markman, G.D., & Baron, R.A. (2003). Person-entrepreneurship fit: Why some people are more successful as entrepreneurs than others? Human Resource Management Review, 13, 281–301.
Mazzarol,T., Volery T., Doss, N., & Thein, V. (2001). Factors influencing Small Business start-ups – A comparison with previous research. International Journal of Entrepreneurial Behaviour and Research
Ingram, M., Ramachandran,V., & Desai, V., (2002). Why do firms choose to be informal? Evidence from enterprise surveys in Africa (RPED paper No. 134)
Morris, M., & Lewis, P. (2005). The determinants of entrepreneurial activity. European Journal of Marketing, 29(7) 31–48.
Morrison, A. (2000). Initiating Entrepreneurship. In S. Carter & D. Jones-Evans (Eds). Enterprise and Small Business Principles, Practices &Policy. Harlow, Prentice Hall.
Mueller, S.L., & Thomas, A.S. (2001). Culture and entrepreneurial potential: A nine country study of locus of control and innovativeness. Journal of Business Venturing, 16, 51–75.
Mugenda, O.M., & Mugenda, A.G. (2003).Research Methods: Quantitative and Qualitative Approaches. Nairobi: ACTS
Mutai, R. (2011). Micro and Small Enterprise sector and Existing Support system in Kenya. Journal of Language, Technology and Entrepreneurship in Africa 3 (1)
Mwangi ,M.,& Birundu,E.,(2015) The Effect of Capital Structure on the Financial Performance of Small and Medium Enterprises in Thika Sub-County, Kenya. International Journal of Humanities and Social Science
National Bureau of Statistics-Kenya and ICF International. 2015. 2014 KDHS Key Findings
Parminder J. S.,(2020) Digital Industrialisation in Developing Countries — A Review of the Business and Policy Landscape
Neetu, B.,(2012)Financing Small Scale Industry. New Delhi Discovery Publishing House
Niels, B., Jolanda, H., Mirjam V., & Ingrid, V. (2011). Entrepreneurship and role models. Tinbergen Institute Discussion Paper TI 2011-061/3.Netherlands.
Niewoudt, S. (2016). Entrepreneurial characteristics and financial performance.
Nkonoki, E. (2010), Factors limiting the success and/or growth of small businesses in Tanzania, An empirical study on small business growth. Unpublished MBA project, Arcada University of Applied Sciences
Olawale, F., and Garwe, D. (2010). Obstacles to the growth of new SMEs in South Africa. Unpublished MBA Project, University of Fort Hare, South Africa.
Olugbenga, O., (2012). Policy Support and Performance of Small and Medium Scale Enterprises in South-West Nigeria
Olusola A. (2011). Accounting Skill as a Performance Factor for Small Businesses in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 2(5), 372-378
Oosterbeek, H., Van Praag M., & Ijsselstein, A. (2010). The impact of entrepreneurship education on entrepreneurship skills and motivation. European Economic Review, 54(3), 442-454.
Orodho, J. A. (2002). Techniques of Writing Research Proposals and Reports in Education and Social Sciences. Nairobi: Masola Publishers
Owour C., (2014). Growth and performance of small – scale enterprises in small urban centres; A case of Migoris manufacturing sub-sector, unpublished MBA project University of Nairobi
Peterman, N., & Kennedy, J. (2006).Enterprise education: Influencing Student perception of entrepreneurship. www.yaa.org.au/media/pdf/journalarticle.pdf
Radipere, S., & Dhliwayo, S., (2014). The role of age and business size on small business performance in the South African small enterprise sector. Problems and Perspectives in Management. 12. 7-12.
Şeker, Murat; Correa, Paulo Guilherme. (2010). Obstacles to Growth for Small and Medium Enterprises in Turkey. Policy Research working paper ; no. WPS 5323. World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/3809 License: CC BY 3.0 IGO.”
Selvaraj N. (2016). A Study on the Socio-economic Background of the Entrepreneurs of Industrial Estates in Southern Districts of Tamil Nadu. Journal of Political Sciences & J Public Affairs.
Subhan, Abdul. Qazi., Mehmood, Rahet. Mian. & Sattar, Abdul. (2013). Innovation in small and medium enterprises (SME’s) and its impact on economic development in Pakistan. Paper was presented in 6th International Business and Social Sciences Research Conference 3 –4 January, 2013, Dubai, UAE, ISBN: 978-1-922069, pp 18-4
Sutton, J (1997). “Gibrat’s Legacy.” Journal of Economic Literature, 35, 40–59.
Timmons J. A,. and Spinelli, S. (1994). “New Venture Creation: Entrepreneurship for the 21st century,” Vol. 4, Irwin Burr Ridge, Burr Ridge,
Wickham, P.A. (2001). Strategic Entrepreneurship: A decision-making approach to New Venture Creation & Management. London: Pitman Publishing.
Ajzen, I. (2001). The nature and operation of attitudes. Annual Review of Psychology, 52 (2), 27- 58.
Bandura, A. (2001). Social Cognitive Theory: An agentic perspective. Annual Review of Psychology, 52, 1–26.
Baran, P. (1952). On the Political Economy of Backwardness. The Manchester School for Economics and Social Studies (1), 66-84.
Bird, B. (2008). Implementing Entrepreneurial Ideas: The Case for Intentions. Academy of Management Review 13 (3), 442-453
Boodhoo, R.,(2009) Capital Structure and Ownership Structure: A Review of Literature (February 3, 2009). Journal of Online Education,
Carsrud, A. L., & Brännback, M. (2009). Understanding the entrepreneurial mind – Opening the black box. New York, NY: Springer.
Chechet. I., & Olayiwola,A.,(2014) Capital Structure and Profitability of Nigerian Quoted Firms: The Agency Cost Theory Perspective. Center for Promoting Ideas, USA
Chowdhury, M., & Alam, Z., & Arif, M., (2013). Success Factors of Entrepreneurs of Small and Medium Sized Enterprises: Evidence from Bangladesh. Business and Economic Research. 3. 38. 10.5296/ber.v3i2.4127.
Cronbach, L. J. (1951). Coefficient alpha and the internal structure of tests. Psychometrika. Vol.16, 297-334.
Cyert, R. M., March J. G. (1963). A Behavioral Theory of the Firm. 2nd ed. Prentice Hall, Englewood Cliffs, NJ.
Davidsson, P. (2005). Determinants of Entrepreneurial Intentions. Paper for RENT IX workshop, Italy Nov. 23-24.
Davidsson, P., Lindmark, L. & Olofsson, C. (2013).The extent of overestimation of small firm job creation: an empirical examination of the ‘regression bias’. Small Business Economics Vol.10: 87-100.
Davies, G., & Gibb, A. (2000). Recent Research in Entrepreneurship. Avebury England: Aldershot.
Ehrlich, I., Gallais-Hamonno, G., Liu, Z., & Lutter, R. (2004). Productivity growth and firm ownership: an analytical and empirical investigation. Journal of Political Economy 102 (5), 1006–1038
Fini, R., Grimaldi, R., & Sobrero, M. (2009). Factors Fostering Academics to Start up New Ventures: an Assessment of Italian Founders' Incentives, Journal of Technology Transfer, forthcoming. 34(4) 380-402.
Gamage, D., & Henegedara, R.H. (2019). An Investigation of the Impact of Social Capital for the Entrepreneurial Intentions. International Journal of Trend in Scientific Research and Development.
Gartner, W., Kelly, S., Elizabeth, G., & Jerome, K. (2007). Finding the Entrepreneur in Entrepreneurship. Entrepreneurship Theory and Practice, 18 (3), 5-9.
Gibson, D.E. (2004). Role models in career development: New directions for theory and research. Journal of Vocational Behaviour, 65, 134-156.
Gist, M., & Mitchell, T. (2000). Self-efficacy: A theoretical analysis of its determinants and malleability. Academy of Management Review, 17, 183–212.
Giorgio, C., & Ilario, F. (2011). The economics of small businesses: An international perspective. London: SPI Publishers.
Githaiga, J., (2015). Effects of Credit Risk Management on the Financial Performance of Commercial Banks in Kenya. Doctoral Dissertation, University of Nairobi.
Gomez, L.J. (2005). Principles of Managerial Finance. (7thEdition). New York: Harper Collins College Publishers.
Goosen, C.J. & de Coning, Tobias & Smit, E.V.D.M. (2002). Corporate entrepreneurship and financial performance: The role of management. South African Journal of Business Management. 33. 21-27. 10.4102/sajbm.v33i4.708.
Hansen, E.L., & Wortman, M.S. (2009). Entrepreneurial Networks: The Organization in Vitro. Academy of Management Best Paper Proceedings, 69- 77.
Hansen, E.L. (2005). Entrepreneurial Networks and New Organization Growth. Entrepreneurship Theory and Practice 19 (4), 7-19.
Jurajda, J., & Terrell, K. (2009). Regional unemployment and human capital in transition economies. Economics of Transition 17 (2), 241-274
Kinyua, L.M. (2014). Influence of Foreign Direct Investment on Entrepreneurship Growth Among The Kenyan Employees. Lucy Mwendwa
Kirui M., (2012). Challenges of SMEs in Kenya, Study mode.com.retrived o5, 2013, from http//www.studymode.com/essays/Challenges of Small-and-MediumEnterprises-1182214 1, 7-9.
Klyver, K., & Schott, T. (2011). How Social Network Structure Shapes Entrepreneurial Intentions? Journal of Global Entrepreneurship Research, 1(1), 3-19
Krueger, F, & Brazeal, V. (2004). Entrepreneurial potential and potential entrepreneurs. Entrepreneurship Theory and Practice, 18, 91–105.
Linan, F., & Chen, Y. (2007). Testing the Entrepreneurial intention model at a two country sample. Document de Treball.06/07 Barcelona.
Linan, F., & Santos, J. (2007). Does Social Capital affect Entrepreneurial Intentions? International Advances in Economic Research, 13(4), 443-453.
Linan, F., & Chen, Y. W. (2009). Development and cross-cultural application of a specific instrument to measure entrepreneurial intentions. Entrepreneurship Theory and Practice, 33(3) 33-52.
Markman, G.D., & Baron, R.A. (2003). Person-entrepreneurship fit: Why some people are more successful as entrepreneurs than others? Human Resource Management Review, 13, 281–301.
Mazzarol,T., Volery T., Doss, N., & Thein, V. (2001). Factors influencing Small Business start-ups – A comparison with previous research. International Journal of Entrepreneurial Behaviour and Research
Ingram, M., Ramachandran,V., & Desai, V., (2002). Why do firms choose to be informal? Evidence from enterprise surveys in Africa (RPED paper No. 134)
Morris, M., & Lewis, P. (2005). The determinants of entrepreneurial activity. European Journal of Marketing, 29(7) 31–48.
Morrison, A. (2000). Initiating Entrepreneurship. In S. Carter & D. Jones-Evans (Eds). Enterprise and Small Business Principles, Practices &Policy. Harlow, Prentice Hall.
Mueller, S.L., & Thomas, A.S. (2001). Culture and entrepreneurial potential: A nine country study of locus of control and innovativeness. Journal of Business Venturing, 16, 51–75.
Mugenda, O.M., & Mugenda, A.G. (2003).Research Methods: Quantitative and Qualitative Approaches. Nairobi: ACTS
Mutai, R. (2011). Micro and Small Enterprise sector and Existing Support system in Kenya. Journal of Language, Technology and Entrepreneurship in Africa 3 (1)
Mwangi ,M.,& Birundu,E.,(2015) The Effect of Capital Structure on the Financial Performance of Small and Medium Enterprises in Thika Sub-County, Kenya. International Journal of Humanities and Social Science
National Bureau of Statistics-Kenya and ICF International. 2015. 2014 KDHS Key Findings
Parminder J. S.,(2020) Digital Industrialisation in Developing Countries — A Review of the Business and Policy Landscape
Neetu, B.,(2012)Financing Small Scale Industry. New Delhi Discovery Publishing House
Niels, B., Jolanda, H., Mirjam V., & Ingrid, V. (2011). Entrepreneurship and role models. Tinbergen Institute Discussion Paper TI 2011-061/3.Netherlands.
Niewoudt, S. (2016). Entrepreneurial characteristics and financial performance.
Nkonoki, E. (2010), Factors limiting the success and/or growth of small businesses in Tanzania, An empirical study on small business growth. Unpublished MBA project, Arcada University of Applied Sciences
Olawale, F., and Garwe, D. (2010). Obstacles to the growth of new SMEs in South Africa. Unpublished MBA Project, University of Fort Hare, South Africa.
Olugbenga, O., (2012). Policy Support and Performance of Small and Medium Scale Enterprises in South-West Nigeria
Olusola A. (2011). Accounting Skill as a Performance Factor for Small Businesses in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 2(5), 372-378
Oosterbeek, H., Van Praag M., & Ijsselstein, A. (2010). The impact of entrepreneurship education on entrepreneurship skills and motivation. European Economic Review, 54(3), 442-454.
Orodho, J. A. (2002). Techniques of Writing Research Proposals and Reports in Education and Social Sciences. Nairobi: Masola Publishers
Owour C., (2014). Growth and performance of small – scale enterprises in small urban centres; A case of Migoris manufacturing sub-sector, unpublished MBA project University of Nairobi
Peterman, N., & Kennedy, J. (2006).Enterprise education: Influencing Student perception of entrepreneurship. www.yaa.org.au/media/pdf/journalarticle.pdf
Radipere, S., & Dhliwayo, S., (2014). The role of age and business size on small business performance in the South African small enterprise sector. Problems and Perspectives in Management. 12. 7-12.
Şeker, Murat; Correa, Paulo Guilherme. (2010). Obstacles to Growth for Small and Medium Enterprises in Turkey. Policy Research working paper ; no. WPS 5323. World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/3809 License: CC BY 3.0 IGO.”
Selvaraj N. (2016). A Study on the Socio-economic Background of the Entrepreneurs of Industrial Estates in Southern Districts of Tamil Nadu. Journal of Political Sciences & J Public Affairs.
Subhan, Abdul. Qazi., Mehmood, Rahet. Mian. & Sattar, Abdul. (2013). Innovation in small and medium enterprises (SME’s) and its impact on economic development in Pakistan. Paper was presented in 6th International Business and Social Sciences Research Conference 3 –4 January, 2013, Dubai, UAE, ISBN: 978-1-922069, pp 18-4
Sutton, J (1997). “Gibrat’s Legacy.” Journal of Economic Literature, 35, 40–59.
Timmons J. A,. and Spinelli, S. (1994). “New Venture Creation: Entrepreneurship for the 21st century,” Vol. 4, Irwin Burr Ridge, Burr Ridge,
Wickham, P.A. (2001). Strategic Entrepreneurship: A decision-making approach to New Venture Creation & Management. London: Pitman Publishing.