Abstract: Small and Medium Size Enterprises (SMEs) play an important role in the economic development of a country. However, existing research in Kenya indicate that their survival rate is low. To address the constraints of SMEs performance, most practitioners and scholars have suggested the use of innovation, technology, knowledge management, human capital and intellectual capital. Indeed, there is little research on how social capital can improve the performance of SMEs. Further, the role of charismatic leadership and social capital in SME performance remains largely unexplored. Therefore, the main objective for this research was to investigate the moderating role of charismatic leadership on the relationship between social capital and performance of SMEs. The specific objectives of this study were: to investigate the effect of social capital indicators on SME performance and to examine the moderating role of charismatic leadership on the relationship between the social capital indicators and SME performance. The study employed explanatory research design and data was collected using a structured self-administered questionnaire. It targeted the top managers of 5,100 SMEs in the four Counties in Western Kenya. Stratified sampling 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. In total, a sample of 357 was used in the study. A pilot study was carried out in Kisumu County. Instrument reliability was tested on the pilot study and all the instruments yielded a Cronbach’s Alpha above 0.6. Data was coded, entered into SPSS 20 program and analyzed using descriptive and inferential statistics. Factor analysis was done to ensure content, construct and discriminant validity. Hierarchical multiple regression model was used to test the hypotheses. The results reveal that the social capital indicators; social network (β=.104, p-value=.024), trust (β=.106, p-value=.026) and co-operation (β=.202, p-value=.002) had a positive and significant relationship with SME performance hence hypotheses 1, 2 and 3 were not supported. The study further revealed that charismatic leadership moderates the relationship between social network and SME performance (β=-.1073, p-value=.016) thus hypothesis 5 was not supported. However, charismatic leadership does not moderate the relationship between; trust and SME performance (β=-.134, p-value=.140) and; co-operation and SME performance (β =.188, p-value=.122) thus hypotheses 5 and 6 were supported. In conclusion, social capital of a top manager plays a significant role in SME performance and that the charisma of the manager in relation to social network only, influences SME performance. The findings are therefore invaluable to the SME sector in relation to development of social capital of the managers which play a significant role in firm performance. Further recommendation from the study is that firms should take a proactive approach towards promoting, building and maintaining social networks coupled with trust and co-operation a mong their structures. The findings informs practitioners both in the public and private sector to factor in social capital particularly social network coupled with charismatic leadership attributes when sourcing for managers to efficiently run SMEs.
Keywords: Social capital, charismatic leadership performance of SME’s, western part of Kenya.
Title: Social Capital, Charismatic Leadership and Performance of Small and Medium Size Enterprises in Western Part of Kenya
Author: Hesbon Nangabo Otinga, Loice Maru, Daniel Tarus
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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