Effects of information technology on the financial performamce of small and medium sized enterprises : a case of SMEs in Nairobi

Abstract

This study examines the effects of Information Technology (IT) on the financial performance of small and medium sized enterprises (SMEs) situated in Nairobi. The primary objective of the study was to examine whether there is any relationship between the use of IT and firm performance. Data was obtained through the use of purposive sampling from the National Social Security Fund (NSSF) Register of Kenya database as of 2009. The purposive sampling employed on the SMEs registered in the NSSF register led to the database of a leading IT firm which then formed the population of the study. The data obtained was analyzed through the use of descriptive analysis and also through the use of ordinary least squares regression analysis. The key finding of study was that firm performance and IT use are positively correlated. It also found that of the factors that affect the use of IT, only the level of spending on IT systems and the organizational structure of a given firm have a significant effect on IT use and its subsequent effect on firm performance. The study suggests that firms should place more emphasis on the role that individuals play within the organization since the organization will tend to perform well when each individual plays their role well. Further research is recommended to be carried out through the use of other methodologies so as to examine different angles of the role of IT in SME performance improvement.