Analysis of Determinants of Competitive Performance for Kenyan Small and Medium Enterprises (SMEs)

Competitive performance of small and medium enterprises (SMEs) is very critical for Kenya as an agricultural nation. Competitive processing in these enterprises would ensure that they effectively stabilize agricultural production, create jobs and reduce poverty. From reviewed literature it is purported that formal education and training, enterprise training, inter-firm, linkages/collaborations and policy framework could affect competitive performance of SMEs. The discussion in this article is based the results of a descriptive research designed study of 30 SMEs distributed into 11 horticulture; 10 dairy and 9 milling sub-sectors respectively. The study was guided by these research questions:- What are the effects of formal education and training on competitive performance of food processing SMEs; Does enterprise training affect the competitive performance of food processing SMEs; What are the effects of inter-firm linkages and collaborations on the competitive performance of food processing SMEs and Does policy framework affect the competitive performance of Kenyan food processing SMEs? Four corresponding hypotheses were tested to verify if the explored variables were significant determinants of competitive performance of SMEs. Data was collected using a combination of instruments. For qualitative data interview guides were used to obtain information from KII, observation schedules were used to gather observable data from within studied enterprises and focused group discussion guides supplemented qualitative information. Computer supported SPSS was used to analyze the coded data. Descriptive statistics were used to present the results and discussion of the analysis. Multiple regression analysis facilitated the presentation of significant relationships between independent variables and the dependent variable collectively and individually. Estimate results of R2 =72.7% and adjusted value of R2=68.3% indicated that all the independent variables tested were significant determinants of competitive performance of food processing SMEs. The t-test was used to establish the magnitude of relationship between individual independent variables and the dependent variable. The study found that formal education and training; enterprise training; linkages and collaborations and policy framework are all essential for quality production and food processing. Further findings confirmed Kenyan SMEs used imported technologies which lowered the profit margins due to increased unit cost of production. It was found that Kenya lacks SMEs’ sector specific policies to address their specific and special needs. It was concluded that since all the investigated independent variables were significant determinants of food processing SMEs competitive performance; Sector specific policies would create an enabling environment for all interventions for strengthening the Kenyan food processing SMEs’ sector. The research recommended that future similar studies should use larger study samples and explore more variables as means of verification of the findings. The special value the study added included establishing that job creation by SMEs should be reinforced by labour laws in order to create salaried jobs as opposed to contractual jobs which are not sustainable and therefore not functional in poverty reduction.