mpetitiveness_in_small_and_medium_size_enterprises_in_Kenya

1 THE IMPACT OF TECHNOLOGY ON ORGANIZATIONAL FLEXIBILITY AND COMPETITIVENESS IN SMALL AND MEDIUM SIZE ENTERPRISES IN KENYA By Student’s Name

2 Contents 1.0 INTRODUCTION ..................................................................................................................... 3 1.1 Background and Rationale ..................................................................................................... 3 1.2 Statement of the Problem ....................................................................................................... 4 1.3 Purpose of the Study/General Objective ................................................................................ 5 1.4 Research Questions ................................................................................................................ 5 1.5 Hypotheses ............................................................................................................................. 5 1. 6 Significance of the Study ...................................................................................................... 6 1.7 Feasibility of the Research ..................................................................................................... 7 1.8 Scope of the Study ................................................................................................................. 7 1.9 Definition of Terms ................................................................................................................ 8 1.10 Chapter Summary ................................................................................................................ 8 2.0 LITERATURE REVIEW ......................................................................................................... 10 2.1 Introduction .......................................................................................................................... 10 2.2 Theoretical Framework ........................................................................................................ 10 2.2.1 Resource-Based View (RBV) ....................................................................................... 10 2.2.2 Dynamic Capabilities Theory ....................................................................................... 10 2.2.3 Technology Acceptance Model (TAM) ......................................................................... 11 2.3 Empirical Review ................................................................................................................. 11 2.3.1 Introduction ................................................................................................................... 11 2.3.2 Overview of Technology Adoption in SMEs Globally ................................................. 12 2.3.3 Technology Adoption in SMEs in Emerging Economies ............................................. 12 2.3.4 Empirical Studies on Kenyan SMEs and Technology .................................................. 13 2.4 Identifying Gaps .................................................................................................................. 13 2.5 Critical Analysis ................................................................................................................... 14 2.5.1 Evaluation of Kenyan Context Studies ......................................................................... 14 2.5.2 Analysis of Studies in Similar Emerging Economies ................................................... 15 2.5.3 Limitations of Current Research ................................................................................... 15 2.6 Chapter Summary ................................................................................................................ 15 3.0 RESEARCH DESIGN AND METHODOLOGY ................................................................... 17

4 1.0 INTRODUCTION 1.1 Background and Rationale Technology is evolving faster than ever before in the 21st century, redefining global business practices. It is an age of increased speed and advances towards digitalized, and enhanced flow of information in businesses. Access to information has been democratized via the development of high-speed internet cloud computing and mobile technology. This have significantly influenced how organizations communicate and operate (Sharma, et al., 2023). Such innovations have helped in building a more interconnected planet and have transformed the organizational frameworks and procedures of the corporate sector, enabling a more joined up and effective globally managed business environment. In the context of small and medium sized enterprises, technology is now an important element that propels growth and competitiveness. Its integration is an important tool for addressing some of the peculiar challenges facing most SMEs which are usually constrained by limited resources and market share. Through adopting technological solutions, SMEs have led to increased operational efficiency, and reduced costs (Oduro, 2019). Such integration has made it possible for SMEs to be able to keep up with the stiff competitions they face in their day-to-day activities. Kenya, which is a fast-growing economy in eastern Africa presents an interesting case study for this research. There has been a significant increase in the establishment of small and medium-sized enterprises in the country that currently forms the basis of its economy. Although they operate in multiple areas such as agriculture, manufacturing and service industry, they have significantly contributed toward job creation, fight against poverty and enhancement of national economic development (Abisuga-Oyekunle, et al., 2020). However, most of these organizations face problems such as shortage of resources as well as lack of essential facilities that makes it hard for them to develop and survive. Their resilience in the face of these challenges underscores the importance of targeted support and policy initiatives to bolster their continued development. Technology has had a vast and revolutionary effect on Kenyan SMEs. For example, the use of mobile technology has allowed these firms to bypass physical boundaries and reach more customers. Financial services including mobile banking and payments solutions like M-Pesa have transformed the way of doing business for SMEs through efficient, convenient, and safer

5 ways ( Omondi, & Jagongo, 2018 ). Technological advancements have also led to a culture that is innovative in nature within these businesses. They are able to invent new business strategies and digital channels which can improve their performance not only locally but internationally as well. Additionally, the emergence of e-commerce sites presents another means through which Kenyan small and medium enterprises can create awareness of their products and facilitate sales. This would lead to increased visibility of their products which enables them to extend their operations beyond the confines of physical boundaries ( Wairimu, 2020 ). SMEs can also use social media to interact with clients, understand market trends, and create brand loyalty among the consumers. Through these platforms, SMEs can carry out targeted and interactive marketing campaigns that will increase sales and foster a personalized relationship between the SMEs and their customers. Technology also revolutionized operations of small businesses in Kenya beyond marketing and selling. Some of these companies are using cloud-based solutions to store and retrieve data remotely without the need for physical structure hence lower operation costs (Chege, & Wang, 2020). Automation has also simplified numerous business procedures such as accounting and inventory management thereby eradicating mistakes and saving time. Furthermore, these technological applications have enabled SMEs to base on informed decision making thereby strategizing and also giving insight into the future growth ( Mallinguh, et al., 2020) . Furthermore, small scale companies have incorporated CRMs and digital PM tools to boost customer experience as well as enhance team productivity within the organization. However, integrating technology within small and medium enterprises (SMEs) has also presented some problems. Issues such as digital literacy, cyber security, and the digital divide continue posing considerable challenges. In addition, many SMEs lack the necessary technical skills and requisite resources to effectively utilize the available technology. This has led to variations in areas where technology is used and applied on various regions within the country (Mutenyo, et al., 2022). Smaller SMEs may find it difficult to adopt advanced technological solutions due to their high implementation costs, perpetuating the challenge between the larger well-established companies and new SMEs (Putro, et al., 2023). Apart from this, rapid technological developments require frequent learning thus requiring more resources, therefore posing more challenges to the small upcoming businesses.

7 4. What are the major challenges in technology adoption faced by Kenyan SMEs and possible remedies? 1.5 Hypotheses Based on the outlined research questions, the following null hypotheses are proposed, each corresponding to a specific research question: 1. Hypothesis 1 (H1): There is no significant difference in the ways technology is implemented among small and medium enterprises in Kenya. 2. Hypothesis 2 (H2): Technology does not play a significant role in enhancing the operational flexibility of Kenyan SMEs, particularly in their responsiveness to market fluctuations. 3. Hypothesis 3 (H3): Technology does not significantly improve the competitive edge for Kenyan SMEs in terms of market positioning, target marketing, efficiency, or overall business performance. 4. Hypothesis 4 (H4): There are no major identifiable challenges in technology adoption faced by Kenyan SMEs that could be systematically addressed. 1. 6 Significance of the Study This study has relevance as it discusses the fast-developing interface between SMEs and technology in the Kenyan setting, an issue that is vital in modern day businesses. The study examines the contribution of technologic developments towards the changing environments for small and medium sized enterprises within the country settings. It is highly important to understand how technological advancement in Kenya shapes SME competitiveness in this time where these small businesses form an integral part of the economy. The purpose of this study is to reveal how technology enhances or hinders flexibility and competitiveness among small firms. These outcomes will greatly inform SMEs on how they can use technology to improve their performance within a competitive context and maintain continuity of the businesses. The results of this study can also be used for policy formulation, educational systems, and investments in Kenya. The study can help policymakers and stakeholders understand what prevents SMEs from adopting technology so that they will be able to establish a favorable environment for technology integration in SMEs. This can also promote economic development and enhance Kenyan global rankings in economy.

8 Finally, the study contributes to the broader academic discourse on technology and business, offering a unique perspective from an emerging African economy. It fills a crucial gap in existing literature, providing a foundation for future research and exploration in this field. The findings could serve as a benchmark for comparative studies in similar economies, thereby broadening the understanding of technology's role in SME development on a global scale. 1.7 Feasibility of the Research The feasibility of addressing the research problem within the scope and timeframe of a PhD project is grounded in several key factors. Firstly, the well-defined nature of the research objectives and questions provides a clear roadmap for the study, ensuring that the investigation remains focused and manageable. This clarity in direction is essential for effective time management and the successful completion of the research within the typical duration of a PhD program. Secondly, the availability of data and resources necessary for this study contributes to its feasibility. Kenya's SME sector is well-documented, with numerous sources of secondary data available through government reports, industry analyses, and academic studies. Additionally, the increasing digital footprint of Kenyan SMEs facilitates the collection of primary data through surveys, interviews, and case studies. Thirdly, the research methodology, encompassing a combination of qualitative and quantitative approaches, is designed to be comprehensive yet practical. This mixed-methods approach allows for a thorough exploration of the research problem while remaining adaptable and efficient in terms of time and resources. Furthermore, the researcher's existing knowledge and expertise in the field of technology and business studies, combined with the support of academic advisors and industry experts, ensure a high level of preparedness and capability to undertake this research. Lastly, the relevance and urgency of the research topic in the context of Kenya's evolving economy ensure strong interest and support from academic and business communities. This support is crucial for facilitating access to data, resources, and networks necessary for the successful completion of the study. 1.8 Scope of the Study The scope of this study is defined by several key parameters that delineate its focus and boundaries. Firstly, the target population is Small and Medium-Sized Enterprises (SMEs) operating within Kenya. This demographic is selected to provide insights specific to the Kenyan business environment and the unique challenges and opportunities SMEs face in this context.

10 1.10 Chapter Summary Chapter One of this research proposal lays the foundational framework for the study on the impact of technology on Small and Medium-Sized Enterprises (SMEs) in Kenya. It outlines the problem statement, clearly identifying the knowledge, policy, and managerial gaps the study aims to address. The primary objective is articulated, focusing on quantitatively assessing the influence of technology on the operational efficiency and competitiveness of SMEs. Key research questions and hypotheses are established, setting a clear path for the investigation. The chapter also delineates the scope of the study, specifying the target population, geographical scope, timeframe, and theoretical underpinnings. Key terms are defined to provide clarity and context. The subsequent chapters build upon this foundation. Chapter Two will delve into a detailed literature review, examining existing research and identifying gaps. Chapter Three will describe the research methodology, focusing on the quantitative approach for data collection and analysis.

11 2.0 LITERATURE REVIEW 2.1 Introduction In exploring the intersection of technology and SMEs, several strategic management and technology adoption theories provide a crucial theoretical framework. These theories offer diverse perspectives and insights into how technology impacts business processes, strategic decision-making, and overall competitiveness in SMEs. 2.2 Theoretical Framework 2. 2 .1 Resource-Based View (RBV) The Resource-Based View (RBV) of strategic management is a theory that emphasizes the internal capabilities of an organization as essential for gaining and maintaining a competitive advantage. This perspective holds that it is the unique combination of resources and capabilities that a firm possesses which differentiates it in the market and underpins its success ( Miller, 2019 ). In the context of Small and Medium-Sized Enterprises (SMEs), the RBV becomes particularly relevant when considering the role of technology as a strategic resource. SMEs, characterized by their limited size and resources compared to larger corporations, often face challenges in competing in the marketplace. In this scenario, technology emerges as a critical asset that can level the playing field ( Chumphong, et al., 2020 ). By leveraging technological resources, SMEs can optimize their operations, enhance product quality, improve customer service, and even enter new markets. Technologies such as cloud computing, e- commerce platforms, and mobile applications enable these smaller enterprises to operate with greater efficiency and flexibility, often at a lower cost than traditional methods. 2.2.2 Dynamic Capabilities Theory Dynamic Capabilities Theory, a concept in strategic management, underscores the importance of a firm's capacity to purposefully adapt, reconfigure, and renew its resources to respond effectively to changing market conditions. This theory is particularly salient in the context of Small and Medium-Sized Enterprises (SMEs) where agility and adaptability are crucial for survival and growth in dynamic business environments ( Kapoor, & Aggarwal, 2020 ). Technology, in this regard, emerges as a critical element in fostering and developing these dynamic capabilities.

13 2.3 Empirical Review 2.3.1 Introduction The empirical review in this study serves as a critical foundation for understanding the current landscape of technology adoption in Small and Medium-Sized Enterprises (SMEs), with a particular focus on the Kenyan context. By examining existing studies, this review aims to gather insights into global and local trends, benefits, challenges, and the overall impact of technology on SMEs. 2.3.2 Overview of Technology Adoption in SMEs Globally Globally, the trend of technology adoption among SMEs has been on a significant rise, driven by the need to stay competitive and efficient in an increasingly digital world. This adoption spans a broad spectrum, from basic digital tools like email and social media for marketing to more advanced applications such as cloud computing, e-commerce platforms, and customer relationship management (CRM) systems ( Shaikh, et al., 2021 ). A key benefit identified in global studies is the enhanced operational efficiency that technology brings, alongside improved customer outreach and market adaptability. These tools have enabled SMEs to streamline their processes, gain valuable customer insights, and expand their market presence beyond traditional boundaries. However, this journey is not without its challenges. SMEs globally face hurdles in integrating technology, primarily due to resource limitations, including financial constraints, lack of technical expertise, and inadequate digital infrastructure. Additionally, concerns about data security and privacy, along with the pace of technological change, pose significant challenges ( Naradda Gamage, et al., 2020 ). The readiness and ability to adapt to new technological advancements vary widely among SMEs, influenced by factors such as the organization's size, sector, and geographical location. These challenges underscore the need for supportive policies and access to resources that can facilitate smoother technology integration for SMEs. 2.3.3 Technology Adoption in SMEs in Emerging Economies In emerging economies, the adoption of technology by SMEs follows a trajectory that mirrors global trends but is influenced by unique regional challenges and opportunities. These economies, characterized by rapid development and growth, presents a significant ground for digital innovation. SMEs in these regions are increasingly embracing technology, recognizing its potential to drive business growth and overcome traditional operational limitations ( Arikan, et

14 al., 2022 ). Studies show a growing use of mobile technology, e-commerce, and digital financial services, reflecting a shift towards more technologically driven business models. However, the path to technology adoption in these economies is marked by distinct challenges. Limited access to affordable and reliable internet connectivity, lower levels of digital literacy, and financial constraints are prominent barriers. Furthermore, the lack of a robust digital infrastructure and supportive regulatory environments often hampers the full realization of technology's potential in these contexts. Comparing these factors to the Kenyan scenario, there are notable similarities, particularly in terms of infrastructural and financial challenges ( Mathivathanan, et al., 2022 ). However, Kenya stands out in some aspects, such as the widespread adoption of mobile money, which has significantly influenced SME operations. These contrasts highlight the diverse ways in which different emerging economies are navigating the landscape of technology adoption, shaped by their unique socio-economic contexts. 2.3.4 Empirical Studies on Kenyan SMEs and Technology Empirical studies focusing on Kenyan SMEs reveal a growing trend in the adoption of technology, which is becoming increasingly essential for business operations and growth. Research indicates a significant uptake of digital tools such as mobile technology, particularly mobile money services like M-Pesa, which have revolutionized payment systems in Kenya ( Chege, & Wang, (2020) . Additionally, SMEs are increasingly utilizing social media and e- commerce platforms to expand their market reach and customer engagement. Studies also highlight the use of basic digital tools for administrative purposes, including accounting software and customer databases. The impact of these technologies on Kenyan SMEs is multifaceted. Research findings suggest that technology adoption has led to improved operational efficiency, better market reach, and enhanced customer service. This adoption has also enabled SMEs to access new markets and increase their competitiveness, both locally and internationally ( Ndiege, 2019 ). However, the extent of technology adoption varies widely among SMEs, influenced by factors such as the industry sector, size of the enterprise, and the level of digital literacy among staff. Despite these variations, the overall trend points towards a positive correlation between technology adoption and business growth in the Kenyan SME sector.

16 2.5.1 Evaluation of Kenyan Context Studies 1. Focus on Mobile Technology: Many studies in the Kenyan context highlight the significant impact of mobile technology on SMEs, particularly in facilitating financial transactions and communication ( Mugalo, 2021 ). The success of mobile platforms like M-Pesa is often cited as a transformative factor for SMEs, enhancing their financial inclusivity and operational efficiency. 2. E-Commerce and Digital Marketing: Research shows a growing trend in the adoption of e- commerce and digital marketing tools among Kenyan SMEs ( Kimana, 2020 ). This shift is driving a change in the way these businesses reach and interact with customers, although the depth of integration varies widely. 3. Challenges and Barriers: Studies frequently identify challenges such as inadequate digital infrastructure, lack of technical skills, and financial constraints as significant barriers to technology adoption in Kenyan SMEs ( Mwangi, et al., 2023 ). However, there's often a gap in these studies regarding the exploration of practical solutions to these challenges. 2.5.2 Analysis of Studies in Similar Emerging Economies 1. Variability in Technology Adoption: Research in other emerging economies indicates a varied level of technology adoption among SMEs, influenced by factors such as economic stability, government policies, and cultural attitudes towards technology. 2. Impact of Government Initiatives: In some economies, government initiatives and support play a crucial role in facilitating technology adoption among SMEs. These studies underscore the importance of policy frameworks and financial subsidies in encouraging SMEs to adopt new technologies. 3. Sector-specific Trends: Certain industries within these emerging economies are more advanced in adopting technology due to the nature of their operations, market demands, and customer expectations. For instance, the fintech and e-commerce sectors often show higher levels of technology integration compared to traditional sectors like agriculture. 2.5.3 Limitations of Current Research 1. Lack of Longitudinal Studies: There is a dearth of longitudinal research that tracks the long- term impact of technology adoption on the growth and sustainability of SMEs. 2. Insufficient Comparative Analysis: Few studies offer a comparative analysis between different emerging economies, which could provide deeper insights into the contextual factors influencing technology adoption.

17 3. Under-representation of Micro-SMEs: Research often overlooks the micro-SME segment, which faces unique challenges and opportunities in technology adoption. In conclusion, while existing studies provide valuable insights into the patterns and impacts of technology adoption among SMEs in Kenya and similar economies, there is a need for more comprehensive research. Future studies should focus on longitudinal impacts, comparative analyses, and inclusive research that covers a broader spectrum of SME segments, especially micro-SMEs. 2.6 Chapter Summary The literature review chapter of this study presents a comprehensive examination of the existing body of knowledge surrounding the impact of technology on Small and Medium-Sized Enterprises (SMEs), with a special focus on the Kenyan context. This chapter begins by providing a global overview of technology adoption trends in SMEs, highlighting the widespread integration of digital tools that enhance operational efficiency and market competitiveness. It underscores the benefits, such as improved operational efficiency and expanded market reach, alongside challenges like financial constraints and limited digital literacy, faced by SMEs globally in integrating technology. The review then narrows down to the specifics of emerging economies, drawing parallels with the Kenyan scenario. It brings to light unique regional challenges, such as infrastructural limitations and financial constraints, which shape the technology adoption landscape in these economies. Delving deeper into the Kenyan context, the chapter reviews empirical studies that specifically focus on Kenyan SMEs. These studies reveal a significant uptake of digital tools, particularly in mobile technology and e-commerce, demonstrating how technology adoption is influencing business operations and growth in the region. The review highlights the varying extent of technology adoption across different industries and sizes of SMEs, emphasizing the positive correlation between technology adoption and business growth. It also discusses the unique challenges faced by Kenyan SMEs, such as infrastructural issues and the digital divide, which affect the extent and nature of technology integration. This comprehensive review sets the groundwork for understanding the context and nuances of technology adoption in Kenyan SMEs, thereby framing the direction for the subsequent research phases.

19 The combination of positivism and interpretivism in this research design enables a comprehensive exploration of the research questions. While positivism will provide a broad overview of the state of technology adoption among SMEs in Kenya, interpretivism will offer detailed, contextual insights into how these businesses experience and navigate the process of technology integration. This methodological pluralism ensures that the research is both empirically grounded and contextually rich, providing a balanced perspective that is crucial for understanding the complex phenomenon of technology adoption in SMEs within the dynamic and diverse Kenyan business environment. 3.3 Research Design In this research proposal, a quantitative research design will be employed to systematically investigate the impact of technology on SMEs in Kenya. This design is selected due to its suitability for quantitatively measuring and analyzing the extent, nature, and effects of technology adoption within a structured framework (Mwenda, 2018). The quantitative approach allows for the collection of numerical data through surveys and questionnaires, which will be administered to a significant sample of Kenyan SMEs across various sectors. This method is ideal for obtaining a broad overview of technology adoption trends and for drawing generalizable conclusions about their impact on business performance and growth. The use of statistical analysis techniques will enable the identification of patterns, correlations, and potential causal relationships (Vinckx, et al., 2018). By contextualizing this research within a quantitative framework, the study aims to produce empirical findings that can be generalized to the wider population of SMEs in Kenya, providing valuable insights for policymakers, business leaders, and academics interested in the intersection of technology and business in emerging economies. 3.4 Alignment with Objectives The chosen qualitative research design aligns closely with and supports the study’s objectives in examining the impact of technology on Small and Medium-Sized Enterprises (SMEs) in Kenya. This alignment is evident in how the design facilitates the exploration of each objective: 1. Analyzing Technology Adoption in Kenyan SMEs: The qualitative approach enables a detailed exploration of the extent and nature of technology adoption among SMEs. Through methods like interviews and focus groups, the research will capture diverse perspectives and experiences, offering a rich understanding of how and why SMEs in Kenya adopt technology.

20 2. Assessing Impact on Operational Flexibility: Qualitative methods are ideal for understanding the nuances of how technology impacts the adaptability of SMEs to market changes and operational challenges. This approach allows for in-depth discussions with SME owners and employees, providing insights into the practical implications of technology on business flexibility. 3. Evaluating Influence on Competitiveness: The research design supports the objective of evaluating how technology enhances competitiveness. By engaging directly with SME stakeholders, the study will uncover real-world examples and narratives that illustrate the role of technology in improving market position, customer outreach, and performance. 4. Identifying Barriers to Technology Adoption: The exploratory nature of qualitative research is particularly suited to identifying challenges and barriers faced by SMEs in technology adoption. Open-ended conversations and case studies will reveal the complexities and obstacles that these enterprises encounter, which may not be apparent through quantitative data. The qualitative methodology, with its emphasis on subjective experience and depth of understanding, is inherently aligned with the study's objectives that focus on comprehensively exploring the various dimensions of technology adoption in SMEs. This approach will not only provide a detailed understanding of the current state of technology use in Kenyan SMEs but also offer insights into the broader implications of technology adoption for their growth and development. 3.5 Population, Sampling Design, and Data Collection Methods For the study on the impact of technology on SMEs in Kenya, the population, sampling design, and data collection methods are tailored to capture a comprehensive understanding of the subject matter within the Kenyan context. 3.5.1 Population The population for this study consists of Small and Medium-Sized Enterprises (SMEs) operating in Kenya. These SMEs span various industries, including but not limited to manufacturing, services, agriculture, and technology. The choice of this population is driven by the objective to explore the diverse experiences and impacts of technology across different sectors, which is representative of the Kenyan SME landscape.