Influence of Entrepreneurial Orientation on Firm Performance Among Small and Medium Enterprises in the Automobile Industry in Nairobi County, Kenya

Abstract

Entrepreneurial Orientation (EO) has become a central concept in research on entrepreneurship and strategy and has received considerable attention, both theoretically and empirically. Entrepreneurial Orientation is defined as the dimensions of Entrepreneurial behaviour along which opportunity is pursued, these consists of Pro-activeness, Innovativeness, Competitive Aggressiveness, Autonomy and Risk Taking Propensity. Research indicates that small and medium enterprises are faced by constant threat of failure and most of them never grow into large enterprises. Past studies indicate that the SMEs sector in Kenya is characterized by high mortality rate. That is in every five SMEs three of them will fail within the first few months of operation, over 60% fail each year and most do not survive to their third anniversary. The objective of this study was to evaluate the relationship between entrepreneurial orientation and performance of small and medium enterprises in the automobile industry in Kenya. This study adopted a descriptive survey research design and the target population was all the 225 second-hand motor vehicle importers operating within Nairobi region. A total number of 172 respondents were selected from all the regions. Primary data was collected using self-administered questionnaires from the respondents. In order to effectively analyze the primary quantitative data, descriptive statistics including percentages, frequencies, means and standard deviation was used. Presentation of quantitative data was done using frequency tables. Presentation of qualitative data was done in prose form, involving explanations. Regression analysis was conducted to determine how innovativeness, risk, pro-activeness, autonomy and competitive aggressiveness affect performance of small and medium enterprises in the automobile industry in Kenya. 143 respondents out of the targeted 172 responded and returned their questionnaire making a return rate of 83.14%. The study found that innovativeness influence firm performance, risk taking and competitive aggressiveness positively influence firm performance to a great extent, pro-activeness positively influence firm performance to a very great extent while autonomy of the management negatively influence firm performance to a great extent. The study further found that competitive aggressiveness had the highest influence on Performance followed by innovativeness, then Pro-activeness, Autonomy, while risk taking had the least influence on Performance. The study therefore recommends that management and proprietors should be innovative, proactive, risk taking and competitively aggressive. However, the study recommends that Autonomy should be regulated.