Effect of venture capital financing on the growth of small and medium-sized enterprises in Kenya
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Date
2013-11Author
Gikomo, James Njama
Type
ThesisLanguage
enMetadata
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The aim of the study is to investigate the effect of venture capital financing on the growth
of SMEs in Kenya. This study is expected to be of great value to the small and medium
enterprises in Kenya as the study will highlight the effect that venture capital financing
and to the financial institutions financing these enterprises, they would benefit greatly as
they would understand the needs of SMEs and how best venture capital can enhance their
growth. The study adopted descriptive cross sectional research design. The target
population for this study was the Top 100 Mid-sized companies (2012) in Kenya.
Stratified sampling was adopted where a 30% sample was chosen to give a sample size of
30 SMEs. The SMEs were chosen though purposive sampling whereby the firm was
chosen based on the basis that they had received venture capital financing. The study
collected secondary data which included the financial statements: the profit and loss
account and the balance sheets for a period of five years starting from 2008 to 2012. The
data was analyzed through inferential statistics by employing a regression model to
establish the form of relationship between the dependent and the independent variables.
The analyzed data was presented in frequency distributions tables. The study found out
that there was a positive and significant relationship between growth in SMEs and
venture capital financing. The study concluded that the effect of venture capital on
growth of SME is real and practical, and that increased venture capital financing
improves SMEs credit rating, marketing and distribution networks, improves technical
expertise and management expertise/skills which in turn enhance growth in these firms.
With good management expertise and technical expertise, the firms have the ability to
strategically use information and resources available to them to present well-crafted
business growth strategies that also reduce risk to the business. The study recommends
that SMEs need to recognize the potential advantages of seeking external equity finance
from corporate sources. Corporate investors can therefore become very important assets
for SMEs both financially and strategically as they provide tangible and intangible valueadded
resources which can play a valuable role in SME growth. Both the government and
the venture capital fund managers also can do more to encourage venture capital
investment. The government should provide credit and equity financing to eligible
venture capital finance companies to support SMEs.
Citation
Degree Of Master of Business Administration (MBA)Publisher
University of Nairobi School of Business
Description
A research project submitted in partial
fulfillment of the requirement of the award of
Degree of Masters of Business Administration,
School Of Business
University Of Nairobi