Determinants of SMMEs growth in post-war communities in developing countries. Testing the interaction effect of government support
| Date | 12 February 2018 |
| Published date | 12 February 2018 |
| DOI | https://doi.org/10.1108/WJEMSD-06-2017-0026 |
| Pages | 50-73 |
| Author | George Okello Candiya Bongomin,John C. Munene,Joseph Mpeera Ntayi,Charles Akol Malinga |
| Subject Matter | Strategy,Business ethics,Sustainability |
Determinants of SMMEs growth
in post-war communities in
developing countries
Testing the interaction effect of
government support
George Okello Candiya Bongomin and John C. Munene
FGSR, Makerere University Business School, Kampala, Uganda
Joseph Mpeera Ntayi
Department of Management Sciences, Makerere University Business School,
Kampala, Uganda, and
Charles Akol Malinga
Department of Finance, Makerere University Business School, Kampala, Uganda
Abstract
Purpose –The purpose of this paper is to test the interaction effect of government support in the relationship
between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and
small, medium, and micro enterprises (SMMEs) survival in post-war communities in Northern Uganda.
Design/methodology/approach –Cross-sectional research design was used in the study and quantitative
data were collected from 304 SMMEs located in Gulu District using a semi-structured questionnaire.
Structural equation modeling (SEM) through the use of analysis of moment structures was adopted to
establish the interaction effect of government support in the relationship between business skills, capital
adequacy, access to finance, access to market, entrepreneurial education, and SMMEs survival in post-war
communities in Northern Uganda. Furthermore, Pearson’s correlation analysis was used to show the
association between the variables under study.
Findings –The results revealed that there is a significant interaction effect of government support in the
relationship between business skills, capital adequacy, access to finance, access to market, entrepreneurial
education, and SMMEs survival in post-war communities in Northern Uganda. Besides, the results indicated
that business skills, capital adequacy, access to finance, access to market, entrepreneurial education,
and government support have significant and positive impacts on SMMEs survival in post-war communities
in Northern Uganda.
Research limitations/implications –The study employed cross-sectional research design, thus, ignoring
longitudinal study approach. Besides, the sample was selected from only Gulu District, therefore, leaving out
other Districts located in Northern Uganda.
Practical implications –Advocates of recovery programs and interventions in developing countries
should consider government support as a vital factor in promoting business skill, capital adequacy, access to
finance, access to market, and entrepreneurial education in order to enhance SMMEs growth in post-war
communities. In addition, governments in developing countries should offer investment incentives and tax
waivers to infant SMMEs in post-war communities like in Northern Uganda.
Originality/value –The study examined the interaction effect of government support in the relationship
between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and
SMMEs survival in post-war communities in developing countries. Thus, to the best of the authors’
knowledge, this is the first attempt to test the interaction effect of government support in the relationship
between business skills, capital adequacy, access to finance, access to market, entrepreneurial education, and
SMMEs survival in post-war communities in Northern Uganda. The use of government support as a
moderator in the relationship between business skills, capital adequacy, access to finance, access to market,
entrepreneurial education, and SMMEs survival is scarce in entrepreneurship literature and theory.
This creates uniqueness in this study.
Keywords Entrepreneurial education, Access to finance, Government support, Northern Uganda,
Post-war communities, SMMEs growth
Paper type Research paper
World Journal of
Entrepreneurship, Management
and Sustainable Development
Vol. 14 No. 1, 2018
pp. 50-73
© Emerald PublishingLimited
2042-5961
DOI 10.1108/WJEMSD-06-2017-0026
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2042-5961.htm
50
WJEMSD
14,1
Introduction
The dynamic role of small, medium, and micro enterprises (SMMEs) as an engine for growth
and development, especially in developing economies has long been recognized. Scholars
like Abor and Quartey (2010) argue that SMMEs greatly contribute to GDP and create jobs
in developing countries (see also the World Bank, 2015). This is supported by Ayyagari et al.
(2007) who observe that SMMEs foster economic growth, innovation, employment, and
poverty alleviation in under-developed communities (see also Garikai, 2011).
Existing evidence by Khan and Jawaid (2004) reveal that SMMEs contribute over
40 percent to GDP and offer more than 90 percent of the jobs in most developing economies
world-wide. Contextually, data from Uganda Investment Authority (2016) indicates that in
the financial year 2015/2016, SMMEs contributed about 6.3 percent to GDP and created over
80 percent of the jobs in Uganda. Thus, Gordon and Brayden (2014) argue that since SMMEs
continue to be the backbone of economic growth and equitable development in both
developed and developing economies, there is a need for the government to support their
survival, growth, and sustainability.
Scholars like Olsen (1983) observes that business environment is an intricate and
dynamic concept, which embraces the independent actions of all institutions, organizations,
and individuals that directly or indirectly impact on the operations of business
organizations. From the foregoing, government plays a great role in creating and
supporting a conducive business environment within which business takes place in an
economy (Adaramola, 2012). Thus, to ensure the survival, growth, and development of
SMMEs, government support towards their operations is critical.
According to Sana and Abbas (2005), government support in developing countries,
especially in post-war countries seldom promote schemes and incentives support systems,
which leads tothe establishment, growth, anddevelopment of SMMEs (see alsoUnited States
Agency for International Development (USAID), 2010; Dandago and Usman, 2011; Shariff
et al., 2010). More so, Chew and Chew (2008); and Spurge and Roberts (2005) also argue that
government support that consist of tax reduction and exemption, fiscal fund aid, and access
to loans strongly impacts on the establishment, expansion, and performance of SMMEs
in developing countries (see also SMEA-Japan, 2010). Similarly, Chen (2006) connotes that
provision of regulatory support such as law and order to offer legal assurance regarding
ownership and conducive business environment, is helpful for the survival and growth of
SMMEs, especially in developing economies.
Drawing from the post-colonial era, SMMEs in Northern Uganda have faced numerous
challenges, which have affected their establishment, growth, and development.
The situation was further worsened by the 21-years’old Lord Resistance Army (LRA)
rebel activities. A study by Okello-Obura et al. (2008) established that SMMEs in Northern
Uganda operates in a business environment that is characterized by lack of business
information, lack of market, lack of entrepreneurial knowledge and skills, poor physical
resources and information infrastructure , lack of government amenities ( business
information archives), limited access to business finance, and double taxation regime,
which have limited their survival, growth, and development.
Whereas several studies have examined the impact of factors like business skills, capital
adequacy, access to finance, access to market, and entrepreneurial education on SMMEs
establishment, growth, and development in developing countries, they fail to test the interaction
effect of government support in the relationship between business skills, capital adequacy,
access to finance, access to market, entrepreneurial education, and SMMEs survival, especially
in post-war communities in developing countries. The use of government support as a
moderator in the relationship between business skills, capital adequacy, access to finance,
access to market, entrepreneurial education, and SMMEs survival, especially in post-war
communities in developing countries is sparse in the entrepreneurship literature and theory.
51
SMMEs
growth in
post-war
communities
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