Effect of Entrepreneurial Competencies on Performance of Manufacturing Small and Medium Enterprises in Nairobi County Kenya

Abstract

Small and Medium Enterprises (SMEs) are central to employment creation, industrial development, innovation, and economic growth in Kenya. Despite their significant contribution to the national economy, many SMEs continue to experience low productivity, limited competitiveness, weak innovation, and high business failure rates. Entrepreneurial competencies have increasingly been recognized as critical capabilities that enable entrepreneurs to identify opportunities, mobilize resources, make strategic decisions, and sustain competitive advantage. This study examined the effect of entrepreneurial competencies on performance of manufacturing SMEs in Nairobi County, Kenya. Entrepreneurial competencies were operationalized through opportunity identification, networking, leadership and organizational learning, while SME performance was constructed from four ordered business outcomes: innovation rate, sales turnover, market share and profitability. The study was anchored on the Knowledge-Based View. A descriptive research design employed a quantitative approach that provided a comprehensive analysis of the relationships under study. The target population comprised 590 manufacturing SMEs in Nairobi County drawn from four sectors: food and beverage processing, cosmetics and detergents, leather and leather goods, and metal fabrication. Primary data were collected from 202 manufacturing SMEs using structured questionnaires administered to SME owners and managers. Data were analyzed using descriptive statistics, Pearson correlation analysis, and multiple linear regression.  Entrepreneurial competencies were positively associated with SME performance (r = .418, p < .001) and significantly predicted performance in the simple regression model (B = .444, standardized ? = .418, R² = .175, F(1, 200) = 42.43, p < .001). When the four competency dimensions were entered simultaneously, the model remained significant (R² = .187, adjusted R² = .170, F(4, 197) = 11.32, p < .001). Organizational learning was the strongest unique predictor (? = .240, p = .003), followed by opportunity identification (? = .184, p = .013); networking and leadership were positively correlated with performance but did not retain significant unique effects in the joint model. The findings extend the Knowledge-Based View by showing that the performance value of entrepreneurial knowledge in manufacturing SMEs depends particularly on the organizational conversion of experience and information into learning routines, alongside the ability to recognize viable opportunities. The study recommends that enterprise-development policy and managerial practice move beyond generic entrepreneurship training toward competency architectures centred on organizational learning, systematic opportunity discovery, strategic networking and leadership practices that support knowledge application.