INFLUENCE OF NETWORK STRUCTURE ON FINANCIAL PERFORMANCE OF MEDIUM SIZED ENTERPRISES KENYA
Abstract
The purpose of this study was to examine the influence of network structure on financial performance of medium sized enterprises in Kenya. A descriptive survey design was adopted. The target population was drawn from 51 medium sized enterprises in Kenya which participated in the KPMG top 100 mid-sized ranking for the period 2011 to 2015. Multi stage, systematic and purposive sampling was used to select a sample of 255 which had the data needed in the study. Primary data was collected using questionnaires which were pretested for reliability and validity to determine it suitability for use in the study. Statistical Package for Social Sciences (SPSS) was used in the analysis of data to generate frequency distribution of the responses and descriptive statistics. It was found that network structure was positively and significantly related to financial performance. The finding lends support to the social network theory, indicating that the more networks the entrepreneur is linked to the more it will affect financial performance. The study findings were that alliances, partnerships, collaborations, or networking assisted the entrepreneur with an access to other individuals’ links. Thus, there will be an extended web of associations that will ultimately lead to identification of new prospects and a broader network of customers and clients. This was evidenced by the responses from the respondents who participated in the study. The findings encourage managers to engage in active networking with different actors within and outside of existing networks and especially with those who are relevant to the business in which the manager and a firm operate. The results strongly support the necessity for managers to create active co-operational relationships. The study concluded that an individual can be constrained in a network if they have too few contacts; has contacts closely connected with one another; or shares information indirectly via a central contact. It can thus be settled that businesses with larger advantage-generating or advantage-improving capacities could gain more from solid network structure, while those with inferior abilities are better off if they form coalition with enterprises from distant network groups, and hence forming a network structure endowed with comprehensive entrepreneurial networks. The study recommended that medium enterprises should become entrenched in various forms of network structure since through this they can track varied competitive approach. It is also recommended that medium sized enterprises in Kenya invest in networking activities, close interconnections and suitable resource partners that would ensure that they maintain a key network behavior which is aligned to the industry leaders.
Key Words: Network Structure, Financial Performance, Medium Sized Enterprises, Entrepreneurial Networks
CITATION: Kirimi, D. G. (2020). Influence of network structure on financial performance of medium sized enterprises Kenya. The Strategic Journal of Business & Change Management, 7(2), 189 – 204.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i2.1620
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