Analysing the organizational culture on performance of small and medium enterprises in Kisumu county, Kenya.

Abstract

Small and medium-sized enterprises (SMEs), which make up 95% of firms and employ 60% of the labor force, are crucial to the Asia-Pacific region, according to the 1989 founding of the Asia-Pacific Economic Cooperation (APEC). Since SMEs account for 90% of all enterprises globally—in both developed and developing countries—they are a major contributor to the expansion of the global economy. SME presence is noteworthy in Kenya, where they account for 98% of all enterprises, according to the Central Bank of Kenya (CBK)'s 2017 National Economic Survey. These businesses generate up to 3% of the country's GDP and 30% of all yearly job possibilities. SMEs play a significant role in Kisumu County, contributing more than 60% of the county's GDP and 70% of jobs. Nevertheless, a 2020 assessment from the Kenya National Bureau of Statistics (KNBS) indicates that three out of every five Kenyan enterprises are at risk of failing within the next four to five years, notwithstanding their economic significance. Remarkably, there is still little study on the relationship between organizational culture and SME performance, especially when it comes to SMEs in Kisumu County. Previous studies have primarily focused on aspects like strategic leadership, resource allocation, and organizational structures, with minimal consideration for factors such as clan culture, market culture, and gender dynamics within the context of SMEs in Kisumu County. While there is some existing literature discussing these relationships, scientific exploration and research specific to SMEs in Kisumu County have been scarce. Thus, insufficient study has been done explicitly examining the effects of organizational culture on the performance of small and medium-sized enterprises (SMEs) in Kisumu County, despite the fact that SMEs have made a substantial contribution to Kenya's economic growth and development. By examining the impact of organizational culture on the performance of SMEs in Kisumu County, this study seeks to close this gap. One of the specific goals of the study was to examine market, adhocracy, and clan cultures using the Organizational Culture theory as a guide. In order to meet its goals, the study focused on 1,000 SMEs in Kisumu County, including both owners and employees. 285 managers and owners of SMEs made up the study's sample. Both closed- and open-ended questions were included in the questionnaires used for data collection. To ensure the reliability of the questionnaire, a pilot study involving approximately 28 SMEs (10% of the total study sample size), including both owners and staff members, was conducted, and the Cronbach alpha (α) test indicated a high reliability score of 0.852 for the study instrument. The study's findings, as determined by the Pearson Correlation coefficient, revealed that all the variables were significantly positively correlated. Specifically, clan culture had a strong positive influence on SME performance, as evidenced by an unstandardized coefficient of 1.597 and a standardized coefficient (Beta) of 0.868. Adhocracy culture also had a moderate positive influence, with an unstandardized coefficient of 0.605 and a Beta of 0.422. Market culture had a relatively weaker positive influence, with an unstandardized coefficient of 0.146 and a Beta of 0.1325. Importantly, all of these influences were statistically significant with p-values below 0.05. In conclusion, this study highlights the critical role of organizational culture in the performance of SMEs in Kisumu County. SMEs see increases in performance when they adopt and uphold elements of the organizational culture, such as the market, adhocracy, and clan cultures. According to the report, Kisumu's SMEs should constantly assess their performance, keep up with industry developments and trends, and effectively compete with other businesses. Enhancing SME performance also requires investing in research and experimentation, encouraging creativity and innovation, and adopting new ideas.