External business factors affecting Small and Medium Enterprises’ participation in Uganda’s oil and gas sector: the moderating role of government institutional support

Abstract

External business factors are key drivers of SME participation in Uganda's emerging oil exploration and production sector. This research examines how access to financing, technological capacity, and regulatory frameworks shape SME engagement in the sector, as well as the moderating influence of government institutional support. Anchored in the Resource- Based View (RBV), Institutional Theory, and Dynamic Capability Theory (DCT), the study applied a quantitative methodology with a descriptive correlational research design and a positivist philosophical paradigm. Primary data were collected through structured questionnaires administered to 215 SME owners and managers in Hoima and Buliisa Districts, key locations within Uganda’s Albertine oil region. Data was analyzed using SPSS version 28, employing correlation and multiple regression techniques to examine the relationships between external business factors and SME participation. Empirical findings revealed statistically significant correlations between external conditions and SME involvement. Access to finance showed a positive effect on participation, although limited financial literacy and poor credit readiness diminished its impact. Technological capability emerged as the strongest predictor, with digital adoption and workforce technical skills driving participation. Regulatory frameworks were found to be the most limiting factor due to licensing complexity, policy inconsistencies, and weak enforcement of local content laws. Importantly, government institutional support significantly moderates these relationships by amplifying enabling factors and mitigating constraints, thus increasing explained variance in participation outcomes. This study significantly addresses a critical gap in empirical research on inclusive SME participation in extractive industries, particularly within low-income, resource-rich countries like Uganda. It offers evidence-based insights into how external structural factors and policy interventions shape equitable access to economic opportunities in the oil and gas value chain. The findings inform both academic and policy bodies by highlighting where targeted institutional support can unlock local enterprise potential. To promote inclusive and sustainable SME engagement, the study recommends strengthening business-linking initiatives, decentralizing SME clinics, fostering joint ventures, and developing a national SME profiling platform. Limitations included restricted access to industry data and high primary research costs. Future studies should explore internal firm-level capabilities and the role of digital support systems in deepening SME integration into Uganda’s oil economy.