Business Networking, Cultural Orientation and Organizational Efficacy among Small and Medium Enterprises in the Manufacturing Industry in Nairobi, Kenya

Abstract

Small and Medium Enterprises are heralded as the engine of economic growth, the incubator of innovation, and the solution to decades of persistent unemployment. The Micro and Small Enterprises Act of 2012, Kenya, protects and promotes the SMEs growth. However, many Kenyan SMEs face significant challenges, key among them being long term viability. Most SMEs collapse before they reach maturity. The reason why SMEs fail to exploit their full potential still remains unresolved. There is need therefore to put keen interest in this sector by conducting further research into ways that will make small firms more viable and competitive. The purpose of the study therefore, was to investigate the challenges faced by SMEs in Kenya and fill the gap left by scholar. This was done by examining the moderating role of cultural orientation on the effect of business networking on organizational efficacy among small and medium enterprises in the manufacturing industry in Nairobi, Kenya. The specific objectives were to investigate the effects of structural dimension of business networking on organizational efficacy of small and medium enterprises in Nairobi, Kenya; to determine the effect of economic dimension of business networking on organizational efficacy among small and medium enterprises in Nairobi, Kenya; to evaluate the effect of social dimension of business networking on organizational efficacy among small and medium enterprises in Nairobi, Kenya; to examine the moderating role of cultural orientation on the relationship between business networking and organizational efficacy among small and medium enterprises in Nairobi Kenya. The study was anchored on the Network Theories which includes the Structural holes theory, and the Strength of weak ties theory. The other theories were Resource Dependence Theory and Theory of Planned Behavior. The study utilized a positivist philosophy and an explanatory research design. The target population was 4,896 SMEs in manufacturing industry spread out in Nairobi City County. Simple Random Sampling method was utilized to derive the sample size from the population. Multiple regression was used to test the hypotheses. Regression results indicated that structural dimension (β =0.414, p=0.000); economic dimension (β =0.237, p=0.000) and social dimension (β =0.215, p=0.002) had a positive and significant relationship with organizational efficacy. Lastly, the moderation effect of cultural orientation was confirmed and supported by a calculated t-statistic of 3.309 that is larger than the critical t-statistic of 1.96. The R2 before moderation was 55.5% but after moderation, the R2 increased significantly by 15.2% to 70.7%. The null hypotheses for each objective was rejected, and alternative hypotheses were adopted. The study concluded that business networking, encompassing structural, economic, and social dimension has a significant positive effect on organizational efficacy of small and medium enterprises in Nairobi, Kenya. Cultural orientation served as a crucial positive moderator in the relationship. Therefore, managers should encourage their employees to participate in business networks, attend industry events, and join professional associations to build relationships and expand their networks. The study recommends that managers should promote cultural awareness and sensitivity within SMEs, given the significant moderating effect of cultural orientation among organisations. Furthermore, the Kenyan government should facilitate business networking through provision of financial incentives, establish resource sharing platforms, and create awareness programs that support Cultural orientation among SMEs in order to strive. These recommendations should be implemented through collaborative efforts between government ministries, industry associations, and SMEs, with the aim of creating an enabling environment for SMEs to thrive, potentially replicable across various organizations globally. Finally, future studies can incorporate other variables such as, diversity and inclusivity that influence organizational efficacy while taking a keener look on the limitations that the study observed.