Networking and Firm Performance Among Manufacturing Small and Medium Enterprises In Kenya

Abstract

SMEs are the backbone of global economies and they serve as medium of job creation and poverty eradication. They are unique compared to large organizations in terms of size, resources and flexibility. Since most of the SMEs are faced with resource constraints, they are unable to compete effectively and hence their survival and longevity is 8 major concern. In addition. they are known to operate in isolation which is considered a major obstacle to their competitiveness and hence performance. It is assumed that networking among SMEs can enhance their performance. This study evaluated networking indicators and their influence on performance of manufacturing SMEs in Kenya. The study was guided by three objectives based on the three networking indicators. In addition. eight hypotheses were formulated based on the three objectives. From literarurc review. the study adopted II\'C theories 11:1I11cly:Transaction Cost Theory. Resource Rased Theory. Social Network Theory. Social Capital Theory and Resource Based View to explain the concept 01' networking. resource acquisition and firm performance. A conceptual framework having eight independent variables (network content. network governance. network structure. network intensity, network range, relational skills. partner's knowledge and internal communications) and dependent variable (firm performance) was developed from critical literature review. The study adopted positivism paradigm and targeted manufacturing SMEs registered under Kenya Association of Manufacturers (KAM). From a population of 660 firms. a sample of 131 firms was drawn using stratified sampling. A survey was conductcd targcting managers or owners 0 I' the firms using questionnai res. Data analysi s "vas carried out using SPSS version 20. Statistical analysis performed in this study were categorized into descriptive and inferential statistics. The study has proposed a network performance model based on critical review of literature. Further. results indicate that network content. network governance. network structure. network intensity, network range. partner's knowledge. relational skills and internal communications influence performance or SMEs. In addition. the study revealed that the level or networking among Kenyan manufacturing SME is low at 26% . The study has made significant contribution to managers. policy makers and III them). For managers the stud: recommended that they should seek to identify and build ties with networks that in the long-term will assist them to acquire resources and capabilities that arc owned by others. For the government. it is recommended that there is need to formalize and legitimize most 01' the networks. In addition network facilitators are expected to steer networks management in order lO avoid conflicts. Finally. this study has added to the empirical literature on developing countries regarding networking and firm performance.