| dc.description.abstract | The influence of institutional factors (structure, organizational culture and leadership) and
strategy on performance of SMEs remains unclear. Also, the moderating effect of institutional
factors on the relationship between strategy and performance of SMEs has not been established.
Therefore, this study was motivated by the desire to fill these gaps in knowledge. The specific
research objectives were to establish the relationship between strategy and performance of
SMEs, the relationship between each institutional factor and performance of SMEs, the joint
effect of institutional factors and strategy on performance of SMEs, the influence of each of the
institutional factors on the relationship between strategy and performance of SMEs and lastly,
the joint effect of institutional factors on the relationship between strategy and performance of
SMEs.
A disproportionate stratified random sampling technique was used to select a sample of 116
firms drawn from a population of 166 small and medium enterprises in Nairobi. Structured
survey questionnaires were administered to collect the primary data. The response rate was 46
percent, representing 53 respondents drawn from manufacturing and service sectors. Descriptive
statistics, correlation and regression techniques were used to analyze the data.
The results of the study show that 87 percent of Kenyan SMEs employ strategic plans in their
businesses, contrary to the findings of the previous research which indicated that small and
medium sized enterprises (SMEs) barely plan their strategies because of lack of resources. It was
also found that the relationship between organizational culture and performance of SMEs was
positive and significant. This implies that organizational culture has influence on the
performance of SMEs. The results further show that the relationship between strategy and
performance is moderated by leadership. This is demonstrated by the positive effect of the
interaction between leadership and strategy on performance. Transformational leadership style
was found to be dominant. However, SMEs combine both transformational and transactional
leadership styles. The ultimate practical implication is that for any SME to survive and make
profit in a turbulent environment, it must put in place strategic plans and align strategies to the
institutional factors. This is consistent with classical view (Whittington. 2001) which states that
SMEs should have a rational process. emphasize on analysis order and contol to achieve long term
advantages and maximize profit.
Despite the foregoing, this study had inconclusive results on four fronts: the joint effect of
strategy and institutional factors on performance of SMEs, the moderating effect of
organizational culture on the relationship between strategy and performance, the moderating
effect of structure on the relationship between strategy and performance of SMEs and the
combined effect of the three moderating variables on the relationship between strategy and
performance of SME's. It is recommended that further research be done to compare the results
and thus establish the source of these differences.
The study has emphasized the importance of strategy and the institutional factors in improving
performance. Therefore it is recommended that policy makers to come up with a policy
framework to support the small and medium enterprises to enhance the quality of their strategies
and institutional factors so that SMEs can survive and improve their performance in a
competitive environment. | en |
