DETERMINANTS OF GROWTH OF MICRO AND SMALL PETROLEUM ENTERPRISES IN KENYA; A CASE OF NAIROBI COUNTY

Abstract

Purpose: MSEs and SME's have always been the backbone and impetus for growth of an economy. To ensure their continued vitality in an increasingly competitive and globalized world, their growth must be ensured. This study therefore set out to evaluate the determinants of firm growth in an integrated way, and to identify the most important determinants of firm growth.

Methodology: The study adopted descriptive research design. A sample size of 134 respondents out of a target population of 7 corporate members listed by PIEA was drawn. The  study  used primary data  which  was  largely  quantitative  and  descriptive  in nature. Both descriptive and inferential analyses were conducted.

Results: Findings reveal that whereas a majority of MSEs have considerably grown over the last five years in all respects including the number of employees, number of stations, gross sales and net profit, the growth has been largely slow and unstable characterized by declines in between the years, as regards gross sales and net profits. It was also found that a majority of the MSEs surveyed are driven by entrepreneurship skills among their management. The study also found that franchise holding significantly influences firm growth through a variety of attributes including earning the firm competitive advantage; increasing the respective firms' business opportunities. Profit margin was further found to have considerably influenced the established firm growth across a majority of the MSEs surveyed, most notably through increased profitability, increased return on investment and increased sales among others. Finally, it was found that cost of capital moderately influences growth across a majority of MSEs reached most notably through service tax, irregular cash flows, interest charges, prepayment charges, loan size, asset base and mismatch of funds.

Contribution to theory, practice and policy recommendations: The impact of the rising petrol price study on the cash flow and profitability of service stations must be addressed as an urgent matter; otherwise it might lead to some service stations being closed in the near future. It will be advisable in future to form one unity body for service station retailers. The Kenyan government should look into the possibility of introducing deregulation of the petrol price.