Determinants of micro and small enterprises growth in Kenya

Abstract

The purpose of this paper is to investigate the effects of investment climate and firm-specific variables on the growth of micro and small enterprises (MSEs) in Kenya. The paper utilized a cross-section survey data of 2,536 MSEs in Kenya. Using the sales growth as the dependent variable, the paper tests the hypotheses that investment climate variables – entrepreneur perception of fairness and affordability of the courts in dealing with commercial disputes, access to formal credit, connections to utilities, crime incidences; and firm-specific resources affect MSE growth. The paper is among the first to establish effects of entrepreneur perception on MSE growth with regards the court system in dealing with business disputes in terms of fairness, timeliness, affordability and enforcement. The paper also extends limited extant research on MSE growth constraints with regards to incidences of insecurity, access to bank credit, connections to utilities and internal resources.