Effect of entrepreneurs’ risk preference on organization efficacy of small and medium enterprises in Kenya

Abstract

Small and medium enterprises (SMEs) are generally thought to play a crucial role in driving economic growth in both developing and developed countries however, entrepreneurial behavior such as entrepreneur’s judgment and capabilities to perform a given actions such as risk assessment is an important means of growth to small and medium enterprises but no study has attempted to cover it. Thus, this study focused on determining the effect of entrepreneurs’ risk preference on organization efficacy of small and medium enterprises in Kenya. The study utilized the explanatory research design and a survey of small and medium enterprises in western Kenya namely, Kisumu, Nakuru and Eldoret town in Kenya. A sample size of 267 respondents is derived from a target Population of 900 enterprises. Structured questionnaire and systematic random sampling technique were used. Descriptive statistics, Pearson correlation analysis, factor analysis and multiple regressions were used to analyze data. The study findings showed that entrepreneurs’ risk preference positively and significantly affect organization efficacy. Similarly, entrepreneurs’ risk preference is an important factor of organization efficacy. It was concluded that entrepreneurs’ risk preference is important in determining efficacy in management of small firms.Recommendations are made based on managerial implications useful for business practitioners and trainers.