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.
