Strategic Product Responses, Structural Capital and The Growth of Export Manufacturing Small and Medium Sized Enterprises In Nairobi County

Abstract

Firm growth is related very closely to firm survival. Specifically, firm growth is positively correlated with the likelihood of survival. Hence firms that experience continuous growth will have a higher probability of surviving in the market. Stiff competition, resource constraints and organizational limitations hinder SMEs growth. The main objective of the study was to investigate the moderating effect of structural capital on the relationship between strategic product responses and the growth of export manufacturing Small and Medium sized Enterprises (SMEs) in Nairobi county. The specific objectives of the study were to establish strategic product design, to determine strategic product development, to assess strategic product differentiation and to evaluate strategic product innovation on the growth of export manufacturing SMEs in Nairobi county and to examine moderating effect of structural capital on the relationship between strategic product responses and the growth of export manufacturing SMEs in Nairobi county. This study used the discrete choice theory, diffusion of innovation theory and chasm theory of growth (Anchor Theory). Explanatory research design was most appropriate for its ability in developing an explanation of a causal relationship between independent and dependent variables. The study area was in Nairobi County and the target population was 369 export manufacturing SMEs. Slovin’s formula was applied to generate a sample size of 191 SMEs. The primary data was collected by using a structured questionnaire. The questions were designed using a 5 point Likert scale ranging (1 to 5). Pilot study was done in Kiambu County covering 19 SMEs. Validity and reliability were tested. The data collected was analyzed using Statistical Package for the Social Sciences (SPSS) version 23.0. Correlation results revealed that product design (r=.476, p=.000), product development (r=.383, p=.000), product differentiation (r=.275, p=.000), product innovation (r=.277, p=.000) and structural capital (r=.276, p=.000) had positive significant correlation with growth of SMEs. Regression results revealed that product design (β=.560, p=.000), product development (β=.565, p=.000), product differentiation (β=.442, p=.000) and product innovation (β=.426, p=.000) all had a positive effect on growth of the SMEs. Product design interaction term (β=.123, p=.056), product development interaction term (β=.052, p=.001) and product innovation interaction term (β=.272, p=.001) is significant suggesting that structural capital strengthens the positive relation between product design, product development and product innovation and growth of SMEs. Whereas, product differentiation interaction term (β=.126, p>.05) is not significant suggesting that structural capital does not significantly moderate the positive relationship between product differentiation and growth of SME. The study concluded that product design, product development, product differentiation, product innovation and structural capital influences export manufacturing SMEs growth. The study recommended that managers and SMEs owners should implement product design, product development, product differentiation product innovation and structural capital to improve on SME growth. Also SMEs should be supported by trade promotion organizations to provide market information, as well as training and network opportunities so as to attain the SDGs