Abstract

Entrepreneurship has been regarded to have a significant effect on the development and
performance of businesses worldwide. The effect is however contingent upon many
different factors. How these factors interact in an integrated configuration is a key issue
for organizations. Vital among these factors are business environment and services that
affect product development and service delivery. However there are few studies on
entrepreneurship in Kenya especially those integrating business environmental factors
and development services. This study therefore intended to interrogate the nature and
effect of entrepreneurial orientation, moderating roles of internal and external business
environments as well as business development services, and their joint effect on the
performance of small and medium enterprises in Kenya.
The study adopted a cross sectional survey design and used primary data collected from
a sample of 150 enterprises in the manufacturing sector in Nairobi. To examine the
moderating and joint inter-variable relationships, both descriptive and inferential
statistical approaches were used to analyze the data at composite, dimensional and
parameter levels.
The findings illustrate that, contrary to expectation, the composite and construct forms of
entrepreneurial orientation had no direct effect on performance. However, further
regressions on entrepreneurial orientation measures indicate that three parameters
significantly affected performance. These findings therefore demonstrate that, at
composite and construct level, entrepreneurial orientation did not affect performance,
whereas at individual parameter level entrepreneurial orientation had a significant
relationship.
The findings at composite and construct levels contradict expectation of the study while
those at parameter level support the theory that entrepreneurial orientation is positively
related to performance. Concerning internal business environment, the study found lack
of moderating on the relationship between entrepreneurial orientation and performance.
Additional tests to determine if internal business environment mediates the relationship
also found no effect. As for external business environment, this study confirmed
presence of a significant moderating effect on the relationship between entrepreneurial
orientation and performance.
In another vein, business development services were found to have a positive and
significant, although weak moderating effect, on the link between entrepreneurial
orientation and performance of small and medium enterprises in the study. However, in
view of the weak moderation result, additional tests to determine other roles of business
development services found that the variable was a very strong mediator in the
relationship.
In addition, this study found that, whereas the joint effect of all the predictor variables
on performance was greater than individual effects of entrepreneurial orientation, internal
and external business environments, the individual effect of business development
services were greater than the joint effect. This study concludes that while performance
of the studied small and medium enterprises were generally affected by entrepreneurial
orientation and external business environmental changes, internal business environment
had no moderating or mediating effect. In contrast, business development services had
moderating and mediating effect on their performance. These findings find support in
theory and empirical literature.
This study therefore recommends that small and medium manufacturing enterprises in
Nairobi should develop strategies to manage these variables and improve their
performance. Key Words: Entrepreneurial Orientation, Business environment, Business
Development Services, Performance, Moderating, Mediating, Small and Medium
Enterprises.