Factors affecting the growth of small and medium-sized businesses include availability of capital; access to credit facilities from lending institutions; owner’s business management skills and experience; owner’s level of education; enterprise connectivity; government tax policies, custom duties, and subsidies; institutionalized corruption; cost of trade licenses and operating permits; poor road infrastructure; political factors; global disease outbreaks such as the covid-19 pandemic; age or growth phase of the enterprise; availability and cost of electricity; marketing skills of the owner; availability of a ready market for enterprise products; distribution channels; competition from business rivals; technological capability of the enterprise; cost of buying or leasing land; judicial procedures; intellectual capital of the enterprise; business planning capability; enterprise location; availability of raw materials; affordability of raw materials; and interference of family matters in business affairs, among others.
The following is a compilation of various empirical studies on factors affecting the growth of micro, small, and medium-sized businesses around the world.
Factors affecting growth and internationalization of micro-enterprises in a sparsely populated region: case of South Savo, Finland
This study investigated factors affecting the growth of micro-enterprises in the South Savo region in Finland. The target population included 108 micro-enterprises operating in the said region. Questionnaires were used to collect data from managers in charge of these enterprises. The collected data was analyzed using multiple regressions (Partala et al., 2024).
According to the findings, business growth was affected by two factors, that is, the intention to grow and the level of networking with other enterprises and relevant actors in the public sector. On the other hand, an enterprise’s intention to grow was directly related to its ability to innovate, intention for internationalization, and business environment. It was also established that constraints to business growth included lack of time for development activities, inability of an enterprise to hire new employees, lack of funds, business rivalry, ineffective marketing strategies, improper business location, ineffective distribution channels, lack of know-how, and management-related challenges (Partala et al., 2024).
Factors affecting growth of small and medium enterprises in Papua New Guinea
This study focused on factors that hinder growth of SMEs in Papua New Guinea. The study targeted 174 SMEs operating in three cities, including Port Moresby city, Rabaul city, and Lae city. The selected SMEs were involved in farming, retail trade, retail motor vehicle sales, manufacturing, and the hospitality industry. Survey design was used in this study. The researcher engaged SME owners in face-to-face interviews in order to obtain data pertaining to their businesses. The collected data was analyzed using descriptive statistics. The findings were presented in tables using frequencies and percentages. The content analysis technique was used to analyze qualitative data (Kavan, 2024).
According to the findings, the following obstacles were established to affect SME growth in Papua New Guinea: difficulties encountered while leasing or buying land; lack of access to finance/loans/capital; difficulties encountered when dealing with banks; government corruption; government regulation; lack of experience running a business or a project; high tax regimes; customary obligations such as school fees, haus krai, bride price, etc.; and competition (Kavan, 2024).
The factors that influence the growth and performance of micro and small-scale enterprises (MSSEs) in Dessie Town, Ethiopia
This study explored the determinants of MSME growth in the construction, manufacturing, service, trade, and urban agriculture sectors. The target population included all the MSMEs operating in Dessie town, Ethiopia. The stratified random sampling technique was used to select 218 managers or owners of MSMEs to participate in the study. The tool for data collection was a self-administered questionnaire. The collected data was analyzed using descriptive statistics and inferential analysis (Ebrahim et al., 2023).
The results revealed that the following factors played a significant role in the growth of MSMEs in the study area: political and legal factors, the covid-19 pandemic, marketing-related factors, technology-related factors, working premises, management techniques, road infrastructure, and entrepreneurial-related factors (Ebrahim et al., 2023).
The impacting factors on small business growth
This study investigated factors that impact the growth of small businesses in the Republic of Uzbekistan. The target population included small businesses operating in Uzbekistan. The research data was obtained from the Statistical Committee of the Republic of Uzbekistan. Data analysis was done using the classical linear regression model, correlation coefficients, the Durbin-Watson test, and the Fisher criterion tests (Boburmirzo, 2023).
The findings revealed that enterprise growth was realized due to the implementation of a partnership between small businesses and the private entities. This partnership entailed increasing the attractiveness of the sector to potential clients. The results also indicated that participation of small businesses and private business entities in foreign economic activities resulted in the development of more competitive products. This in turn led to enhanced growth of the enterprise (Boburmirzo, 2023).
Contemporary drivers of business growth: evidence from United States (US) public companies
This study sought to identify endogenous factors enhancing company growth in US-based businesses by analyzing their annual reports. The target population included 40 US companies derived from the TOP 150 of Brand Finance Global 500 companies for the period 2008-2020. Regression analysis with panel data was undertaken to establish the relationship between the dependent and independent variables (Derun & Mysaka, 2021).
The findings indicated that intellectual capital of the company had a stronger effect on business growth as compared to tangible assets. The results also revealed that a balanced management of a company’s tangible assets and intellectual capital could lead to internal expansion of the business. Furthermore, the results showed that the influence of fixed assets as well as human capital on business growth was on the decline in a competitive environment (Derun & Mysaka, 2021).
Factors influencing the growth of small and medium businesses: a case of women-enterprise-funded projects in Njoro Sub-County, Kenya
This study examined the influence of the Women Enterprise Fund (WEF) program on the growth of small and medium enterprises in Njoro Sub-County, Kenya. Specifically, the study examined how SME growth is affected by three main variables, that is, the business support services offered by the WEF, the training and capacity-building program offered by the WEF, and SME innovation capability. A descriptive survey research design was utilized in the study. The target population included all the registered SMEs in Njoro Sub-County. 100 participants drawn from the registered SMEs and WEF officials took part in the study. Data collection was accomplished using researcher-administered questionnaires (Muchoki, 2020).
The findings revealed that the WEF program had a significant influence on the level of savings, which in turn affected SME growth. In addition, the training and capacity-building program offered by WEF was found to be positively associated with SME growth. It was further established that new product introduction (innovation) positively influenced SME growth (Muchoki, 2020).
The influential factors of business development among SMEs in the food industry of the Gulf Cooperation Council (GCC) region
This study sought to identify factors affecting business development in companies operating within the food industry of the GCC region. The target population included 36 companies operating in the food sector in the said region. Research respondents included owners and top directors of the target companies. They were interviewed using a semi-structured questionnaire (Alharbi & Al-Ashaab, 2020).
According to the findings, the following factors were identified as the key drivers of business growth and development in the targeted SMEs: increasing sales, proper identification of the market need, new product development, new market research, marketing strategies, access to finance (loans), business planning capability, and availability of affordable agricultural raw materials (Alharbi & Al-Ashaab, 2020).
Factors affecting the growth of small business enterprises in Kenya
This study examined factors that influence the growth of small business enterprises dealing with second-hand products in Kenya. Specifically, the study focused on the financial and non-financial determinants of business growth. Descriptive research design was adopted in the study. The target population included licensed second-hand product retailers operating within the municipality. 102 participants were selected using the stratified random sampling technique. Questionnaires were used to collect data from the selected respondents. Descriptive statistics including frequencies, percentages, mean, mode, variance, deviation, skewness, and kurtosis were used in the study. A chi-square test was employed to establish the association between variables under study. Regression analysis was also used to establish the relationship between variables under study (Gisore, 2020).
The findings revealed that growth of SBEs is hindered by lack of managerial skills of business owners, competition from business rivals, and lack of access to credit from lending institutions (Gisore, 2020).
Evaluation of factors affecting small and medium enterprises’ (SMEs’) growth in Afghanistan
This study investigated the internal and external factors affecting the growth of SMEs in Kabul, Afghanistan. To achieve this objective, the Exploratory Factor Analysis (EFA) technique was employed to establish intercorrelations of the variables under study. The target population included all the SMEs operating in Kabul, Afghanistan. Using the random sampling technique, 150 respondents were drawn from the top and middle-level managers in charge of the target SMEs. Data collection was done using questionnaires. The collected data was analyzed by running the KMO and Bartlett’s test, variance explanation, and factor analysis using the SPSS application (Adel & Waqasullah , 2019).
According to the findings, the following factors were identified as key determinants of SME growth: managerial skills, technological capacity, marketing skills, marketing strategies, government policies (including tax regimes, judicial regulations, government aid packages, procurement rules, and public private partnerships), and access to credit from banks or other microfinance institutions (Adel & Waqasullah, 2019).
A review of factors affecting the growth of small and medium enterprises (SMEs) in Tanzania
This study investigated factors that hinder growth of SMEs in Tanzania. Specifically, it examined how the following variables affected SME growth: lack of business training, inadequate access to capital or finances, poor business infrastructure, lack of collateral, poor production techniques, ineffective production technologies, tight regulations, corrupt practices, inaccessible markets, business owner motivation, limited access to business information, and lack of qualified personnel (Nkwabi & Mboya, 2019).
The content analysis technique was used to extract constraints to business growth from 21 studies covered in the literature review. According to the findings, SME growth in Tanzania was greatly impacted by the following variables: financial constraints, inadequate capital, use of ineffective technologies, and presence of tight regulations in the business environment (Nkwabi & Mboya, 2019).
Strategic factors influencing growth in small and medium-sized enterprises
This study investigated strategic factors that SMEs have implemented and how they affect business growth. The study also focused on identifying challenges faced by SMEs in the target area. A qualitative research method was adopted for the study. The target population included two SMEs based in Nigeria and one located in Finland. Secondary data was used to address research questions in the study (Akinbola, 2019).
According to the findings, growth strategy is one of the most commonly used strategies by SMEs. This strategy can be further subdivided into two strategies, the internal growth strategy and the external growth strategy. An internal growth strategy entails the development of new product lines by the enterprise. An external growth strategy entails mechanisms put in place by the business to help it dominate the market. The findings further revealed that SMEs use customer satisfaction as a growth strategy. Basically, customer satisfaction strategy enables the business to differentiate its products from those of its competitors. The findings also revealed that the change management strategy employed by the enterprise determines its ability to grow (Akinbola, 2019).
The findings also established that lack of access to credit is a major challenge facing the targeted SMEs. Another challenge faced by the SMEs is the high cost of getting listed on the capital market (Akinbola, 2019).
Factors limiting growth and development of small businesses: evidence from the MaraMara region, Tanzania
This study explored factors hindering SME growth and development in the Mara region, Tanzania. Cross-sectional survey research design was adopted for the study. The target population included 631 small businesses located in five districts of the Mara region. The stratified random sampling technique was used to select 235 respondents from the target population. The collected data was analyzed using descriptive statistics. The results were presented in tables depicting frequencies and percentages of variables under study (Jane, 2018).
According to the results, SME growth in the Mara region is constrained by the following factors: lack of adequate capital, lack of support from local financial institutions such as banks, tight government controls and regulations, hostile tax regimes, poor knowledge about financial management, inadequate business management skills, dynamic business-process technologies, poorly designed business objectives, ineffective business plans, intense business rivalry, and interference of family matters in business affairs (Jane, 2018).
Factors affecting growth of small businesses in Kenya: Case of Kariobangi Area in Nairobi
This study focused on the effect of capital investment, managerial skills, and market dynamics on the growth of small enterprises in Kariobangi, Kenya. The target population included 308 SMEs operating in the Kariobangi area. 241 participants were selected from the owners and employees of the target SMEs. Questionnaires were the main tools for data collection. Descriptive statistics were used to analyze the collected data. Regression coefficient analysis and chi-square test of associations were done to establish the relationship between variables under study. The findings were presented using frequencies and percentages in table format as well as charts (Njuguna, 2016).
It was revealed that availability of capital significantly affected business growth. Specifically, financial limitation experienced by most SMEs was due to their inability to source funds from lending institutions. This was caused by lack of collateral, lack of guarantors, and lengthy loan application procedures. Another factor affecting business growth was lack of management skills by business owners. Most of them lacked training in areas such as accounting, marketing, economics, and administration. Furthermore, SME growth was hampered by lack of a ready market for their products. This was largely caused by lack of marketing skills by the business owners (Njuguna, 2016).
Factors influencing the development and growth of small and medium-sized enterprises: the case of Ghana
This study investigated factors affecting growth and development of SMEs in a developing country like Ghana. The target population included 75 SMEs in Ghana that were selected using a purposive sampling technique. Participants were drawn from the targeted SMEs. Data collection was done using direct observations, semi-structured interviews, and informal discussions (Agyapong, 2016).
The findings revealed that business growth is greatly influenced by the level of electricity available as well as the cost of electricity. Business owners indicated that erratic energy supply was a key constraint to business growth. The results also indicated that government policy, specifically unfavorable tax regimes and high custom duties, greatly affected the development and growth of SMEs. Stiff competition from business rivals, both local and foreign, was also found to greatly impede the growth of SMEs. High levels of inflation also negatively impacted the growth and development of SMEs in the target location. Finally, level of education of the business owner was also found to significantly impact the growth and development of the enterprise. In other words, SMEs managed by owners equipped with essential management skills out-performed those run by owners who lacked proper managerial skills (Agyapong, 2016).
Factors affecting the growth of small and medium enterprises in South-West Nigeria
This study evaluated factors that affect the growth and development of small and medium enterprises (SMEs) in Southwest Nigeria. The study population included all the SMEs in the target location that are duly registered by the small and medium enterprise development agency of Nigeria (SMEDAN). Using the multistage sampling technique, a sample size of 384 participants was obtained from Lagos and Oyo States. Data collection was done using questionnaires. Descriptive statistics were used to analyze the collected data. Research findings were presented using frequencies, percentages, and mean (Bolaji et al., 2016).
The findings revealed that growth of SMEs in the target location was significantly affected by the operating environment of the business, entrepreneurial education of the owner, and size of the enterprise. In other words, SMEs operating in favorable business environments registered significant growth compared to those found in areas where the operating environment was hostile. In addition, SMEs run by owners with better managerial skills registered significant growth compared to those run by owners who lacked the said skills. Finally, SMEs that were large in size registered significant growth compared to those that were small-sized (Bolaji et al., 2016).
Towards the factors affecting small firm growth: review of previous studies
This study reviewed previous studies that investigated factors affecting business growth from 2006 to 2014. Data for the study was assembled from secondary sources, either online or hardcopy. 34 papers were examined for this study. The study was focused on the following six areas: different approaches of firm growth, theories of firm growth, SME growth choice, name of journals used, distribution of research papers by industry focus, and distribution of research papers by the four major factors, including owner-manager characteristics, firm characteristics, financial factors, and external environment (Hossain et al., 2016).
Factors influencing growth of small and microenterprises in Nairobi Central Business District (CBD)
This study sought to examine the influence of credit, age of a firm, and entrepreneur’s level of education on the growth of SMEs in Nairobi CBD. The target population included all the SMSEs operating in Nairobi CBD. Descriptive research design was used in the study. 80 respondents were selected to participate in this study. Questionnaires were the main instruments of data collection. The content analysis method was used to analyze quantitative data. Inferential statistics were used to establish the relationship between the dependent and independent variables (Afande, 2015).
The findings showed that access to credit had the highest influence on growth of SMSEs. An entrepreneur’s level of education ranked second in terms of effect on SMSEs’ growth. Age of the enterprise was found to have the least influence on SMSE growth (Afande, 2015).
Factors that affect the growth and development of small, micro, and medium-sized business enterprises in the Vaal Triangle region of Gauteng Province in South Africa
This study sought to identify and quantify the reasons why most SMMEs in the Vaal Triangle region were failing. The target population included all SMMEs conducting their business in the Vaal Triangle of South Africa. The stratified random sampling technique was used to get a sample of 133 SMMEs for investigation. Data collection was done using a questionnaire. Both quantitative and qualitative data were collected for analysis. Descriptive statistics were used to analyze the gathered data. The findings were presented using frequency and percentage tables (Ndege, 2015).
The findings revealed that three main factors hindered the success of SMMEs in the target location. These factors included difficultyin securing loans from lending institutions, shortage of entrepreneurial skills needed to effectively run the business, and lack of training opportunities (Ndege, 2015).
Factors affecting growth of small businesses in Macedonia: the case of a developing country having experienced transition
This study examined factors affecting business growth in a post-socialist, developing economy experiencing transition. The target population included 305 small and medium businesses in Macedonia. Data collection was done using questionnaires distributed in both soft and hard copy formats. Multiple linear regression was used to establish the relationship between the dependent variable (growth) and independent variables, including limitations in the internal and external business environment, business owner education, employee knowledge and skills, successful implementation of a strategic plan, and planning techniques adopted by the business (Janeska-Iliev & Debarliev, 2015).
According to the findings, the following factors were established to have the greatest effect on business growth: limitations in the internal business environment (such as lack of key resources), education qualification of the business owner, and successful formulation and implementation of a strategic plan for the business (Janeska-Iliev & Debarliev, 2015).
Factors that influence the growth of micro- and small enterprises in Nairobi Central Business District (NCBD)
This study investigated factors influencing the success of micro and small enterprises MSEs operating in the NCBD, Kenya. The target population included the MSEs conducting business in the target location. A sample size of 97 MSEs was obtained using the multi-stage stratified random sampling approach. Data collection was accomplished using questionnaires. Analysis of collected data was done using descriptive statistics. The findings were presented using frequencies, percentages, pie charts, and bar graph illustrations (Wachira, 2013).
According to the findings, the following factors were found to hinder the successful growth of MSEs in the target location: a hostile business environment, inadequate capital, lack of access to loans, business connectivity, lack of social networking, poor road infrastructure, and the high cost of trade licenses and business permits (Wachira, 2013).
Factors influencing the growth of women-owned businesses in the United States of America (USA)
This study examined factors affecting growth in businesses owned by women in the US. The study was initiated by the National Women’s Business Council (NWBC) of the US, which advises the President of America, the Congress, and the United States of America Department of Small Business Administration. This initiative came about due to the observed lag in growth of women-owned businesses. So the main reason for the study was to establish factors that make businesses owned by women lag behind in terms of growth (NWBC, 2013).
The target population included all women-owned small businesses operating in three metropolitan locations in the US. Specifically, the study sought to establish the influence of risk, motivations, and expectations on the growth of women-owned businesses in the targeted metropolis (NWBC, 2013).
According to the findings, owners who were risk-takers reported higher growth of their businesses compared to those who were risk-averse. Owners who were comfortable in taking risks also exhibited high expectations for business performance. Women comfortable with risk-taking were also more likely to be motivated to create wealth. They thus worked very hard to make their businesses more valuable in order to create more wealth. Cultural expectations on women, for instance, child care and handling of household chores, tend to reduce the attention they give to their business. This in turn negatively impacts the growth of their business (NWBC, 2013).
Firm growth and its determinants
This study explored factors affecting the growth of enterprises. The study established that both internal business factors and external business factors affect firm growth (Gupta et al., 2013). According to the findings, external factors affecting enterprise growth include:
· Demographic factors such as diverse tastes, beliefs, preferences, and temperaments.
· Social environmental factors such as human relationships and how they affect society.
· Cultural environment factors.
· Political environment, including factors associated with management of public affairs.
· Economic environment factors include economic planning, for instance, budgets, fiscal policies, and industrial policies, among other factors.
· Financial environment with reference to the pulse of the money market and occurrences in the capital market.
Internal business factors affecting an enterprise growth include synergy, resources, and distinctive competencies of the business. These can be further simplified as follows:
· Business strategy,
· Organizational structure,
· Marketing capabilities,
· Operations capabilities,
· Personnel capabilities,
· Financial capabilities, and
· Technical capabilities of the enterprise.
Citation
Adil, K. and Waqasullah, K.S. (2019). Evaluation of factors affecting small and medium enterprises’ growth in Afghanistan. Unpublished Master’s Thesis submitted to Kardan University, Kabul, Afghanistan.
Afande, F.O. (2016). Factors influencing the growth of small and microenterprises in Nairobi Central Business District. Journal of Poverty, Investment and Development 9.
Agyapong, G.T. (2016). Factors influencing the development and growth of small and medium-sized enterprises: the case of Ghana. Unpublished doctorate thesis submitted to the Brunel Business School, University of Brunel.
Akinbola, C. (2019). Strategic factors influencing growth in small and medium-sized enterprises. Unpublished Degree Project submitted to the Centria University of Applied Sciences.
Alharbi, B. and Al-Ashaab, A. (2020). The influential factors of business development among SMEs in the food industry of the GCC region. Journal of Business & Retail Management Research, 14(2), 18.
Bandar, F.A. & Ahmed, A. (2020). The influential factors affecting business development among SMEs in the food industry of the GCC region. Journal of Business and Retail Management Research, 14(2).
Boburmirzo, K.F.U. (2023). The impacting factors on small business growth. Frontline Marketing Management and Economics Journal, 4(1), 24-36.
Bolaji, A.O., Fisayo, A.A., Epetimehin, F.M., and Adeigbe, K.Y. (2016). Factors affecting the growth of small and medium enterprises in Nigeria. International Journal of Social and Management Sciences, 8(2).
Derun, I. and Mysaka, H. (2021). Contemporary drivers of business growth: evidence from US public companies. Journal of International Studies, 14(4), 39-55.
Ebrahim, E.A., Toy, A., and Kassim, Y.H. (2023). The factors that influence the growth and performance of micro- and small-scale enterprises in the Dessie Town administration. Front. Sustain. Cities 5:1296605.
Gisore, N. (2020). Factors affecting growth of small business enterprises. African Journal of Economics and Sustainable Development, 3(3), 80-87.
Gupta, P., Guha, S., Krishnaswami, S. (2013). Firm growth and its determinants. Journal of Innovation and Entrepreneurship, ISSN 2192-5372, Springer, Heidelberg, 2, 1-14. https://doi.org/10.1186/2192-5372-2-15.
Hossain, M., Ibrahim, Y., and Uddin, M. (2016). Towards the factors affecting small firm growth: review of previous studies. International Journal of Academic Research in Business and Social Sciences, 6(5).
Jane, O.S. (2018). Factors limiting growth and development of small businesses: Evidence from the Mara region, Tanzania. Journal of Business and Management, 20(2), 79-84.
Janeska-Iliev, A. and Debarliev, S. (2015). Factors affecting the growth of small businesses: the case of a developing country having experienced transition. European Scientific Journal, 11(28).
Kavan, P. (2024). Factors affecting growth of small and medium enterprises in Papua New Guinea. Published Discussion Paper submitted to the National Research Institute of Papua New Guinea.
Muchoki, C.W. (2020). Factors influencing the growth of small and medium businesses: a case of women-enterprise-funded projects in Njoro Sub-County, Kenya. Unpublished Master’s Thesis submitted to the United States International University (USIU), Africa.
National Women’s Business Council (2013). Factors influencing the growth of women-owned businesses. Public, 119 Pere Marquette Drive, Suite 1C, Lansing, MI 48912-1231 (517) 485-4477. www.publicpolicy.com
Ndege, M. (2015). Factors that affect the growth and development of small, micro, and medium-sized business enterprises in the Vaal Triangle region of Gauteng province in South Africa. European Journal of Business, Economics, and Accountancy, 3(3).
Njuguna, S. (2016). Factors affecting the growth of small businesses in Kenya: a case of the Kariobangi area in Nairobi. Unpublished Master’s Thesis submitted to the United States International University–Africa.
Nkwabi, J.M. and Mboya, L.B. (2019). A review of factors affecting the growth of small and medium enterprises (SMEs) in Tanzania. European Journal of Business Management, 11(33).
Partala, T., Jantunen, S., Kuukkanen, T., and Merikoski, H. (2024). Factors affecting growth and internationalization of micro-enterprises in a sparsely populated region: case South Savo, Finland. Journal of Innovation and Entrepreneurship, 13(20).
Wachira, L.W. (2013). Factors that influence the growth of micro- and small enterprises in Nairobi Central Business District. Unpublished Master’s Thesis submitted to the Kenyatta University Department of Accounting and Finance, Kenya.
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