Contribution of Internationalisation to SME Growth: Evidence from the Kenyan Manufacturing Sector
DOI:
https://doi.org/10.2478/eb-2020-0017Keywords:
Internationalisation, SMEs, Growth, OLS, ExportsAbstract
Sub-Saharan African countries are among the poorest countries in the world and there is a need to develop their economies. Researchers suggest the promotion of small and medium-sized enterprises (SMEs) to foster economic development in countries. Internationalisation has been proved to be a key strategy for SME growth. This study investigates the effect of internationalisation on manufacturing SME growth in Kenya. Kenya is a developing country and the leading economy in the East African community. Using data from the World Bank enterprise survey, a sample of 94 SMEs operating in Kenya between 2013 and 2018 was selected. Multiple linear regression analysis using ordinary least square (OLS) was applied and the results revealed that internationalisation through direct exports contributed positively to the growth of manufacturing SMEs in Kenya. The findings of the study suggest that policy makers should promote internationalisation of SMEs in Kenya to improve the doing business environment in general and remove external barriers to internationalisation of SMEs at the national and international level in particular.References
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Bakunda, G. (2003). Explaining firm internationalisation in Africa using the competence approach. Journal of African Business, 4(1), 57–85. https://doi.org/10.1300/J156v04n01_04
Baltagi, B. H. (2011). Econometrics. Springer, 5th ed. https://doi.org/10.1007/978-3-642-20059-5
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Cant, M. C., & Wiid, J. A. (2013). Establishing the challenges affecting South African SMEs. International Business & Economics Research Journal (IBER), 12(6), 707–716. https://doi.org/10.19030/iber.v12i6.7869
Cerrato, D., & Piva, M. (2012). The internationalisation of small and medium-sized enterprises: the effect of family management, human capital and foreign ownership. Journal of Management & Governance, 16(4), 617–644. https://doi.org/10.1007/s10997-010-9166-x
Chelliah, S., Sulaiman, M., & Yusoff, Y. M. (2010). Internationalisation and performance: Small and medium enterprises (SMEs) in Malaysia. International Journal of Business and Management, 5(6), 27. https://doi.org/10.5539/ijbm.v5n6p27
Chu, W. W. (1997). Causes of growth: a study of Taiwan's bicycle industry. Cambridge Journal of Economics, 21(1), 55–72. https://doi.org/10.1093/oxfordjournals.cje.a013659
Cieslik, J. E. R. Z. Y., & Kaciak, E. U. G. E. N. E. (2009). Measuring Growth and Internationalisation of SMEs: Toward an Integrated Analytical Framework (No. 6-2009). Kozminski Working Paper Series.
Dagnino G. B. (2012). Handbook of Research on Competitive Strategy. Edward Elgar Publishing Limited, Cheltenham. https://doi.org/10.4337/9780857938688
Dana, L. P., Etemad, H., & Wright, R. W. (1999). The impact of globalization on SMEs. Global Focus, 11(4), 93–106.
Fernández, Z., & Nieto, M. J. (2006). Impact of ownership on the international involvement of SMEs. Journal of International Business Studies, 37(3), 340–351. https://doi.org/10.1057/palgrave.jibs.8400196
Fisman, R., & Svensson, J. (2007). Are corruption and taxation really harmful to growth? Firm level evidence. Journal of Development Economics, 83(1), 63–75. https://doi.org/10.1016/j.jdeveco.2005.09.009
George, G., Wiklund, J., & Zhara, S. A. (2005). Ownership and the Internationalisation of Small Firms. Journal of Management, 210–233. https://doi.org/10.1177/0149206304271760
Golovko, E., & Valentini, G. (2011). Exploring the complementarity between innovation and export for SMEs’ growth. Journal of International Business Studies, 42(3), 362–380. https://doi.org/10.1057/jibs.2011.2
Hessels, J. (2005). Internationalisation of Dutch SMEs. EIM Paper M, 200507.
Hessels, J., & Parker, S. C. (2013). Constraints, internationalisation and growth: A cross-country analysis of European SMEs. Journal of World Business, 48(1), 137–148. https://doi.org/10.1016/j.jwb.2012.06.014
Ibeh, K., Wilson, J., & Chizema, A. (2012). The internationalisation of African firms 1995–2011: Review and implications. Thunderbird International Business Review, 54(4), 411–427. https://doi.org/10.1002/tie.21473
Ali Jamali, M., & Md Nor, N. G. (2012). Growth of Firms in Manufacturing Sector: A Panel Data Analysis in Iran. Global Business Review, 13(1), 51–68. https://doi.org/10.1177/097215091101300104
Khandelwal, P. (2004). Comesa and Sadc : Prospects and Challenges for Regional Trade Integration. IMF Working Papers, 2004/227. https://doi.org/10.5089/9781451875447.001
Kipsaat, K. J. (2019). Firm Characteristics and Export Intensity in Kenyan Manufacturing Firms: An Empirical Analysis. Journal of Business and Economic Development, 4(1), 31–37. https://doi.org/10.11648/j.jbed.20190401.15
Korsakiene, R., & Tvaronavi, M. (2012). The internationalisation of SMES: An Integrative Approach. Journal of Business Economics and Management, 13(2), 294–307. https://doi.org/10.3846/16111699.2011.620138
Korsakiene, R. (2014). Internationalisation of Lithuanian SMEs: Investigation of barriers and motives. Economics and Business, 26, 54–60. https://doi.org/10.7250/eb.2014.020
Lejpras, A. (2009). Determinants of internationalisation: differences between service and manufacturing SMEs. DIW Berlin Discussion Paper No. 886. https://doi.org/10.2139/ssrn.1461395
Levratto, N., Zouikri, M., & Tessier, L. (2010). The Determinants of Growth For Smes - A Longitudinal Study From French Manufacturing Firms. Available at SSRN: https://doi.org/10.2139/ssrn.1780466
Love, J. H., & Roper, S. (2015). SME innovation, exporting and growth: A review of existing evidence. International Small Business Journal, 33(1), 28–48. https://doi.org/10.1177/0266242614550190
Lu, J. W., & Beamish, P. W. (2001). The internationalisation and performance of SMEs. Strategic Management Journal, 22(6-7), 565–586. https://doi.org/10.1002/smj.184
Nunes, P. M., Gonçalves, M., & Serrasqueiro, Z. (2013). The influence of age on SMEs’ growth determinants: empirical evidence. Small Business Economics, 40(2), 249–272. https://doi.org/10.1007/s11187-011-9363-2
Jekanyika Matanda, M. (2012). Internationalisation of established small manufacturers in a developing economy: A case study of Kenyan SMEs. Thunderbird International Business Review, 54(4), 509–519. https://doi.org/10.1002/tie.21480
Beck, T., & Maksimovic, V. (2002). Financial and Legal Constraints to Firm Growth: Does Size Matter? Policy Research Working Papers. https://doi.org/10.1596/1813-9450-2784
Mcintyre, M. A. (2005). Trade Integration in the East African Community : An Assessment for Kenya. IMF Working Paper, 2005/143. https://doi.org/10.5089/9781451861624.001
Memili, E., Fang, H., Chrisman, J., & Massis, A. De. (2015). The impact of small- and medium-sized family firms on economic growth. Small Business Economics, 45(4), 771–785. https://doi.org/10.1007/s11187-015-9670-0
Misati, E., Walumbwa, F. O., Lahiri, S., & Kundu, S. K. (2017). The Internationalisation of African Small and Medium Enterprises (SMEs): A South-North Pattern. Africa Journal of Management, 3(1), 53–81. https://doi.org/10.1080/23322373.2016.1275940
Morone, P., & Testa, G. (2008). Firms Growth, Size and Innovation an Investigation Into the Italian Manufacturing Sector. Economics of Innovation and New Technology, 17(4), 311–329. https://doi.org/10.1080/10438590701231160
Mtigwe, B. (2010). The entrepreneurial firm internationalisation process in the Southern African context: A comparative approach. International Journal of Entrepreneurial Behaviour & Research, 11(5). https://doi.org/10.1108/13552550510615006
Mupemhi, S. (2013). Factors Affecting the Internationalisation of Manufacturing SMEs in Zimbabwe By Richard Duve Ronicah Mupemhi Midlands State University, Gweru, Zimbabwe.
Paul, J., Parthasarathy, S., & Gupta, P. (2017). Exporting challenges of SMEs: A review and future research agenda. Journal of World Business, 52(3), 327–342. https://doi.org/10.1016/j.jwb.2017.01.003
Kesk, H., Ġentürk, C., Sungur, O., & Kġrġġ, H. M. (2010, June). The importance of SMEs in developing economies. In 2nd International Symposium on Sustainable Development (pp. 183–192).
Wilson, K. (2006). Encouraging the internationalisation of SMEs. OECD papers, 6(12), 43–66.
Wolszczak-Derlacz, J. (2018). The analysis of firms’ involvement in internationalisation and determinants of its intensity–an analysis for developing and post-transition economies. Economics and Business Review, 4(1), 44–63. https://doi.org/10.18559/ebr.2018.1.4
Wooldridge, J. (2016). Introductory econometrics; A modern approach. Nelson Education.
World Bank. (2020). Trading for development in the age of global value chains. Wordl Development Report 2020.
Ahmed, A. D., Cheng, E., & Messinis, G. (2007). Causal links between export, FDI and output: Evidence from sub-Saharan African countries.
Akinboade, O. A. (2015). Determinants of SMEs growth and performance in Cameroon’s central and littoral provinces ’ manufacturing and retail sectors. African Journal of Economic and Management Studies, 6(2), 183–196. https://doi.org/10.1108/AJEMS-03-2013-0033
Bakunda, G. (2003). Explaining firm internationalisation in Africa using the competence approach. Journal of African Business, 4(1), 57–85. https://doi.org/10.1300/J156v04n01_04
Baltagi, B. H. (2011). Econometrics. Springer, 5th ed. https://doi.org/10.1007/978-3-642-20059-5
Bernard, A. B., Grazzi, M., & Tomasi, C. (2011). Intermediaries in international trade: Direct versus indirect modes of export. Working paper 17711, National Bureau of Economic Research, Cambridge, MA. https://doi.org/10.3386/w17711
Cant, M. C., & Wiid, J. A. (2013). Establishing the challenges affecting South African SMEs. International Business & Economics Research Journal (IBER), 12(6), 707–716. https://doi.org/10.19030/iber.v12i6.7869
Cerrato, D., & Piva, M. (2012). The internationalisation of small and medium-sized enterprises: the effect of family management, human capital and foreign ownership. Journal of Management & Governance, 16(4), 617–644. https://doi.org/10.1007/s10997-010-9166-x
Chelliah, S., Sulaiman, M., & Yusoff, Y. M. (2010). Internationalisation and performance: Small and medium enterprises (SMEs) in Malaysia. International Journal of Business and Management, 5(6), 27. https://doi.org/10.5539/ijbm.v5n6p27
Chu, W. W. (1997). Causes of growth: a study of Taiwan's bicycle industry. Cambridge Journal of Economics, 21(1), 55–72. https://doi.org/10.1093/oxfordjournals.cje.a013659
Cieslik, J. E. R. Z. Y., & Kaciak, E. U. G. E. N. E. (2009). Measuring Growth and Internationalisation of SMEs: Toward an Integrated Analytical Framework (No. 6-2009). Kozminski Working Paper Series.
Dagnino G. B. (2012). Handbook of Research on Competitive Strategy. Edward Elgar Publishing Limited, Cheltenham. https://doi.org/10.4337/9780857938688
Dana, L. P., Etemad, H., & Wright, R. W. (1999). The impact of globalization on SMEs. Global Focus, 11(4), 93–106.
Fernández, Z., & Nieto, M. J. (2006). Impact of ownership on the international involvement of SMEs. Journal of International Business Studies, 37(3), 340–351. https://doi.org/10.1057/palgrave.jibs.8400196
Fisman, R., & Svensson, J. (2007). Are corruption and taxation really harmful to growth? Firm level evidence. Journal of Development Economics, 83(1), 63–75. https://doi.org/10.1016/j.jdeveco.2005.09.009
George, G., Wiklund, J., & Zhara, S. A. (2005). Ownership and the Internationalisation of Small Firms. Journal of Management, 210–233. https://doi.org/10.1177/0149206304271760
Golovko, E., & Valentini, G. (2011). Exploring the complementarity between innovation and export for SMEs’ growth. Journal of International Business Studies, 42(3), 362–380. https://doi.org/10.1057/jibs.2011.2
Hessels, J. (2005). Internationalisation of Dutch SMEs. EIM Paper M, 200507.
Hessels, J., & Parker, S. C. (2013). Constraints, internationalisation and growth: A cross-country analysis of European SMEs. Journal of World Business, 48(1), 137–148. https://doi.org/10.1016/j.jwb.2012.06.014
Ibeh, K., Wilson, J., & Chizema, A. (2012). The internationalisation of African firms 1995–2011: Review and implications. Thunderbird International Business Review, 54(4), 411–427. https://doi.org/10.1002/tie.21473
Ali Jamali, M., & Md Nor, N. G. (2012). Growth of Firms in Manufacturing Sector: A Panel Data Analysis in Iran. Global Business Review, 13(1), 51–68. https://doi.org/10.1177/097215091101300104
Khandelwal, P. (2004). Comesa and Sadc : Prospects and Challenges for Regional Trade Integration. IMF Working Papers, 2004/227. https://doi.org/10.5089/9781451875447.001
Kipsaat, K. J. (2019). Firm Characteristics and Export Intensity in Kenyan Manufacturing Firms: An Empirical Analysis. Journal of Business and Economic Development, 4(1), 31–37. https://doi.org/10.11648/j.jbed.20190401.15
Korsakiene, R., & Tvaronavi, M. (2012). The internationalisation of SMES: An Integrative Approach. Journal of Business Economics and Management, 13(2), 294–307. https://doi.org/10.3846/16111699.2011.620138
Korsakiene, R. (2014). Internationalisation of Lithuanian SMEs: Investigation of barriers and motives. Economics and Business, 26, 54–60. https://doi.org/10.7250/eb.2014.020
Lejpras, A. (2009). Determinants of internationalisation: differences between service and manufacturing SMEs. DIW Berlin Discussion Paper No. 886. https://doi.org/10.2139/ssrn.1461395
Levratto, N., Zouikri, M., & Tessier, L. (2010). The Determinants of Growth For Smes - A Longitudinal Study From French Manufacturing Firms. Available at SSRN: https://doi.org/10.2139/ssrn.1780466
Love, J. H., & Roper, S. (2015). SME innovation, exporting and growth: A review of existing evidence. International Small Business Journal, 33(1), 28–48. https://doi.org/10.1177/0266242614550190
Lu, J. W., & Beamish, P. W. (2001). The internationalisation and performance of SMEs. Strategic Management Journal, 22(6-7), 565–586. https://doi.org/10.1002/smj.184
Nunes, P. M., Gonçalves, M., & Serrasqueiro, Z. (2013). The influence of age on SMEs’ growth determinants: empirical evidence. Small Business Economics, 40(2), 249–272. https://doi.org/10.1007/s11187-011-9363-2
Jekanyika Matanda, M. (2012). Internationalisation of established small manufacturers in a developing economy: A case study of Kenyan SMEs. Thunderbird International Business Review, 54(4), 509–519. https://doi.org/10.1002/tie.21480
Beck, T., & Maksimovic, V. (2002). Financial and Legal Constraints to Firm Growth: Does Size Matter? Policy Research Working Papers. https://doi.org/10.1596/1813-9450-2784
Mcintyre, M. A. (2005). Trade Integration in the East African Community : An Assessment for Kenya. IMF Working Paper, 2005/143. https://doi.org/10.5089/9781451861624.001
Memili, E., Fang, H., Chrisman, J., & Massis, A. De. (2015). The impact of small- and medium-sized family firms on economic growth. Small Business Economics, 45(4), 771–785. https://doi.org/10.1007/s11187-015-9670-0
Misati, E., Walumbwa, F. O., Lahiri, S., & Kundu, S. K. (2017). The Internationalisation of African Small and Medium Enterprises (SMEs): A South-North Pattern. Africa Journal of Management, 3(1), 53–81. https://doi.org/10.1080/23322373.2016.1275940
Morone, P., & Testa, G. (2008). Firms Growth, Size and Innovation an Investigation Into the Italian Manufacturing Sector. Economics of Innovation and New Technology, 17(4), 311–329. https://doi.org/10.1080/10438590701231160
Mtigwe, B. (2010). The entrepreneurial firm internationalisation process in the Southern African context: A comparative approach. International Journal of Entrepreneurial Behaviour & Research, 11(5). https://doi.org/10.1108/13552550510615006
Mupemhi, S. (2013). Factors Affecting the Internationalisation of Manufacturing SMEs in Zimbabwe By Richard Duve Ronicah Mupemhi Midlands State University, Gweru, Zimbabwe.
Paul, J., Parthasarathy, S., & Gupta, P. (2017). Exporting challenges of SMEs: A review and future research agenda. Journal of World Business, 52(3), 327–342. https://doi.org/10.1016/j.jwb.2017.01.003
Kesk, H., Ġentürk, C., Sungur, O., & Kġrġġ, H. M. (2010, June). The importance of SMEs in developing economies. In 2nd International Symposium on Sustainable Development (pp. 183–192).
Wilson, K. (2006). Encouraging the internationalisation of SMEs. OECD papers, 6(12), 43–66.
Wolszczak-Derlacz, J. (2018). The analysis of firms’ involvement in internationalisation and determinants of its intensity–an analysis for developing and post-transition economies. Economics and Business Review, 4(1), 44–63. https://doi.org/10.18559/ebr.2018.1.4
Wooldridge, J. (2016). Introductory econometrics; A modern approach. Nelson Education.
World Bank. (2020). Trading for development in the age of global value chains. Wordl Development Report 2020.
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09.12.2020
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Safari, K. (2020). Contribution of Internationalisation to SME Growth: Evidence from the Kenyan Manufacturing Sector. Economics and Business, 34, 261-272. https://doi.org/10.2478/eb-2020-0017
