CEO cooperation, charismatic leadership and performance of small and medium size enterprises in Western Kenya

Abstract

Small and Medium Size Enterprises (SMEs) have an immense contribution on the economic growth and development of a given country. Nevertheless, existing researches in Kenya show that SMEs survival rate is low. To help address the constraints of SMEs performance, most practitioners and scholars have used innovation, technology and intellectual capital to increase performance among other variables with little emphasis on trust as a significant predictor of SMEs performance. Further, the moderating role of charismatic leadership in this relationship between trust and SMEs performance remains largely untested. The study employed explanatory research design and targeted a population of 2000 respondents (top managers and employees) from the 1000 SMEs in the four counties of Western Kenya. Stratified sampling technique was used to determine the sample size of SMEs from both service and manufacturing sectors and then simple random sampling was done to select the SMEs and respondents that participated in the study. A sample size of 150 SMEs corresponding to 300 respondents was drawn to participate in the study. Factor analysis was done to ensure content, construct and discriminant validity. Hierarchical multiple regression model was used to test the hypotheses. Results of our study support a direct positive effect of trust on performance of SMEs. However, charismatic leadership did not significantly moderate the relationship between trust and SMEs performance. The results of this study therefore not only enriches literature on SMEs performance as pertains to trust but also contributes to knowledge by presenting contrary findings on the interaction between charisma and trust as not essential for SME performance. The results conclusively reveal that an SME’s top manager trust is very important for SME performance but his/her interaction with charisma may not necessarily improve SME performance.