School of Business and Economics, Moi University. Kenya.
School of Business and Economics, Moi University. Kenya
Small and Medium Size Enterprises (SMEs) play an important role in the economic development of a country. However, existing research in Kenya indicate that their survival rate is low. To help address the constraints of SMEs performance, most practitioners and scholars have used innovation, technology and intellectual capital to increase performance among other variables with little emphasis on social network. Indeed, there is little research on how social network can improve the performance of SMEs. Further, the moderating role of charismatic leadership in this relationship remains largely unexplored. The study employed explanatory research design and targeted a population of 2000 respondents (top managers and employees) from the 1000 SMEs in the four counties of Western Kenya. Stratified sampling technique was used to determine the sample size of SMEs from both service and manufacturing sectors and then simple random sampling was done to select the SMEs and respondents that participated in the study. A sample size of 150 SMEs corresponding to 300 respondents was drawn and participated in the study. Factor analysis was done to ensure content, construct and discriminant validity. Hierarchical multiple regression model was used to test the hypotheses. Results of our study support a direct positive effect of social network on performance of SMEs. Additional analyses revealed that charismatic leadership moderates the relationship between social network and SME performance. To improve SMEs performance, SME managers should thus ensure that they maintain strong network ties with customers, suppliers, commercial banks and government agencies. so as to establish strong business networks.