Effect of Trade Facilitation Practices on Foreign Market Competitiveness of Small and Medium Enterprises in Industrial Area, Nairobi

Abstract

In the present-day contemporary era, the internationalization of businesses has become an ever increasing phenomenon and thus attracting the attention of many interested parties due to the influence it has to national economic growth and bringing together different countries. The purpose of the study was to evaluate the effect of trade facilitation practices on foreign market competitiveness of small and medium sized enterprises in Industrial Area, Nairobi. In order to understand the perspectives of the variables in question, the study was premised on two theories; The Technological, Organizational, and Environmental (TOE) framework and the network model. This research was a cross-sectional descriptive design where the population of the study was made up of registered SMEs in Industrial Area, in Nairobi as at December 2020. Data analysis delved on descriptive and inferential statistics. Notably, a significant portion of the surveyed businesses falls within the 201–300 employees category (44.8%), reflecting the predominance of medium-sized enterprises. The age distribution of businesses reveals a fairly balanced representation across different age categories, with the majority falling within the 10– 20 years range (50.0%). Concerning annual sales from foreign markets, a considerable proportion of SMEs reported sales between 20 and 50 million Kenyan Shillings (40.5%). The majority of businesses are local enterprises (80.2%), underscoring the importance of understanding the dynamics of local SMEs in the context of global competitiveness. In automation and digitalization, businesses strongly adopt electronic documentation platforms (Mean = 4.59), indicating a technologically advanced approach. However, the use of automated freight booking and tracking systems shows some variability (Mean = 3.41). Improvement of infrastructure and services is generally positively perceived, with high scores for trade facilitation training (Mean = 4.22) but a slightly lower mean for border infrastructure enhancement (Mean = 3.85). Institutional and regulatory cooperation scores are consistently positive, indicating strong government and inter-agency coordination (Mean = 4.54). additionally, simplification and harmonization of trade procedures receive favorable scores, but with notable variability, particularly in areas like standardized documents (Mean = 3.17). The regression analysis further clarified the relationships between trade facilitation practices and foreign market competitiveness. The overall model was statistically significant (R = .704, R Square = .496), indicating that the predictors collectively explain a substantial portion of the variability in foreign market competitiveness. The R Square value of 0.496 indicates that approximately 49.6% of the variability in competitiveness can be attributed to the included predictors. Among the predictors, automation and digitalization (b = 0.511, sig. = 0.000), improvement of infrastructure and services (b = 0.204, sig. = 0.027), institutional and regulatory cooperation (b = 0.228, sig. = 0.005), and simplification and harmonization (b = 0.211, sig. = 0.001) exhibited positive and statistically significant coefficients, underlining their importance in shaping SMEs' competitiveness in foreign markets. The study suggests that efforts to bolster the competitiveness of SMEs in the industrial area of Nairobi should prioritize initiatives that enhance digital literacy and technology adoption. Policymakers and business support organizations ought to invest in comprehensive training programs that equip SMEs with the skills to effectively leverage electronic documentation platforms, automated customs clearance systems, and other digital tools.