ENTREPRENEURIAL ECOSYSTEM PRACTISES AND PERFORMANCE OF SMES IN NAIROBI CITY COUNTY’S TRADE SECTOR, KENYA

Abstract

Entrepreneurial ecosystem support practices are interactions among institutions, infrastructure, policies, and support systems that collectively create an environment conducive for entrepreneurial development and business growth. Small and medium enterprises (SMEs) play a critical role in promoting economic growth, employment creation, and social well-being. However, performance of SMEs in Kenya continues to face challenges associated with inadequate infrastructure and unfavorable policy environments. This study examined the effect of infrastructure support practices and policy support practices on performance of SMEs in Nairobi City County’s wholesale and retail trade sector, Kenya. The study was guided by Infrastructure-Led Growth Theory and Institutional Theory. The study adopted a descriptive research design targeting 11,253 SMEs operating within Nairobi City County’s wholesale and retail trade sector, with business managers serving as the unit of observation. Using Yamane’s (1967) formula, a sample size of 386 SMEs was obtained through stratified random sampling. Primary data was collected using structured questionnaires. A pilot study involving 39 business managers was conducted to test validity and reliability of the research instrument. Data was analyzed using Statistical Package for Social Sciences (SPSS) Version 28 using descriptive and inferential statistics, including correlation and multiple regression analysis. Findings revealed that infrastructure support practices had a strong positive and statistically significant relationship with performance of SMEs (r = 0.543, p = 0.000), while policy support practices had the strongest positive and statistically significant relationship with performance of SMEs (r = 0.828, p = 0.000). Regression findings further established that both variables significantly predicted performance of SMEs in Nairobi City County’s wholesale and retail trade sector. The study concludes that infrastructure support practices and policy support practices significantly influence performance of SMEs. The study recommends improvement of transport systems, electricity supply, water supply, and digital infrastructure within business zones. The study further recommends implementation of supportive regulatory and policy reforms aimed at simplifying licensing procedures, improving tax fairness, and enhancing access to SME support programs.

Key Words: Entrepreneurial Ecosystem Practices, Infrastructure Support Practices, Policy Support Practices, Performance of SMEs, Nairobi City County, Kenya