Relationship Between Entrepreneurial Mind-Set and Performance of Small and Medium Enterprises in Kisumu County, Kenya

Abstract

Small and Medium Enterprises (SMEs) contribute to employment and economic growth They create about 85 % of Kenya's employment but contribute only 20% of the total Gross Domestic Product. Moreover majority collapse before they become large businesses. Previous research on these problems of SMEs has focused on economic and social factors like capital, infrastructure, education and culture in vain. Whilst theory argues entrepreneurial mindset has a role in decision making and performance of SMEs, empirically clear information is lacking on that relationship. The main objective of the study was to investigate relationship between entrepreneurial mindset and performance of SMEs in Kisumu County, Kenya. Specifically the study sought to determine relationship between each of four components of entrepreneurial mindset, that is; passion, purpose, positioning and personality and performance of SMEs in Kisumu County, Kenya. The study was guided by Resource Based View Theory. It adopted a descriptive cross sectional survey design. Cluster random sampling design was used to draw a sample of 370 from target population of 10,002 owners of SMEs. Primary data was gathered using semi structured self-administered questionnaire. Reliability of the instrument was determined at Cronbach's Alpha of 0.841. Data was analyzed using descriptive statistics. The findings of the study were mixed. Personality findings, were empowering employees (Asymp.sig. 2-sided,p<0.05) and networking (Asymp.sig. 2-sided,p>0.05). This means personality in the form of networking had insignificant relationship with SME performance in the form of net profit. The converse is true for personality in the form of empowering employees. Positioning findings were; target specific market and focus on execution of ideas (Asymp.sig.2-sided, p<0.05) while limit business lines (Asymp.sig. 2- sided,p>0.05). This means that positioning through target of specific market and focus on execution of new ideas had significant relationship with performance of SMEs while the converse is true for limit business lines pursued. Purpose findings were (Asymp.sig. 2- sided, p<0.05). This means that purpose had significant relationship with performance of SMEs. Passion findings were; area of specialty, opportunity identification and risk taking (Asymp.sig. 2-sided, p<0.05) while business alertness (Asymp.sig. 2-sided,p>0.05). This means that passion through business alertness had insignificant relationship with performance of SMEs. The other three areas posed the converse. It can be concluded that passion, purpose, positioning and personality had relationship with SMEs performance in form of net profit per year. The study recommends that SMEs adopt and engage in activities that strengthen entrepreneurial mindset. These findings would serve as a guide for researchers, academicians and policy makers, to focus on entrepreneurial mindset as a key approach directing SMEs performance. The researcher recommends further study that use superior analysis tools such as correlation and regression for better results.