Determinants of organizational performance of Micro and Small Enterprises in the Kamukunji Area, Nairobi County, Kenya

Abstract

Micro and Small Enterprises (MSEs) are vital to Kenya’s economic development, yet their performance remains weak due to persistent challenges such as limited financing, weak entrepreneurial capacity, and burdensome tax systems. This study investigated the determinants of organizational performance of MSEs in the Kamukunji area of Nairobi County, focusing on three key factors: access to finance, entrepreneurial orientation, and taxation policies. The study was grounded in the Pecking Order Theory and Dynamic Capabilities Theory, which together provide a framework for understanding how internal financial decisions and adaptive capabilities influence business outcomes. A descriptive cross-sectional research design was adopted, and data were collected from 227 MSE owners and managers using structured questionnaires. The data were analyzed using descriptive and inferential statistics, including multiple linear regression. The findings revealed that all three factors, access to finance, entrepreneurial orientation, and taxation policies, have significant positive associations with organizational performance. Among them, entrepreneurial orientation emerged as the strongest predictor. The results underscore the importance of internal capabilities and strategic behavior in driving performance, particularly in dynamic and resource-constrained environments. The study recommends that policymakers improve access to credit, simplify tax compliance procedures, and strengthen entrepreneurship development programs. MSE managers are also encouraged to enhance their financial management skills and embrace innovation and proactive strategies. These insights contribute to the broader discussion on MSE performance by offering evidence-based guidance for improving performance outcomes in urban informal economies.